Most climate risk assessments start with a list of addresses. Each plant, warehouse and office gets a rating for flood, heat or wildfire. That tells you which buildings might flood. It doesn't tell you whether you can still ship, and this year showed the difference.
If your main freight route shut for a week, or ran at a fifth of its capacity for a month, what would it cost you? If nobody in the business can put a figure on it, that's the place to start.
What this year did to freight
On the Rhine, the water-level gauge at Kaub in Germany read below 10 cm on 14 August, against an old record of around 25 cm, according to a European Environment Agency briefing. By late July, barges passing Kaub were often only about 20% loaded. Freight from the Amsterdam, Rotterdam and Antwerp ports to Basel went from about €35 a tonne to €277 by mid-August. Companies turned to road and rail, but one barge can take up to 150 trucks to replace. Covestro declared force majeure on products from its Dormagen site.
On the Mississippi, low water pushed up barge rates for the fourth year in a row. Spot rates for grain heading south from St. Louis averaged $25.67 a ton in the third quarter, up 34% on a year earlier, according to the US Department of Agriculture's grain transportation report. Volumes were up 6%. Shippers just paid more to move them.
In New Mexico, flooding from 24 October damaged BNSF's main line. More than 150 trains were affected, and average transit time from Los Angeles to Chicago went from 5.34 days to 7.16 days, according to Kuehne+Nagel.
Australia's National Climate Risk Assessment says it gets worse. Replay the October 2022 floods across Victoria and New South Wales in a 2090 climate, and the value of freight they block goes from A$4.9 billion to A$9.3 billion (more people and more freight explain part of that). Replay a worse version of the 2022 floods that cut the Eyre and Stuart highways, and detours get 730 km longer on average, with some as long as 3,200 km.
Why the number matters, with or without the rules
The international climate disclosure standard, IFRS S2, asks where in your business and value chain climate risks are concentrated, and what they do to your finances. If one river or rail line carries most of your inbound goods, that's the kind of concentration it means. Australia's climate reporting standard is built on it and is being phased in by size through 2027. Many service businesses won't find freight material. Manufacturers, food companies, miners, retailers and logistics firms often will.
But finance teams should want this figure even if no standard asked for it. Every fix for a fragile lane costs money: stock built up before the dry season, rail booked on take-or-pay terms, a second supplier on another corridor who charges more. Without a cost per disruption day, nobody can tell which of those is worth paying for. The same figure belongs in capital decisions. A new plant, a warehouse lease or an acquisition that depends on one river or rail corridor should carry that route's cost of a bad event in the business case.
Logistics teams often say continuity plans already cover this. They cover recovering from an incident. A lane that runs low most summers keeps costing you, so it needs a line in the budget. And passing the cost on only works if you can still ship and your contracts let you reprice. If you sell on fixed prices, the freight premium is yours.
While you're at it, ask your broker whether your contingent business interruption cover needs physical damage before it pays. A low river damages nothing.
How to put a figure on a route
- Map the routes that matter as they really run, not as straight lines.
- For each, estimate how many days a year flooding, heat or low water could close it or cut its capacity, now and under the scenarios you already report on.
- Check whether a closure strands your freight or whether there's a detour, what it adds, and whether the fallback would be hit by the same weather.
- Cost a disruption day: the extra freight cost, the margin on sales you'd lose or deliver late, any penalties, and the days it takes to clear the backlog.
- Multiply out an expected cost per year and the cost of one bad event, show it as a share of operating profit, and compare both with what prevention would cost.
Where technology earns its place
This is hard to do in a spreadsheet, and harder to keep current. Routes change, hazards change, and the scenario you need is rarely in a carrier's history. A once-a-year workbook gives you a number that's out of date by the next dry season, with no record of how it was built.
The work suits technology because the hard parts are spatial and repetitive. Software can lay your routes on the real road, rail and sea network, check each stretch against hazard projections under each scenario, test whether trucks would be stuck or could detour, and turn disruption days into a cost per route you can rerun whenever your network or the climate data changes. It also keeps the trail an assurer will ask for: which routes were in scope, which data and scenarios were used, and why.
A global logistics company did exactly this. It already had its own method, projected days of disruption a year multiplied by operating cost. Socialsuite's Logistics module, working with its Climate Risk Assessment, mapped the company's routes on the real road, rail and sea network, estimated disruption days per route under each scenario, and checked whether trucks would be stuck or could detour. Each route got a cost of disruption by scenario and time horizon that the company can use in planning and disclosure, next to the physical risk at its sites across 14 hazard types, with the audit trail to support assurance.
What to change before your next assessment
Put your critical routes in scope next to your sites, starting with the lanes that have no real alternative. The cost of a disruption day is a finance number, so finance should own the route figures, built with logistics, before the scenario analysis is signed off. Then the cost of a bad event on those routes goes to the audit and risk committee alongside the other principal risks.
