Source
Securing the availability and supply chain of critical raw materials
and resources includes sub-challenges, such as:
- Water scarcity. The availability of fresh water for irrigation is
declining, especially in regions affected by droughts and flooding,
while flooding and rising sea levels cause water salination,
making the water unusable for agriculture. - Declining crop production. Suboptimal weather conditions are
decreasing agricultural yields, such as European heat waves that
lead to crop failures. Additionally, climate effects are increasing
the appearance of pests and invasive species, while changing
growing conditions mean many traditional crops are now
unviable. - Access to critical materials. Due to climate effects like sea
level rise, storms, and droughts, interruptions and/or significant
slowdowns in supply chains are expected. This means critical
materials will become increasingly expensive to procure,
including rare earths or rare metals for the manufacturing
of batteries. - Disrupted supply routes. Interruptions and/or significant
slowdowns to the transport and distribution of raw materials,
resources, goods, and services are increasing due to severe
climate events. For example, due to droughts, the Panama Canal
functioned at reduced capacity during the winter of 2024, with a
major impact on global supply chains.
Example: Wine industry requires resilient crops
Since grapes grow in narrow temperature zones, with average growing season temperatures between 12°C-22°C (56°F-72°F), increasing heat and more severe climate events such as longer heat waves are reducing winemakers’ productivity. For example, in 2022, France saw its smallest harvest since 1957 due to increased heat waves and rain, costing the industry around US $2 billion in sales. Vineyards near Madrid, Spain, can no longer make wine below 16%-17% alcohol, which falls outside mainstream consumer tastes. Producers that have started moving to regenerative agriculture have suffered invasions of ants that have eaten their vines. Water scarcity is also a key issue for vineyards in countries such as Chile. Adaptation technologies are needed, and companies are experimenting with new techniques that enable modifications to vines to increase their resilience against diseases and climate events.
Make
Manufacturing and other industrial processes also must adapt to a changing climate, including sub-challenges, such as:
- Energy and water supply. The instability of traditional electricity grids and water shortages caused by extreme climate events impact reliable access to energy and water. As a result, companies are looking to reduce inefficiency and install water recycling systems.
- Productivity improvements. Despite challenges around raw material availability, companies need to preserve product quality to ensure customer satisfaction, while maintaining their manufacturing processes against a backdrop of extreme temperature variations. To offset these factors as well as supply chain and business interruptions, companies are looking to potentially increase the pace of production, reduce labor and inventory costs, and/or rationalize manufacturing processes to optimize costs and meet changing consumer needs.
- Working conditions. Companies must maintain viable working temperatures in factories and offices despite frequent heat waves, while implementing remote working plans to mitigate more frequent epidemic risks.
Example: Securing a reliable energy supply
Due to cheap labor costs, India is home to many textile, electronics, and automotive factories. Today, according to experts we interviewed, the Indian electricity grid is 70% coal-powered and 15% hydroelectric, with the remainder coming from nuclear and solar sources. However, the country imports coal from Indonesia and Australia, and lower Indian rainfall due to climate change means that hydroelectric and nuclear power plants are not as efficient as they once were. This makes the Indian grid highly unstable, with two-thirds of rural and two-fifths of urban households reporting that they face at least daily outages, also interrupting factory production. Adaptation technologies could help improve energy supply (e.g., through smart grid and stabilization systems).
Protect
Industrial sites and assets (including extraction, manufacturing, and logistics) must be protected from climate change impacts, such as rising temperatures/sea levels and extreme climate events. This includes sub-challenges such as:
- Detection and alert. With the increase of unforeseen climate events, such as flooding and storms, governments and companies must ensure they have better capabilities to both predict and warn people of such dangers.
- Shielding. In the event of sea level rise, floods, and storms, companies must better protect their assets and infrastructure from damage, using natural or man-made solutions.
- Resilient design. With more severe climate events, companies also must consider new ways of designing and building resilient assets, such as solar panels that can easily be removed before a storm hits.
- Remediation. Companies face increased damage or loss of their machinery/production sites due to extreme adverse climate events. To limit downtime and productivity losses, they must be more efficient and quicker to restart production after such interruptions.
- Relocation. Some key business locations will be vulnerable to sea level rise/flooding (e.g., China, Vietnam, and Bangladesh) and droughts/heat waves (e.g., Sub-Saharan Africa, India, and Southeast Asia), forcing companies to find more resilient locations for their industrial sites and assets. For example, in China, the headquarters of Alibaba in Hangzhou, the Suzhou Industrial Park (Panasonic’s country headquarters) and Tesla’s Shanghai Gigafactory are all located in at-risk areas.
Example: Military bases on the US East Coast
Sea level rise and more severe storms and flooding are increasingly affecting businesses on the US East Coast, with studies showing that flood frequency is predicted to triple in the coming years, reaching up to 85 flood days a year by 2050. At the same time, assets and real estate continue to be built in high-risk locations. The US military’s East Coast bases are impacted by this trend. In 2018, for example, a hurricane and floods ripped through a naval base, causing about $4.7 billion in damage, while affecting its ability to conduct and support operations in the Atlantic. The US Department of Defense estimates that there are more than 1,700 US military installations in coastal areas worldwide that may be affected by sea level rise. Consequently, the US military has begun to pilot adaptation measures. For example, it is building sea walls at its Norfolk, Virginia, naval base, and, in the Hampton Roads area, the US Navy has updated its building criteria to ensure more resilient infrastructure.
Sell
Companies must ensure goods and services are competitive and differentiated amid a changing climate while adapting to new consumer behaviors, including new use cases and changing customer demands. This includes sub-challenges such as:
- New products and services. Companies must design new innovative products and services in response to emerging needs driven by climate change (e.g., heat-resistant fabrics).
- New usage patterns. Companies must better understand and anticipate future consumer expectations and patterns of consumption, adapting their business models to remain competitive (e.g., embracing recycled, reusable, and modular products).
- Changing sales channels. In the event of climate-driven supply chain disruption, companies must still be able to deliver products to consumers. They also need to transform sales channels to mitigate against changing consumer behaviors.
Example: Modular products in the automotive industry
New car prices are rising due to increasing material costs. This is driving consumers to look for cheaper options with lower environmental impacts, such as buying used cars (2023 sales were up 5% on 2022), leasing vehicles (with this market expected to reach approximately $5.4 billion by 2030 in Europe, from $3.25 billion today, assuming a constant euro-dollar exchange rate), or car-sharing to reduce costs. To remain competitive, automotive manufacturers must look to reduce the customer’s cost of ownership. One way to do this is to develop modular products, which allow users to easily customize their vehicle. By having fewer, more standardized and interchangeable parts, and incorporating fasteners to eliminate the need for screws and bolts, each modular component is designed to be cheaper and easier to assemble/disassemble, while extending the overall product lifecycle. Demonstrating the impact, rather than paying around $1,080 to replace an entire seat with one with lumbar adjustment, in a modular seat all that would be needed is to change and upgrade part of the backrest, at a cost of approximately $108 to the customer.
“We used to look up at the sky and wonder at our place in the stars. Now we just look down and worry about our place in the dirt.” – Cooper, Interstellar