Tornadoes in several US states highlight increasing risks of extreme weather to supply-chain operations

• Tornadoes in six states damaged industrial facilities and rail lines and killed at least 90 people.
• The rare December storms put more pressure on already strained supply chains.

A massive storm caused dozens of tornadoes to rip through six Midwest states over the weekend. Authorities said the extreme storms were responsible for at least 90 deaths, and dozens of people are still being searched for. Their out-of-season timing in December has wide-ranging repercussions for supply chains and risk management.

While the scientific community is still researching the connection between tornadoes and climate change, the climate crisis has been linked to an increase of severe weather. Extreme heat, less rainfall, and insect outbreaks have been linked to negative effects on the availability of major food crops, manufacturing, the transportation of goods, and employee productivity. And while tornadoes do occur in December, the ones on Friday and Saturday were unsually long and intense. The disruptions from the tornadoes worsened supply-chain issues that were already strained because of the COVID-19 pandemic.

Increasingly, organizations have been forced to prepare for more frequent and severe natural disasters across the US. The annual cost of disruptions to supply chains from natural disasters rose to $95 billion in 2020. The frequency and intensity of weather and climate disasters costing over $1 billion have also grown since 2000. There were 22 events in 2020, a record.

Industrial facilities damaged by the tornadoes included a candle factory in Mayfield, Kentucky, and an Amazon warehouse in Edwardsville, Illinois, which collapsed. Both were operating night shifts in response to an increase of holiday orders and have been criticized for doing so during inclement weather.

Experts say the growing risk from the climate crisis to supply chains will likely mean higher costs and prices. This is because of a rise in the probability of severe weather events and disasters each year, which are capable of damaging manufacturing facilities and other assets. Lower yields for many crops from wildfires, droughts, and pests could raise commodity prices and insurance prices. Supply-chain disruptions also became much more common during the pandemic and affected several Fortune 500 companies.

According to a 2020 sustainability report from the consulting firm McKinsey, the companies that should be the most concerned about the risk from the climate crisis to their supply chains are the ones that specialize in specific materials, products, or geographic regions. For example, the likelihood of an intense hurricane capable of disrupting the supply chains for semiconductor chips — a key component in many types of electronics — may grow by two to four times by 2040.

Companies like Mars that are concerned about the risks to their supply chains have become more proactive and willing to invest in mitigation efforts on a long-term basis. The multinational behind brands like Pedigree and Snickers has transitioned to renewable energy for its offices and manufacturing facilities. It is also working to manage the effects of droughts and extreme weather in places like western Africa, where many of its key ingredients are grown.

Earlier this year, Barry Parkin, Mars' chief procurement and sustainability officer, told Insider the approach was now an integral part of the company's global business model. "We have to work on everything," he said.