CLIMATE

Locating natural disaster risk

CLIMATE

Natural disasters
are a matter
OF WHEN, NOT IF

MEXICO’S ADAPTIVE CAPACITY
is notably better than other
high-risk countries

The five locations identified most at risk of sourcing disruption from climate and weather events are the Philippines, Indonesia, India, Colombia, and Mexico. Four of these lie on the Circum-Pacific Belt, a region prone to extreme weather events such as earthquakes, typhoons, and volcanic activity. Each is also deeply embedded in global trade, which amplifies the potential for disruption.

Based on data from the World Risk Index (WRI), we assess the likelihood of natural disasters and pair this with the prevalence of sector-specific sourcing in those locations. Notably, the top five countries in the climate risk heatmap mirror the global top five identified by the WRI.

Not all climate risks are equal, however. Different regions face different types of hazards, and the impact varies depending on the industry and its ability to withstand climate shocks. Consequences may range from crop destruction and infrastructure collapse to power outages and disruptions in the cross-border flow of goods and services.

Buyers should consider the risk of climate shocks but assess this alongside coping capacity and adaptive capacity, namely the ability of companies and governments to cope with and adapt to extreme weather events. For example, while the top five score highly for likelihood, many other countries are far less able to withstand extreme weather impacts.

THE PHILIPPINES

Highly exposed to super typhoons and flooding, the Philippines poses serious and frequent risks to sectors like food and beverage—particularly coconut oil. Services such as BPO face a more moderate but growing risk. While typically located in areas with stronger infrastructure, these services remain vulnerable to power outages, connectivity issues, and transport disruption. As the BPO sector expands into more provincial locations, buyers should factor climate resilience into due diligence.

INDONESIA

As the world’s largest exporter of palm oil, accounting for over 50% of global supply, Indonesia is highly vulnerable to flood and drought cycles that directly impact crop yields. It is also an expanding manufacturing hub for textiles, footwear, and consumer goods, with many industrial zones situated in flood-prone areas. Buyers adding capacity or establishing operations in Indonesia should be aware of these risks and embed resilience measures and contractual safeguards accordingly.

Agriculture exports and
BPO services
PARTICULARLY IMPACTED

INDIA

India’s vast geography makes it vulnerable to nearly every major type of natural disaster. Twenty-seven of its twenty-nine states face regular exposure to cyclones, floods, droughts, earthquakes, and landslides. Given India’s scale and global importance, from food and textiles to pharmaceuticals and tech, risk cannot be avoided but can be strategically managed. Not all sectors face the same exposure, and “where” you source from in India matters greatly.

As the world’s most populous country and a major food supplier, natural disasters in India can trigger global ripple effects. Cyclones in the east frequently damage rice and sugarcane harvests, disrupting international supply chains. For service sectors like BPO, the risks are often indirect, such as energy or water shortages following floods, which have caused temporary shutdowns in recent years.

COLOMBIA

Colombia’s geographic and geological diversity makes it among the countries most vulnerable to natural disasters. Located on the Andean seismic belt, it experiences frequent earthquakes, landslides, and seasonal flooding - especially during El Niño and La Niña cycles. Limited infrastructure resilience and uneven emergency response across regions exacerbate these risks.

Key export sectors such as agriculture (coffee, bananas, flowers) and mining are highly exposed, with frequent disruptions to domestic logistics and international trade flows. For sourcing professionals, contingency plans in Colombia must address both chronic weather volatility and sudden geophysical events.

INDIA & COLOMBIA

Risk impact can
VARY BY REGION
within a country

THE PHILIPPINES
& INDONESIA

As a key nearshoring hub, its resilience is increasingly important for manufacturing strategies. Buyers should assess not just exposure to climate risk but also a country’s ability to adapt, an often-overlooked factor in location decisions.

THE US, EUROPE, AND CHINA

Major economies like the US, China, and Australia rank high in climate risk not because of poor resilience but because their size and geography make extreme weather inevitable. When disasters do strike, the impact may be amplified globally due to their central role in supply chains (subject to coping capacity). At the other end of the spectrum, European supply chains benefit from a more stable climate, but sourcing here often comes with higher costs and stricter regulation. Still, recent flash floods and droughts across Europe suggest that climate risk is no longer limited to developing markets.

Sectors like food and beverage, construction, and retail, which are often reliant on just-in-time models, are especially exposed. As a result, procurement strategies are evolving toward just-in-case planning, diversified sourcing, and resilience-first thinking.

MEXICO

Mexico faces hurricane threats on both coasts, along with inland flooding and drought. Despite these challenges, it demonstrates a strong adaptive capacity bolstered by a solid infrastructure, economic development, and disaster planning. While most countries in our index perform relatively well compared to less economically advanced nations, the duality of Mexico’s vulnerability and adaptive capacity stands out even among leading trade economies.

SOURCING AND SUPPLY TACTICS

Hedge supply sources across alternative geographies. For climate, resilience often means finding another, similar source of natural and physical resources and alternative infrastructure. This can be problematic due to the concentration of skills, raw materials, and conditions.

Companies like Coca-Cola have expanded sugar and fruit sourcing across India and Mexico to manage water stress. Elsewhere, fashion brands such as H&M and Zara hedge production across Turkey, Eastern Europe, and Asia to balance the likelihood and impact of different hazards.

Hold safety stock for vulnerable critical products or inputs. Climate events can trigger sudden, multi-week shutdowns in production or transport, something that just-in-time models struggle to absorb. Just-in-case inventory offers a buffer, allowing near-continuous operations during such events. Not all sectors or inventory strategies are alike. What to stock, where to store it, and at what level will vary by product and logistics. Some firms treat inventory as a contingency; others integrate it into long-term resilience plans.

A notable example was Toyota’s response to earthquakes and floods in the 2010s, which included mapping risk across 650 components and boosting inventory to cover multiple months’ supply for critical parts.

Plan and forecast using real-time weather data and predictive analytics. Today’s sourcing professionals can access accurate, real-time climate data that integrates with supply chain systems. Early warnings enable proactive decisions, rerouting logistics, expediting shipments, activating dual sourcing, or adjusting inventory before disruption hits and ahead of competitors. Leading companies are embedding them into their most vulnerable supply chain nodes.

For example, Cargill uses satellite sensing to monitor drought and soybean crop health in Brazil, while Walmart integrates weather patterns into its automated planning system to preposition inventory before disasters, protecting availability and accelerating recovery.

3 | FORECASTING TECHNOLOGY

2 | INVENTORY MANAGEMENT

1 | CLIMATE LED SUPPLY
DIVERSIFICATION

SOURCING AND SUPPLY TACTICS

For sourcing professionals today, climate risk can be unavoidable in specific sectors; natural disasters are likely, not exceptional. This reinforces the need to balance locations where possible and invest in local coping mechanisms and contingency plans.