With rising temperatures across the globe, scientists say that climate-related disruptions will intensify in the coming years. The level of carbon dioxide is increasing faster mostly due to human activity which has led to rising temperatures, rising sea levels, glacial ice loss, and extreme weather events. With almost 90 percent of the world’s freight moving by ship, the increasing sea levels will eventually threaten the supply infrastructure. A 2020 paper^⁠ in Maritime Policy and Management even asserted that if current climate science is correct, “global supply chains will be massively disrupted, beyond what can be adapted to while maintaining current systems.”

With the growing frequency of extreme weather events and warming temperatures, organizations will now have to invest in climate mitigation efforts including the shift to green energy and regulations on environmental due diligence.

Here is how the rise in temperatures could affect the supply chains globally-

Reducing global supplies

One of the most disruptive effects the rising temperatures would have on the supply chains is on the supplies. Climate change has already started to affect various industries thereby decreasing their output. With this trend, supply chains might have lesser and lesser reliable sources for some products.

Extreme weather events could decline global supplies even rapidly. For instance, the wildfires in North American forests are a grave threat to the lumber industry, and as climate change worsens it might become more frequent. Similar events like flooding, and hurricanes will have a negative impact on the seaside and oceanic industries.

Transportation challenges

With the rise in temperatures globally, transporting products and parts across the globe might become more challenging and even dangerous in a few cases. Severe weather events could delay transportation and can endanger employees. For instance, high-intensity rainfalls have become a common occurrence due to climate change and this alone can slow down ground transportation as it can cause storms in the sea, impact ocean transport, and delay flights leading to global disruptions.

Workplace challenges

Workplaces that sustain global supply chains are also facing the impact of climate change. The rise in temperatures can cause exhaustion and illness among workers. Besides that, the rising sea levels and severe weather conditions can displace the workforce thus making it difficult for some facilities and warehouses to maintain adequate staffing. Moreover, these facilities could themselves face physical damage, for instance, weather events like tornadoes, fires, floods, and hurricanes have all become more frequent and severe due to climate change.

Increasing costs

The above-mentioned challenges could also contribute to a rise in operational costs across global supply chains. For instance, as the workplace face staffing shortages due to severe weather-driven displacement, and suppliers decline, it is likely that output will see a downward trend. With demand remaining the same and output decreasing, the organizations would have to raise costs to make up for the gap.

In fact, supply shortages could alone have a significant impact on the costs. Even the staffing costs may increase due to environmentally driven displacement. Supply chains across the globe may have to offer higher pays to engage the workforce to remain in that area or to move to other place. For smaller companies, it can become a bigger challenge as they may not be able to adapt and face going out of business.

Supply chains will have to get ahead of the problem for sustainability

Rising temperatures will have a significant negative impact on the global supply chains and many of the trends are already visible. To mitigate the impact of extreme weather impact organizations will have to map their supply chains to understand better where the risks lie exactly, whether it is the supplier whose area is subjected to hurricanes or it is the transport unit that is susceptible to flooding. Organizations will have to find ways to cut emissions to improve resilience and reduce risks in future.

The bottom line is that the threat of climate change is grave but it’s not inevitable, businesses will have to be proactive. Companies will have to look at creating a comprehensive strategy including all stakeholders in the supply chains to mitigate climate change risks.

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The complications created by the coronavirus pandemic have never been experienced before and are beyond any regionalized natural disaster ever faced by the industry. The COVID-19 outbreak has placed unprecedented stress on the global food supply chains, with impacts in farm labor, transport, logistics, processing along with significant shifts in demand. Most of these interruptions are a result of measures adopted by countries to contain the spread of the virus.

How has the current situation affected the food supply chains?

The disruptions due to the pandemic have been experienced at various stages of the food supply chain. Let’s take a look.

Effects on farm production

Farm production has been affected by blockages for inputs, mainly labor. Many farm sectors are more dependent on seasonal labor than others. For instance, fruits and vegetables are more labor-intensive, while oilseeds and cereals require less labor. Limited mobility of people has reduced the availability of seasonal labor for planting and harvesting in the vegetable and fruits sector in many countries.

Besides farm labor, other important inputs include seeds, fertilizers, pesticides, and energy. The seed sector is highly globalized, and the seeds travel through several countries for production, multiplication, processing, and packaging. Seeds are often transported by air, a mode of transport that has been severely disrupted. With several countries now easing down the lockdown restrictions, the concerns regarding supply of these inputs have waned.

Impact on processing due to shutdowns and labor shortages

The food processing industries have been affected by the rules of social distancing, labor shortages due to illness, and due to the lockdown measures. In confined places such as packaging units for meat, fruits, and vegetable processing facilities, the requirement of maintaining social distancing has reduced the efficiency of operations since the employers need to ensure the safety of the labor force.

Some modes of transport have been affected severely

Bottlenecks in logistics and transport have disrupted the movement of products along the food supply chains. Broadly speaking, there are three main modes of transport that are used in the supply chains- ships and barges for bulk, trucks, rail or boat for transporting containers, and air freight. Different transport is used for different products. For instance, oilseeds and cereals are typically shipped in bulk quantities; meat and dairy products are transported in refrigerated containers and trucks. Although the bulk shipments have not been affected much, air freight has taken the maximum brunt. 

According to the OECD (Organization for Economic Cooperation and Development), the global air cargo capacity between the second and third weeks of May was 26% lower than during the same period in 2019 with the largest decline on routes between Latin America and Europe. The vegetables and food sector has also seen a major impact due to quarantine measures and delays in border inspections.

Consumer demand has seen unprecedented and rapid shifts

The pandemic has led to drastic shifts in consumer demand from ‘outside food’ (restaurants or food service) towards ‘food at home’. This has caused significant changes in how food supply chains operate. As the coronavirus outbreak gathered pace, the sale of food from restaurants, hotels, cafes, and catering collapsed. However, at the same time, the retail demand for food increased. There was a dramatic increase in demand for packaged and frozen food items. 

According to a report by OECD, in the second week of March, weekly sales of frozen food were 63% higher than last year in France, for example. The shift from food away from home to food at home had a considerable impact. For instance, restaurants tend to use more cheese on pizza toppings than what is made at home and also involve expensive meat cuts (like steak vs. minced meat at home). Even though similar products are consumed, the products usually sold to foodservice operations and restaurants cannot always be sold to retailers without incurring extra costs. For instance, a restaurant will be buying a big block of cheese, whereas much smaller packs are needed for retail sales. Moreover, retailers have different quality expectations and requirements.

The Bottom Line

With the COVID-19 pandemic threatening to wreak more economic havoc globally, governments and the private sector must work together to address the risk of disruptions to the food supply chains. Beyond that, global policy coordination may be required to prevent food protectionism from becoming the new-normal post the pandemic.

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