CEOs see climate change disrupting supply chains, costs

A majority of global CEOs expect some degree of impact from climate change in 2023 primarily in their cost profiles and supply chains, more than the safety of their physical assets, according to a recent Global CEO survey by PwC.

The survey, which surveyed 4,410 CEOs from 105 countries and territories, said 50 percent of them expect a moderate, large or very large impact and 42 percent expect it to impact their supply chains.

“Fewer (24 percent) are worried about climate-related damage to their physical assets.

“CEOs in China feel particularly exposed, with 65 percent seeing the potential for impact in their cost profiles, 71 percent in supply chains and 56 percent in physical assets,” it added.

According to the United Nations (UN), climate change refers to long-term shifts in temperatures and weather patterns. The primary cause of climate change is the burning of fossil fuels, such as oil and coal, which emit greenhouse gases into the atmosphere primarily carbon dioxide.

While some of the noticeable environmental shifts have been natural, human actions like the burning of fossil fuels, excessive use of coal, deforestation, pollution, and unstructured urban development have accelerated the pace at which the earth is warming, fostering devastating effects on lives and properties.

In Africa, climate-related problems have been significant including the current floods in Nigeria and droughts in Somalia, Ethiopia, and Kenya

This has made it a global issue as it is considered by business leaders as one of the greatest threats to economic stability.

A 2021 Deloitte Global Climate Check report said most global organizations are already starting to feel its negative impacts.

It said leaders acknowledge the business imperative of climate change and increasingly understand it to be an existential threat that can have long-term impacts on their people and business operations.

“A warming planet creates a wide range of risks for businesses, from disrupted supply chains to rising insurance costs to labor challenges. Climate change and extreme weather events such as hurricanes, floods and fires, for example, have a direct impact on 70 percent of all economic sectors worldwide,” it said.

Some of the ways that climate change is already impacting or threatening to impact companies across the world are operational impact, scarcity/cost of resources, regulatory/political uncertainty, increased insurance costs or lack of insurance availability and reputational damage.

At the 2023 World Economic Forum (WEF) Annual Meeting, international organisations like the World Trade Organization (WTO) and others, warned that deglobalization would negatively impact the world and especially emerging economies.

Alexander De Croo, Prime Minister of Belgium, said creating a trade agenda that prioritizes inclusivity and decarbonization is a major priority.

“Many European governments have welcomed the recent embrace of sustainability in US economic policy. The world can only be happy that the United States has moved to the right side of the aisle on climate,” he said.

Ngozi Okonjo-Iweala, director-general of WTO, said services that are green, digital, inclusive will determine the future of trade.

In a statement, the WEF said many nations have seen a push to relocate manufacturing closer to consumers’ demand, after supply shocks associated with port blockages, the war in Ukraine and the COVID-19 pandemic.

“Moreover, concerns about national security have caused many nations to question their over-reliance on certain countries for critical goods and services, such as European dependence on Russian energy,” it added.

Before climate change became a global priority from a fringe one, the Paris Agreement was adopted by 196 parties at the UN’s Climate Change Conference in 2015.

The Agreement often referred to as the Paris Accords or the Paris Climate Accords, is an international treaty on climate change.

It covers climate change mitigation, adaptation, and finance and the long-term temperature goal is to keep the rise in mean global temperature to well below 2 °C (3.6 °F) above pre-industrial levels, and preferably limit the increase to 1.5 °C (2.7 °F), recognizing that this would substantially reduce the effects of climate change.

Emissions should be reduced as soon as possible and reach net-zero by the middle of the 21st century. And there is an agreement that every five years, there will be an updated plan that would reflect the country’s highest possible ambition at that time.

“Seven years ago, world leaders signed an international treaty to limit global warming to well below 1.5°C. Nonetheless, efforts remain insufficient to limit global temperature rise to 1.5 degrees Celsius by the end of the century,” said Fida Kibbi, vice president and head of Marketing, Communications and Sustainability & Corporate Responsibility at Ericsson Middle East and Africa.

She said the ramifications and severity of climate change vary depending on where you live. “In Africa, climate-related problems have been significant including the current floods in Nigeria and droughts in Somalia, Ethiopia, and Kenya as few examples to mention.”

During the 2021 UN’s Climate Change Conference commonly referred to as COP26, another agreement called the ‘Glasgow Climate Pact’ was signed by 197 parties. It aims to reduce unabated coal usage.