From Connectivity to Complexity: Supply Chain Digitalisation, Governance Capacity, and Climate Vulnerability

Abstract

ABSTRACT The complexity of the global supply chain system, coupled with advanced digitalisation makes it difficult to estimate its domino effects on climate vulnerability. A clear understanding of the possible climate vulnerability consequences generated all over the world is, however, a fundamental step toward building socio‐economic resilience and planning effective adaptation strategies. Within this context, this paper examines how supply chain development and digitalisation affect climate vulnerability across 162 countries from 1990 to 2022, with particular attention to governance capacity. Climate vulnerability is measured using the ND‐GAIN overall vulnerability index; supply chain development is proxied by air transport departures; and supply chain digitalisation is captured by the net ICT goods trade balance. Using complementary static and dynamic panel estimators, supported by diagnostic tests and robustness checks, the study finds that supply chain development consistently reduces climate vulnerability, with the resilience‐enhancing effect becoming stronger after correcting for endogeneity. By contrast, supply chain digitalisation is positively associated with climate vulnerability across most specifications, indicating that the digital transition may intensify climate exposure when clean energy systems and institutional support do not adequately match rising energy demand, infrastructure complexity, and weak risk‐management capacity. The results further show that governance quality strengthens the protective role of supply chain development and shapes the extent to which digitalisation translates into resilience. The study therefore recommends resilient, digitally enabled supply chain systems, supported by strong governance frameworks that safeguard critical logistics corridors and strengthen climate adaptation capacity.