Lack of data is the biggest driver of increased renewable energy supply chain risk – WTW

Lack of data is the biggest driver of increased renewable energy supply chain risk – WTW | Business Insurance America

Eight in 10 agree that the lack of alternative suppliers has hampered their company’s supply chain resilience

Risk Management News

By Kenneth Araullo

WTW’s latest report revealed the most significant challenges facing the renewable energy supply chain sector in 2023, as well as key findings regarding the risks of renewable energy, as more and more companies comply with the net-zero program.

That of the insurer 2023 Renewable Energy Supply Chain Risk Report found that 74% of companies said supply chain losses had been higher or much higher than expected over the past two years. As expected, 44% also cited shortage of raw materials as the top supply chain factor that will impact businesses over the next two years.

  • 84% of respondents said they had made improvements to their approach to supply chain management in response to COVID
  • 85% said lack of data, knowledge and understanding were among the biggest challenges to addressing risk over the next three to five years
  • 80% agreed that the lack of alternative suppliers hindered their ability to implement an effective two- or multi-source strategy

Risks on the horizon for renewable energy

The insurer’s supply chain survey also shed light on the uncertainties and hurdles on the path to energy transition. They are the following:

  • Geopolitics – considered to have the greatest impact on supply chain risk, geopolitical tensions are ranked by 57% as medium impact and 25% as high impact. The ongoing conflict in Ukraine, for example, has cut off a source of lithium needed for batteries.
  • Critical shortages – the shortage of raw materials tops the list of factors expected to have the biggest impact on renewables over the next two years. Logistics and warehousing shortages as well as component shortages are also highly rated, highlighting the sector’s dependence on critical supplies.
  • Cyber ​​- renewable energy sources such as wind turbines and solar farms are often built in remote locations, requiring the use of centralized computer systems for remote control, thus exposing them to cyber risks . Cyber ​​is also named as the most important effector on supply chains, with 39% calling it high risk for their businesses.
  • Economic – soaring energy prices have a huge impact on suppliers and contractors, leading to increased risks to manufacturing capacity. Rising material and labor costs and volatility in energy prices may also impact revenue and growth projections.
  • Climate change and the environment – ​​more than half of respondents said climate change and the environment were among the top trends influencing supply chain resilience. This is mainly driven by concerns about the carbon footprint, all the more important as the sector is supposed to offer a cleaner future thanks to renewable energy.
  • ESG – 82% of respondents said that ESG is a specific selection criteria when selecting new supply chain suppliers. As renewable energy becomes an increasingly common source of energy, the industry is under increasing pressure to source responsibly and sustainably.
  • Workforce – this includes the difficulties in attracting and retaining talent in the renewable energy sector. Currently, the industry is facing major labor challenges as the demand for green jobs exceeds the availability of skilled workers.
  • Pandemics – while the world as a whole may have already seen the worst of COVID, the risks involving new strains or an entirely new pandemic are still seen by many as a sore point.

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

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