Risk to Resilience in the Pet Industry: Part II From Awareness to Assessment Why Measurement Is the First Step to Resilience

| Article by Hannah Hintz, Sr. Sustainability Analyst, PSC, Bard MBA in Sustainable Business, GARP SCR (Sustainability & Climate Risk) Certificate Holder |

Climate and sustainability pressures are already affecting ingredient sourcing, packaging requirements, retailer expectations, and the operating costs across the pet industry. Yet many companies still lack visibility into where they are most vulnerable, and what disruption could mean for their business.

In Part I of this series, we established that climate and sustainability risk is already affecting how the pet industry operates, from ingredient availability and production costs to retailer requirements and consumer expectations. Now the harder question: how do you actually begin to size these risks for your business?

There is currently no single framework for doing this. Every company’s starting point may be different, shaped by its size, supply chain, geography, risk tolerance (and data available). What this article offers is a directional overview, a set of concepts and questions that any pet company can use to begin understanding where it is exposed, how vulnerable it is, and what the potential impact could be.

This is not a technical guide to risk modeling. It is a foundation for strategic thinking. The goal is to move from knowing that climate risk exists to understanding what it might mean for your operations, your suppliers, and your integrated bottom line.

A Starting Framework: Exposure, Vulnerability, and Impact

Measuring climate risk starts with a willingness to look honestly at your business. It begins with three questions:

• Exposure: Where does your business touch climate-related hazards or sustainability pressures? 
• Vulnerability: How sensitive is your business when those hazards hit? 
• Impact: What would be the actual business consequences if a risk event played out?

These questions do not produce a single definitive risk score, but they can provide clarity about which parts of your business are most exposed, where you are most sensitive to disruption, and what the financial consequences could look like. That clarity is the foundation for everything that comes next, from supplier conversations to capital planning to disclosure.

The sections below walk through each question with examples relevant to the pet industry, followed by an introduction to scenario planning and a framework for risk assessment. 

Question 1:

Exposure: Where Does Risk Touch Your Business?

Exposure is about proximity. It asks where your operations, ingredients, facilities, and markets come into contact with climate-related hazards or sustainability pressures. The more these overlap, the higher your exposure.

For the pet industry, exposure is broader than most companies initially recognize.

Upstream: Supply Chain and Ingredients

Protein ingredients such as chicken, beef, lamb and salmon come from agricultural and fishing systems that are highly sensitive to climate change. Drought, heat stress, ocean warming and extreme weather all affect availability and price.  For pet companies, this can show up as poultry shortages, fishmeal price volatility, delayed ingredient shipments, or sudden formulation changes when key proteins become difficult to source.

Companies relying on single-source suppliers in climate-vulnerable regions face concentrated exposure: if that supplier goes down, there is often no quick or easy backup.

Many pet companies also have limited visibility beyond their Tier 1 suppliers. Risks present at the farm, the watershed, or the fishing ground are invisible until they show up as a price spike or a stockout.

Operationally: Facilities, Energy, and Logistics

Manufacturing facilities located in flood zones, wildfire corridors, or extreme heat regions face direct physical risk to operations and worker safety. Energy costs are directly tied to climate policy: as carbon pricing and clean energy requirements expand, operating costs shift. Logistics networks that depend on specific ports, highways, or cold chain infrastructure are vulnerable when extreme weather disrupts movement. This could translate to delayed ingredient deliveries, increased freight costs, or inventory shortages.

Downstream: Markets, Retailers, and Consumers

Major retailers are embedding sustainability requirements into procurement decisions. Companies that cannot answer basic questions about their environmental footprint face increasing risk of being deprioritized. Regulatory exposure is also growing: the EU’s Corporate Sustainability Reporting Directive (CSRD), and California’s SB-261 are beginning to reach more companies of all sizes through their supply chains.

Consumer trust is exposure too. Pet owners are emotionally invested in their pets’ wellbeing and increasingly extend that care to how products are made. A brand caught flat-footed on environmental claims faces real reputational risk.

Question 2:

Vulnerability: How Much Would a Disruption Actually Hurt?

Exposure tells you where you’re touching the risk. Vulnerability tells you how bad the impact would be if that risk materialized. The same hazard can produce very different outcomes depending on how prepared a company is to absorb, adapt, or respond.

Factors that increase vulnerability include:

• Concentration: Relying on one or two suppliers, one key ingredient, or one manufacturing facility creates single points of failure. When that point breaks, everything downstream breaks with it.
• Limited supply chain visibility: If you can’t see beyond your Tier 1 supplier, you can’t see risks already present further up the chain.
• Thin margins: Companies with little financial cushion have less capacity to absorb cost spikes or operational disruptions without passing them to customers or changing inputs. 
• No contingency plans: Without tested response plans, companies move slower and at much higher cost when problems arrive.

Factors that reduce vulnerability include:

• Diversified supplier networks across geographies and production systems
• Long-term supplier relationships with transparency into upstream practices
• Formulation flexibility that allows ingredient substitution when needed
• Contingency plans that have been stress-tested before a crisis
• Investment in the health of natural systems within and around key sourcing regions, a point we return to below

Question 3:

Impact: What Are the Business Consequences for Risk?

This is the question that often goes unasked until it is too late. Impact is the real financial and operational consequence when a risk event plays out. Putting even a rough estimate on that consequence is one of the most powerful things a pet company can do. It transforms risk from an abstract concern into a business decision.

Direct impacts include ingredient cost increases when a key protein becomes scarcer due to drought or disease, operational disruptions from extreme weather, compliance costs when new regulations require product or process changes, and capital losses if facilities are damaged by physical climate events.

