Physical risks are called out by the SEC climate disclosure rule for Scope 1, but March gave us an example of how unanticipated physical risks can manifest beyond Scope 1. A little over a week ago, I questioned how companies are to account for changes in or inefficient transportation routes for products or raw materials (Scope 3). Then, the Francis Scott Key Bridge in Baltimore, Maryland collapsed – cutting off the country’s fifth largest container shipping port. The impacts of that event were discussed by Ford CFO John Lawler, who CFO Dive reported as saying it will
“probably lengthen the supply chain a bit… At this point we’ll have to work on what that means for us specifically. We’ll work on workarounds. We’ll have to divert parts to other ports along the East Coast or elsewhere in the country.”
Other companies face the same problems and solutions that will result in higher Scope 3 transportation emissions for an indeterminate period of time.
Then, according to Renewable Energy World, a March 15 hailstorm damaged thousands of solar panels at the 350-MW Fighting Jays Solar Farm in Fort Bend County, Texas. The project developer stated that the solar farm is operating at “reduced capacity,” but I couldn’t find estimates for what the reduced capacity is or how long it will take before it is back to 100%.
Companies should plan for supply chain disruptions impacting Scope 2 and 3 emissions, whether those disruptions are related to physical risks or other factors like geopolitical upheaval. Risks like these should be identified by companies themselves, but it is also crucial to explore how carbon/GHG emissions software solutions reflect such risks or changes that manifest in your company’s Scope 2 or 3 emissions.
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