Report Suggests Economic, Weather, and ESG Risks as Key Disruptors to Global Supply Chains

In a revealing study released on March 6, 2024, Sphera’s inaugural Supply Chain Risk Report has identified a complex web of challenges confronting global supply chains post-COVID-19 pandemic. With the world gradually emerging from the pandemic’s shadow, the focus has shifted to economic pressures, extreme weather events, and burgeoning environmental, social, and governance (ESG) concerns as primary sources of disruption.

The report, drawing on data from Sphera’s advanced Supply Chain Risk Management (SCRM) software, underscores the profound impact of economic instability on supply chains. Over one-third of financial risk notifications pointed towards a gloomy revenue and growth forecast. The ripple effects of inflation in significant economies such as the EU and US have been particularly harsh, leading to a notable uptick in supplier insolvencies (23%) and bankruptcies (42%). The findings stress the necessity for businesses to stay vigilant about financial health indicators to navigate through economic uncertainties adeptly.

Moreover, the analysis shines a light on the alarming rise in natural hazard warnings, including a 45% increase in tornado warnings, a 26% hike in hailstorm alerts, and a 6% rise in tropical cyclone warnings. Given that two-thirds of the global economy is predicated on predictable weather patterns, such erratic climatic shifts spell trouble, especially for sectors like agriculture, energy, and transportation. The report advocates for robust weather risk management solutions capable of offering real-time monitoring and advanced notifications to mitigate potential disruptions.

Another critical aspect the report delves into is the escalating ESG-related risks, with a notable 6% overall increase in ESG risk indicators. This includes a 12% rise in human rights notifications, a 13% increase in labor practice issues, and a 1% uptick in environmental violations. The surge in these indicators is attributed to factors such as increased globalisation, evolving regulatory landscapes, and the growing scrutiny from consumers and investors alike. Embracing a holistic approach that weaves ESG considerations into corporate strategy emerges as a vital strategy for companies aiming to cushion themselves against these emerging threats.

Paul Marushka, Sphera’s President and CEO, encapsulates the essence of the findings, highlighting the dynamic and evolving nature of supply chain risks that contribute to market volatility. He advocates for the optimization of supply chain compositions and the diversification of suppliers as strategic moves to manage uncertainties. Marushka emphasizes the importance of actionable insights and proactive risk monitoring as tools for staying ahead of potential disruptions, thereby enhancing competitive advantage and fostering resilient, transparent, and agile supply chains.