Indirect impacts include customer and retailer attrition if supply commitments cannot be met, reputational damage if sustainability claims cannot be substantiated, and rising financing costs as lenders increasingly price climate exposure into lending decisions.

Moving Beyond Inquiry to Build Readiness with Scenario Planning

Measuring risk exposure and vulnerability gives you a picture of where you stand today. Scenario planning extends that picture forward, asking how different versions of the future might affect your business.

This is not forecasting, as the future is uncertain, it is stress-testing. Rather than trying to predict what will happen, scenario planning explores how your business would fare under a range of plausible conditions, allowing you to identify gaps, test assumptions, and make more informed decisions before disruption forces them.

For a pet company, relevant scenarios might include:

• A world with stronger climate regulation: Carbon pricing is in effect, retailers require verified sustainability data, and consumers actively choose lower-impact products. Which of your current suppliers would still be viable partners? Does your portfolio hold up to scrutiny?
• A world of more frequent physical disruption: Extreme weather events increase in frequency and severity. Drought hits key agricultural sourcing regions. Ingredient costs spike and availability tightens. How resilient is your supply chain to a sustained disruption?
• A world where supply chain transparency is the baseline: Full visibility into ingredient sourcing is expected as standard, not premium. What would you need to know (and be able to show)  to retain your most important retail partners and customers?

The value of this exercise is not finding a single right answer. It is surfacing the questions your business should already be asking under standard risk assessment. Companies that work through scenarios, even informally, consistently report that the process brings to light risks that were known but unspoken, and turns individual concerns into shared strategic priorities.

A Proven Risk Management Logic: Identify, Assess, Manage

ne framework has shaped how climate risk is approached across industries, financial institutions, and regulators worldwide: the Task Force on Climate-related Financial Disclosures, or TCFD. This framework has become the foundation for the IFRS S2 climate disclosure standard, the EU’s CSRD, and major regulatory frameworks globally. Understanding its logic is relevant for any company operating in or selling into international markets.

The core of TCFD’s risk management approach is a straightforward three-part process:

The logic is straightforward: risks that are not identified cannot be assessed. Risks that are not assessed cannot be managed. And risks that are not managed do not disappear, they accumulate quietly until they become crises.

The logic is straightforward: risks that are not identified cannot be assessed. Risks that are not assessed cannot be managed. And risks that are not managed do not disappear, they accumulate quietly until they become crises.

Most pet companies are not yet doing formal climate risk disclosure, yet the identify-assess-manage logic is useful at any scale and at any stage. A small pet treat brand and a large multi-category manufacturer both benefit from asking: Have we looked for our climate risks? Do we understand how serious the biggest ones could be? Are we doing anything about them? Starting to answer those questions, even informally, is the beginning of real risk management.

Start Now: You Don’t Have to Have All the Answers

One thing that holds many companies back is the belief that climate risk assessment requires certainty, specialized expertise, or a formal process. It does not.

The goal is not a perfect risk score. It is to see your business more clearly than you did before. Rough but honest answers are almost always more useful than polished answers built on unexamined assumptions. Start with your team and ask:

• Which ingredients or materials are we most dependent on? What happens if any one of them is disrupted for 60 to 90 days?
• Where are our manufacturing partners and key suppliers located? Are any of those areas increasingly affected by drought, flooding, wildfire, or extreme heat?
• Have any of our retail partners or key customers asked about our sustainability practices or environmental footprint in the last 12 months? What did we tell them?
• Are there regulatory changes on the horizon, in climate policy, packaging, or labeling that could affect our cost structure or product formulations?
• If our top supplier raised prices by 20% due to climate-related production disruptions, could we absorb that? What would we do?

The answers, or the realization that you do not have them, tell a great deal about where your business stands. It is the starting point.

Moving From Awareness to Action

Across the industry, we see leading companies beginning to take steps that are directly tied to business performance, not separate from it:

• Asking supply chain partners specific questions about their climate exposure and contingency planning
• Using scenario planning to stress-test sourcing and operations against a range of futures
• Identifying their highest-impact risk categories and prioritizing those for deeper assessment
• Embedding risk and resilience questions into supplier selection, product development, and capital decisions

None of these require a sustainability team or a formal risk management program. They require a willingness to ask better questions and take the answers seriously.

The Takeaway: Measurement Is Where Risk Becomes Real

Understanding that climate risk exists is necessary. Knowing what it means for your specific business is what creates the opportunity to act.

The pet industry is still early in this journey compared to sectors like food and beverage or financial services. That creates both risk and opportunity. Companies that invest in understanding their exposure, vulnerability, and impact now, even imperfectly, even informally  will be better positioned when disclosure requirements tighten, when retailer demands escalate, and when the next climate-related disruption tests supply chains that were not ready for it.

The opportunity is to move before disruption forces the question.

Ready to take the next step?

The Pet Sustainability Coalition (PSC) is proud to support sustainability leaders within the pet industry and welcomes all others to join us. Our coalition connects you with peers doing this work, provides industry benchmarks through our State of Sustainability report, and offers resources to help you build a more resilient business.

Get the tools, benchmarks, and community to build a more resilient business.

About This Series

Risk to Resilience in the Pet Industry is a three-part series from the Pet Sustainability Coalition exploring how pet companies can understand and act on climate and sustainability risk. Part I introduced the types of climate risk and why they are material to the pet industry. Part II (this article) provides a directional framework for beginning to measure and size those risks for your specific business. Part III will move from assessment to action, covering how pet companies can integrate risk findings into real business decisions: supplier engagement, product and portfolio strategy, governance, and stakeholder communication. If Part I is the why and Part II is the what, Part III is the how.