Climate Change is Disrupting Supply Chains. Is Your Business Ready?

Aug 19

5 min read

Introduction

For many businesses, climate change is no longer a distant environmental concern. It is already affecting how products are made, transported and delivered. In Canada, the 2026 wildfire season has already disrupted transportation and business operations. In July, wildfires in northwestern Ontario forced Canadian National Railway to suspend freight operations along part of a major cross-country rail route (Reynolds, 2026). CN rerouted some traffic through the United States, while heavy smoke prevented access to an affected train (Reynolds, 2026). The resulting wildfire smoke also created health and safety challenges for employees and communities (Reynolds, 2026). Other climate issues such as heavy rainfall and floods also damaged roads, bridges, warehouses, electrical systems and other essential infrastructure. When key routes are closed or facilities are damaged, businesses can face delayed shipments, missed deliveries and extended downtime.

Extreme heat can create equally serious challenges. High temperatures can reduce employee productivity, damage equipment, disrupt transportation and place additional strain on energy systems. The effects are not limited to Canada. In Europe, prolonged heat and drought have caused water levels on the Rhine River to fall to exceptionally low levels (Reuters, 2026a). In July 2026, cargo vessels at the Kaub bottleneck were operating at as little as 20% of normal capacity, while transport costs increased sharply (Reuters, 2026a). By August, some sailings had been halted altogether, disrupting the movement of commodities and creating higher logistics costs for industries that depend on the Rhine (Reuters, 2026b). These examples demonstrate that this is no longer just an environmental issue, but a business risk affecting supply chains, costs, customer service and operational resilience.

How Climate Change is Disrupting Supply Chains

Transportation Disruptions

Wildfires, floods, storms, extreme heat, and drought can affect roads, highways, rail lines, ports, rivers, and canals used to move goods between suppliers and customers. A transportation disruption does not need to occur near a business to cause damage. A closed highway several provinces away can interrupt deliveries across an entire region.

Manufacturing Interruptions

Manufacturing facilities may be forced to slow or stop production because of: power outages or grid instability; flooding at plants, warehouses or critical access roads; extreme heat affecting employees, equipment or temperature-sensitive products; water shortages affecting production, cleaning or cooling processes; and delayed deliveries of components and raw materials. The effects can include missed customer commitments, overtime costs, and lost sales.

Material Shortages and Price Volatility

Climate-related disruptions can reduce the availability of products, minerals, energy, water and more. When supply is constrained, prices can rise quickly. Businesses may also face additional expenses when they need to purchase materials from alternative suppliers, use more expensive transportation routes, pay low-water, fuel or emergency freight surcharges, replace damaged inventory or equipment, or source substitute materials at short notice. The result is greater uncertainty in budgeting and pricing.

Insurance and Business Interruption Costs

As climate-related risks increase, some businesses are facing higher insurance premiums, larger deductibles or more restrictive coverage. Damage to buildings and equipment is only part of the financial exposure. Companies may also lose revenue while operations are interrupted or customers who turn to competitors.

Why SMEs Are More Vulnerable

Small and medium-sized enterprises often have less capacity to absorb disruption than larger organizations. A single disruption can have significant operational and financial consequences. Many SMEs:

Depend on a small number of suppliers or a single sourcing region.
Keep limited inventory to control storage and working-capital costs.
Have smaller financial reserves and less access to emergency capital.
Rely on shared transportation networks and third-party logistics providers.
Have fewer employees dedicated to procurement, risk management or business continuity.
May not have detailed information about their suppliers’ suppliers.

Four Steps SMEs Can Take to Build Resilience

Building supply chain resilience starts with understanding where critical dependencies exist and how climate-related disruptions could affect them. The following actions can help organizations identify vulnerabilities, strengthen continuity planning, and improve their ability to respond and adapt to climate-related risks.

Identify and improve visibility of critical suppliers and assess their climate risks.
- Start by mapping, recording, and tracking the suppliers, facilities, transportation providers and services that are essential to your operations. Identify which inputs would cause the greatest disruption if they were delayed or unavailable. For each critical supplier, consider the locations of facilities, climate-related risks, dependency on transportation routes, whether they have emergency response plans, and resilience after disturbances. A simple risk register can help categorize suppliers as low, medium or high priority.
Diversify suppliers and sourcing locations where feasible.
- Where feasible, avoid relying on a single supplier, region or transportation route for critical materials. Alternative suppliers and substitute materials can provide flexibility when a primary source is disrupted. Diversification may involve higher upfront costs, so it should be prioritized according to business impact.
Incorporate climate risk into business continuity and procurement planning.
- Climate risk should be part of ordinary business planning, not a separate exercise that is reviewed only after a disaster. Plans should address alternate suppliers and routes, minimum inventory levels, emergency contacts, backup powers and other systems, employee safety and remote-work arrangements, better communication during delays, and recovery plans, with periodic testing. Additionally, it is vital that plans assess whether they have sufficient insurance to cover flooding and other business interruptions.
Reduce emissions and improve operational efficiency to strengthen long-term resilience.
- Reducing emissions does not replace adaptation, but it can strengthen long-term resilience. More efficient businesses often use less energy, fuel, water and materials, making them less exposed to rising prices and supply constraints. Investments in efficient equipment and renewable energy as well as improving inventories and planning may also help.

The Business Case for Acting Now

Building supply chain resilience is not simply a defensive exercise. It can create measurable business value. A more resilient SME is better positioned to achieve:

More reliable operations and delivery schedules.
Fewer costly business interruptions.
Lower long-term exposure to emergency freight, shortages and downtime.
Greater relationships and customer confidence and trust.
Improved competitiveness and better preparedness for future risks.

Acting before a disruption occurs and resilience also supports long-term growth. Demonstrating a practical approach to climate resilience can help SMEs meet those expectations and compete for new opportunities.

Conclusion

Climate-related disruptions are becoming more frequent, complex and costly. Wildfires, flooding, extreme heat and drought can affect every stage of a supply chain, from raw material production to transportation, manufacturing and final delivery. SMEs may face greater exposure because they often operate with limited resources and concentrated supplier networks. However, they do not need to solve every risk at once. By identifying critical suppliers, diversifying key dependencies, improving supply chain visibility, incorporating climate risk into planning and reducing operational inefficiencies, SMEs can take practical steps toward a more resilient future.

🌿Achieve Sustainability can help your business identify climate-related supply chain risks, strengthen resilience and develop practical sustainability strategies that protect operations and support long-term growth. Reach out to Achieve Sustainability for a free consultation here or email us at info@achievesustainability.ca.