Lack of data leading factor in rising renewable supply chain risks – WTW

Eight in 10 agree that lack of alternative suppliers has impeded their businesses' supply chain resilience

Lack of data leading factor in rising renewable supply chain risks – WTW

Risk Management News

By Kenneth Araullo

The latest report from WTW revealed the most prominent challenges facing the renewable supply chain sector in 2023, as well as key findings regarding the risks involved in renewable energy as more and more companies are getting in line with the net-zero program.

The insurer’s 2023 Renewable Supply Chain Risk Report found that 74% of businesses said that losses related to the supply chain had been higher or much higher than expected over the last two years. As expected, 44% also named the shortage of raw materials as the biggest supply chain factor that will impact businesses in the next two years.

Other findings include:

  • 84% of respondents said that they have made some improvements in their approach to supply chain management as a response to COVID
  • 85% said that a lack of data, knowledge, and understanding were among the factors posing the greatest challenge to addressing risks over the next three to five years
  • 80% agreed that a lack of alternative suppliers impeded their ability to implement an effective dual or multi-source strategy

Risks on the horizon for renewables

The insurer’s supply chain survey also highlighted uncertainty and obstacles on the road to the energy transition. They are as follows:

  • Geopolitical – thought to have the greatest impact on supply chain risks, geopolitical tensions are rated by 57% as medium and 25% as high impact. The ongoing conflict in Ukraine, for instance, has cut off a source of lithium needed for batteries.
  • Critical shortages – the shortage of raw materials topped the list of factors thought to have the greatest impact on renewables in the next two years. Logistics and warehousing shortages as well as component shortages are also rated highly, stressing the dependence of the sector on critical supplies.
  • Cyber – renewable energy sources such as wind turbines and solar farms are often built in remote locations, necessitating the use of centralized computer systems to control remotely, therefore exposing them to cyber risks. Cyber is also named the most profound effector on supply chains, with 39% calling it high-risk to their businesses.
  • Economic – soaring energy prices are impacting suppliers and contractors hard, resulting in heightened risks for manufacturing capacity. The rising cost of materials and labour as well as volatile energy prices can also influence projections of income and growth.
  • Climate change and environment – more than half of respondents said that climate change and environment are among the top trends influencing supply chain resilience. This is primarily driven by concerns about the carbon footprint, made all the more important as the sector is meant to deliver a cleaner future through renewable energy.
  • ESG – 82% of respondents said that ESG is a specific selection criterion when selecting new supply chain vendors. As renewables become a more prevalent energy source, there is more pressure on the industry to source responsibly and sustainably.
  • Workforce – this includes difficulties in attracting and retaining talent in the renewable sector. Currently, the industry faces major workforce challenges as the demand for green jobs is outpacing the availability of qualified workers.
  • Pandemics – while the world at large may have already seen the worst of COVID, risks involving new strains, or an entirely new pandemic are still seen by many to be a top pain point.

“Working more closely with suppliers as partners can help companies understand their supply chains better and address these risks. Diagnostic mapping and monitoring tools and analytics can help to visualize, quantify and assess risks across the chain and in specific locations,” WTW said.

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