The Impact of Extreme Weather on the Supply Chain

Weather is a persistent threat to supply chains. At its most extreme, severe weather can cause loss of life, as well as disrupt transportation networks; damage critical infrastructure; cause production stoppages; and destroy crops, buildings and homes. 

In addition to operational disruption, extreme weather has significant economic impacts. 

Figures from EM-DAT (Emergency Events Database) found that tropical cyclones drive the most economic damage. Since 2000, these extreme wind events have caused more losses than any other weather category. Non-tropical cyclones rank second. This trend is accelerating as evidenced in the last decade – four of the five most costly years have occurred since 2017.  

Furthermore, EM-DAT found that global economic losses from flooding have also surged by 27% since 2000 to an average of $42 billion every year. 

This pattern reveals a clear intensification of supply chain disruptions. However, this is not just about the cost of disruption – it is also a hidden tax on the global economy. The cost is ultimately passed down to all of us as consumers. 

The Surprising Domino Effect 

Extreme weather in one part of the world can trigger a cascade of disruptions in industries that seem entirely unrelated. 

Wheat, for example, has many uses besides food such as bread, cake, and pasta. Different parts of wheat are used in a variety of products including cosmetics and skincare, adhesives, surface coatings, polymers, resins, particle boards, paper products and so forth. Similarly, cacao, oats, and rice are also used in pharmaceuticals, cosmetics, and skincare products. 

A shortage of these key ingredients, therefore, translates to higher costs for more than just foodstuffs. Food manufacturers, pharmaceutical companies, and cosmetics brands end up in a bidding war for the same limited resource.   

In a global shortage, supply and demand can create a volatile spot market sending prices soaring. This was starkly demonstrated in 2025, when cacao prices surged 300% above the early 2024 prices. 

Compound Events and Damage to Infrastructure 

We are also witnessing a rise in “compound events,” where multiple extreme weather phenomena occur simultaneously or in rapid succession.  

A hurricane might be followed by torrential rains, leading to widespread flooding and landslides. A heatwave might be accompanied by a drought and wildfires. These compounding crises overwhelm traditional risk management strategies. 

In addition to the challenge of weather intensification, the fact that much of the world’s critical infrastructure is aging and in desperate need of investment. Ports, bridges, power grids, and transportation networks are all facing unprecedented strain, and this strain is being exacerbated by extreme weather. 

In late 2025, a series of three consecutive cyclones in South and Southeast Asia caused extensive flooding and landslides. The cyclones caused loss of life, as well as impacted agriculture, infrastructure, manufacturing, and logistics.  

In Sri Lanka, the highway network suffered an estimated $615 million in damages, and only 30% of the railway network remained operational. In southern Thailand, damage to roadways and rail lines halted the flow of high-tech and automotive components and disrupted cross-border trade with Malaysia. 

Figure 1: Companies can leverage different responses to climate-related supply chain risks. 

From Reaction to Resilience 

The intensification of extreme weather events is a challenge that we can no longer afford to ignore.  

How can your business navigate this new landscape of risk? The key is to shift from a reactive to a proactive approach.  

Here are some of the key strategies that leading companies are adopting: 

External Risk Assessments

You need to assess which suppliers, distribution hubs, and manufacturing plants are most likely to experience serious disruptions due to weather. This allows you to consider where and how to de-risk your supply chain.  

Diversify Supplier Portfolios

Spreading your supplier base across different climate regions can help to mitigate the impact of a localized weather event.   

Integrate Climate Risk into Long-Term Planning

Climate risk should be a key consideration in all your long-term planning decisions. This includes everything from where you locate your manufacturing facilities to how you design your distribution networks. 

Leverage Applied Meteorology

Applied meteorology can help you to not just forecast the weather, but to forecast the business impact of the weather. This can enable you to plan your shipping schedules to literally bypass disruptive weather, protecting your cargo and preventing costly delays.   

Crop Monitoring

If you rely on agricultural products, you should consider monitoring crops during the growing season. This helps to predict quality and yield months before harvest. As a result, you can secure crops from other sources before prices skyrocket. 

Given the impact of extreme weather on all parts of the supply chain, it is no longer enough to simply know that a weather event is looming. Businesses need to understand the specific vulnerabilities within their supply chains – and get ahead of the storm. 

To learn more about the impact of weather on the supply chain, download the 2026 Annual Supply Chain Risk Report.