Part A. Why Resilience
A-2. Market Failures at the Heart of the Challenge
Why are responses from companies and governments to supply chain disruptions often reactive and isolated? The answer lies in market failures.
Supply chains are complex, multifaceted, and fragmented, involving thousands of players, making them difficult for anyone to oversee, let alone control. Only one in three surveyed businesses have good visibility beyond their first-tier suppliers and associated risks. This lack of upstream and downstream visibility is a major barrier to addressing supply chain disruptions.23 Companies may be discouraged from investing in logistics networks when competitors benefit without contributing, a classic free-rider problem. As a result:
- Manufacturers and retailers, also known as shippers or freight buyers, often respond by modifying their global supply chains. Strategies include keeping inventory buffers, nearshoring, regionalizing, or diversifying their sources, manufacturing bases, and logistics providers. Those investing in resilience or adaptation tend to focus on assets within their direct sphere of influence (e.g., factories or warehouses) rather than on logistics and transport infrastructure that connects their products to consumers. Likewise, many supply chain risk management tools used by corporations are ‘location-focused,’ overlooking the transport legs of the chain.
- Freight forwarders and logistics service providers (LSPs) have sharpened their tactical role as trouble-shooters. They work to anticipate disruptions anywhere in their networks and respond quickly by retiming deliveries, rerouting, switching modes, or using backup carriers. Technological innovations have also been widely adopted: digital twins of global supply chains, combined with predictive analytics and AI, are helping both shippers and LSPs improve resilience, efficiency, and decision making. A further priority is improved coordination and information sharing, for example to facilitate container transfers through ports.
Yet something crucial is being overlooked: these strategies only work around the problem. Truly solving it requires investing upfront in making logistics infrastructure, opera- tions, and the workforce more resilient.
Adaptation, supply chains and transport remain blind spots in the Paris Agreement and NDCs. Progress on implementing the agreement – including the goal on global adaptation24 – has been slow due to an overemphasis on mitigation, while the Global South continues to call for equal attention to finance and adaptation, combined with local development. Moreover, supply chains have long been overlooked across all aspects: mitigation, adaptation, and finance. While 81% of Nationally Determined Contribu- tions (NDCs) include adaptation, of the 23 third-generation NDCs submitted by July 2025, only half include transport adaptation measures, and those often lack detail beyond a generic mention of adapting transport infrastructure to a changing climate.25 26 A contributing factor is that costs and benefits from adaptation measures needed to build the investment case are poorly understood.6
Supply chains, logistics and adaptation are often shortcomings in companies’ climate efforts. ‘Scope 3’ greenhouse gas (GHG) emissions make up 75% of an average company’s footprint, yet only 37% report on all scopes to the environmental disclosure platform CDP, and just 30% recognize upstream climate-related risks in their value chains.27 28 29 Few companies have incorporated supply chains into their climate adaptation strategies: while 21% of those assessed by Standard & Poor’s already have adaptation plans, these tend to focus more on their own assets than on transport and logistics parts of their supply chains that usually are outsourced.30
A short-term mindset dominates political and economic systems. Immediate concerns, such as strikes or inflation, take priority over long-term planning for impacts like coastal inundation or food system collapse. Similarly, after disasters, companies focus on getting back on their feet quickly, while governments prioritize immediate local emergency relief after storms or crop failures.
Both governments and companies struggle to allocate budgets for building long-term resilience, especially when it involves supporting other countries or deeper parts of a company’s value chain. Deep uncertainty, which means not knowing how future scenarios will play out, further complicates decision-making.31 They and other actors also hesitate to invest independently due to the diversity of hazards and adaptation measures, the challenges of predicting extreme weather (location, frequency, intensity, and impact), and the uncertainty of when and to what extent benefits will materialize.
The connection between consumers and producers is also weak. Since COVID, almost half of consumers in both advanced and developing economies place importance on buying local from their own markets.32 However, consumers don’t always know where their vegetables, clothes, or the critical materials in their mobile phones come from, weakening the link between them and producers. Labels on products can be inconsistent or misleading.33 As a result, the damage that climate change or other disruptions inflict on local communities in poorer countries is less visible to consumers. Contributing to this disconnect is the fact that more than half of consumers everywhere are preoccupied with the rising cost of living, and for 81% of surveyed consumers price is the main consideration in purchase decisions.34
What if...
- we make supply chains, that connect producers and consumers across the globe, drivers of resilient climate action and local sustainable development
- by building innovative partnerships that co-invest and collaborate on solutions…
- …to make critical logistics links in shared supply chains more resilient, while reducing emissions and improving sustainability…
- …benefiting all stakeholders from communities to companies, countries and consumers.
