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Delivering mitigation and adaptation

Climate change set to shape supply chains

Supply chains are at the heart of the climate crisis. They are both critical to the climate change response, by delivering the climate solutions we need to mitigate and adapt, and extremely vulnerable to the impacts of climate change.

How can organisations in New Zealand prepare for the future and build resiliency in their supply chain? Recognising the climate-related trends and influencing pressures that are impacting supply chains is a good first step. We identify four global climate-related trends that will – and in many cases already are - shape supply chains, impact New Zealand’s supply chain exposed industries, and influence New Zealand’s climate change response:

1. Supply chains will shift. Disruptions will persist

Globally, new supply hubs will emerge as some countries dominate supply of new ‘climate change solution’ products. This may challenge current economic power balances. The physical attributes of supply chains will also change. The types of products that need moving, how the products are moved, and the volumes required, will change.

Managing exposure to disruption of supply chains will be critical for New Zealand. Disruption will come in the form of supply-demand imbalances and the physical impacts of climate change. Not only is New Zealand exposed to an increase in severe weather events at home, but climate related disruptions offshore can drastically impact global supply chains that New Zealand is reliant on. Adaptation planning must involve resilience planning in this context.

2. An increase in trade of ‘climate change solutions’

There will continue to be high demand globally for supply of components that enable the transition to lower carbon economies. In New Zealand, most of the products we need for decarbonisation such as raw materials (e.g. building materials) or finished products (e.g. EVs), need to be imported.

New Zealand heavily relies on global supply chains to respond to climate change. The challenge here is in being in a position to guarantee supply, particularly in the short term as demand is likely to continue to outweigh product availability.

Scope 3 emissions will come into focus: it’s not just you who cares about your carbon.

The irony of the global decarbonisation challenge is that the supply chain must deliver the components to decarbonise, but it must do so in a low emissions manner. This is reflected in the opening line of a 2021 publication by the World Bank: “While trade exacerbates climate change, it is also a central part of the solution because it has the potential to enhance mitigation and adaptation."

4. Pressure to decarbonise from investors will increase

Organisations will face increased pressure from investors to decarbonise the supply chain. This is driven both by mandatory reporting (such as the climate-related disclosures) and publicised net-zero commitments. Transport and logistics more broadly is an obvious high emitting sector that investors with a net-zero commitment, or investors looking for lower carbon alternatives, are likely to scrutinise.

Organisations that can understand the changing supply and demand dynamics in light of climate change, will not only survive – but thrive.

For more about climate change and supply chain resilience, take a look at our 2023 Ports and Freight Yearbook here.

Catch up on the other blogs in our series, covering supply chain resilience here and the economic outlook for global trade here.

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