Preparing for climate risks to key commodities: What businesses should know

For companies that depend on crops such as rice and wheat or minerals such as lithium and iron, climate change has become a real and present threat. Rising temperatures result in more heat stress and more drought. That puts pressure on farms and mines—and, ultimately, the businesses that buy from them.

Take cobalt. As renewable-energy generation expands, makers of solar panels, batteries, wind turbines, and other hardware need more of this critical mineral. From 2017 to 2022, world cobalt demand grew 70%, and the share being used in clean energy tech nearly doubled, according to the International Energy Agency. Demand for critical minerals could double again by 2030.

Meanwhile, the world’s cobalt mines are likely to face more climate stress. Analysis for a PwC report shows that none of the world’s cobalt mines face significant or higher levels of drought risk today. But our projections suggest that in 2035, the mines that now produce 20% of all cobalt would face significant, high, or extreme drought risk—even if global carbon emissions fall substantially. By 2050, the share of current production facing these risks would climb to more than 70%.

And cobalt is just one product that could come under strain. Producers of nine commodities that we analyzed—three critical minerals, three crops that make up a large share of global food supply, and three metals used extensively in industry—can expect worsening heat stress and drought in the years ahead.

Mindful of these challenges, forward-looking companies have begun safeguarding their operations and supply lines against climate-related disruptions. Many are also exploring business opportunities and working across sectors to shape better outcomes. A climate-stressed future won’t be easy for businesses. But companies that get ready now can improve their chances of coming out ahead in challenging conditions.