Climate Adaptation Unlocking Value Chains with the Power of Technology 2025

Climate risks can impact value chains in many ways, such as a decline in raw material quality or quantity, supply chain disruption, destruction of production capacity, shifting consumer preferences, weakened community support systems and harm to employees’ health. Each of these causes financial impacts from increased operating costs and lower revenues to unforeseen asset damage and escalating insurance premiums.16 Collaboration is therefore vital. If one part of the value chain fails – for example, a raw material supplier goes out of business due to a hurricane – the repercussions will reverberate all along the chain. Companies have to adopt a systemic approach to climate risks. Collaboration unlocks several benefits, including:1. Increased resilience to climate change impacts for companies and their value chain partners, safeguarding operations and long-term growth. 2. Improved financial returns by pooling adaptation investments, reducing costs and unlocking collaborative value creation. 3. Streamlined regulatory compliance through unified adaptation standards and metrics across the value chain. 4. Accelerated research and innovation for adaptation by combining the expertise of value chain players and technology providers. 5. Greater positive impacts on communities, ecosystems and local businesses through more equitable access to technology and data. Physical climate risks threaten value chains in five dimensions FIGURE 4 Core value chainInput supply of raw materialsProduction Processing & packaging Storage & distribution Retail & services End consumer Shapi ng agents Financi al institu tions Policy-makersDeteriorat ion of quality and quant ity of raw materialsDisruption of global supply chain networkDestruction or deteriorat ion of production a ssets or capac itiesImpacts on employees' healt hImpacts on consumer preferences and produc t purchases e.g. The number of regions most suited to growing coffee will decline by 50% by 2050.e.g. In 2011, floods in Thailand disrupted the operations of over 14,500 global companies, resulting in losses of $15-$20 billion. e.g. In 2013, typhoon Haiyan in the Philippines inflicted losses of $3 billion, damaging over 2,300 health facilities and 560 transmission towers.e.g. Heat stress in the US causes labour shortages and kills 40 workers annually in farming, construction and delivery .e.g. Wildfires have led to an 11% drop in tourism revenues in Califor nia, amounting to a $51 million loss in 2017 alone.Natural resour ces Operations Assets Employees Market Shape context and influence behaviour directly or through policy-makers (e.g. NGOs, donors, academia, communities, public influencers, tech innovators)Steer behaviour with financial incentives and by framing policy boundaries (e.g. national and local gover nments, multilateral institutions)Facilitate investments and influence the system (e.g. banks, investors) Sources: BCG-GRP-USAID, Grüter, Trachsel, Laube & Jaisli, BBC, Government of the Philippines, Asian Development Bank, Time Magazine, Visit California.17 Climate Adaptation: Unlocking Value Chains with the Power of Technology 8