Gartner: Digital tech can help mitigate climate change risks
According to Gartner - a leading consultant in supply chain and procurement -27% of leaders in the industry have conducted a climate change risk assessment to identify their most critical supply chain risks. Surveying 320 leaders, 18% have conducted both risk assessments and scenario planning for climate change.
“The effects of climate change are hard to predict, but it is possible to model the risks and opportunities that might occur. Chief supply chain officers (CSCOs) regularly assess various risks and opportunities as part of normal business – this must be done for climate change as well,” commented Heather Wheatley, senior director analyst with the Gartner Supply Chain practice.
Do supply chain and procurement leaders understand the risks of climate change?
According to Gartner, 44% of respondents have a general sense of potential climate change risks based on previous events, meaning they understand that risks associated with climate change are emerging.
However, despite this understanding, many risks are not methodically identifiable or quantifiable, and the past is not necessarily a good predictor for future events, as the severity and impact of climate change will escalate.
“Scenario planning is a crucial part of the process, as it highlights key elements of a possible future and helps draw attention to the key factors that will drive future developments. For example, in a future that includes raw material scarcity and trade uncertainty, organisations that rely on more resilient inputs such as drought-resistant crops can gain a competitive advantage,” added Wheatley.
Biggest challenges for climate adaption
While Gartner emphasises that climate adaption must be included in any investment decisions, the need for financial investment can deter action. Other top barriers when it comes to climate adaptation include organisations focusing on short-term decision-making (57%) and an inability to link the cause and investment to benefits (57%).
“Investments in climate adaptation require a certain level of foresight. An increasingly popular tool is the shadow carbon price, which applies a notional cost to greenhouse gas emissions, effectively translating a future risk into a present-day operational cost that attracts the attention of business leaders,” said Wheatley.
Use of technology to assist in climate change is still in its infancy stages
With only 19% of organisations using digital technology to understand climate change risks, Gartner reported that the use of technology is still in its infancy stage. Of those organisations using technology, 85% are harnessing the capabilities of predictive analysis. Many are also using geospatial analysis, drones, and AI, as well as partnering with external consultants.
“For those organisations that are not using digital technology, it is unclear what information is being used to help model scenarios and to identify and assess risks. CSCOs should ensure that this blind spot is not overlooked,” concluded Wheatley.
To read the full report, click here.
