The sticker shock we’ve all experienced on grocery food bills is not a temporary anomaly but a sign of a deeper, systemic issue. Recent analysis indicates a significant proportion of food price inflation can be directly attributable to climate change-related factors. As the effects of climate change accelerate, we should be under no illusion that these effects will also mean higher food prices.
Some commodities are more vulnerable than others. Cocoa, for instance, has seen prices surge over four years primarily due to climate change-induced heatwaves in major growing areas such as West Africa. For fmcg brands, the question is no longer ‘if’ disruption will hit, but whether they’re ready when it does. The stakes are high, and climate change now ranks as one of the most pressing risks for causing disruption to fmcg supply chains.
The world’s breadbasket regions face drastically increased exposure to spatially compounding hot, wet, or dry extremes. This isn’t abstract future risk, it’s today’s reality. In 2024, extreme weather destroyed crops across the globe, from flooded corn fields in Tanzania to drought-withered coffee in Vietnam. The ripple effects of these disasters cascade through interconnected systems. But climate change runs far deeper than a single failed crop. It is a systemic risk that affects all crops and supply chains simultaneously. For fmcg products, it means volatile commodity prices are here to stay and the weekly shop is going to get more expensive.
Major food and beverage manufacturers are increasingly nervous about the accumulation of climate risk within their agriculture supply chain. These are no longer abstract threats. They are tangible risks materialising as water scarcity intensifies, transport disruptions become more frequent and carbon prices make fossil fuel-dependent productivity more costly. The convergence of physical, regulatory and reputational risk means that a brand’s resilience to climate-related risks is directly correlated to its long-term viability. Unless businesses can get a handle on these risks and build resilience, they will continue to experience cost shocks that are not sustainable over the longer term.
Traditional risk management, based on historical data, is no longer fit for purpose in this era of unprecedented volatility. The scale of the challenge demands a more sophisticated response. Forward-looking analytics are now essential, enabling businesses to move from reactive crisis management to proactive strategy. By modelling climate and nature related risks at a granular, asset level – such as the risks to a key processing plant – decisionmakers can finally identify hotspots and hidden interdependencies across their supply chain. Using scenario analysis allows the business to stress-test their sourcing strategies against both acute and chronic climate-related risks.
On the consumer side, research shows that firms aligned with ESG-related aspects consistently outperform their category growth rates, in some cases by several percentage points [McKinsey]. Remarkably, over half of consumers are willing to pay an average of 10% more for sustainably produced goods, despite a cost of living crisis [YouGov]. Research by Risilience shows that companies that lead in building resilient and decarbonised supply chains can secure access to capital at more favourable rates, attract and retain top talent, and build trust with consumers who increasingly favour brands that demonstrate genuine environmental stewardship.
As climate volatility intensifies, the future belongs to those who can transform data into resilience. The most successful organisations will be those that recognise climate resilience not as a cost centre, but as their next competitive advantage, turning planetary boundaries into business possibilities.
Scott Kelly, SVP model development, Risilience
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