It's the end of the global supply chain as we know it

To be sure, the world has continued to rely on China-centric global supply chains over the COVID-19 pandemic. But this is different.

First, unlike previous supply chain disruptions caused by natural disasters such as earthquakes or floods, the supply chain disruptions from Ukraine and Shanghai are primarily due to geopolitics. In Ukraine, Putin’s aggression prompted the West to impose broad and coordinated anti-Russia sanctions. In Shanghai, a key factor behind the harsh lockdown is Beijing’s desire to prove that its pandemic policy is superior to the West’s.

Second, both the events in Ukraine and Shanghai revealed how critical global logistics are and how global supply chains can break down overnight. Prior to 2022, the pandemic’s disruption was primarily limited to human movement, with global freight logistics remaining structurally unaffected. The twin events have major logistical implications. Following the Russian aggression, all ocean freights were suspended in the Sea of Azov and the Black Sea, and most air freight was suspended when dozens of countries closed their airspace to Russian aircraft. In the case of Shanghai, the port of Shanghai has experienced major disruptions not seen since the beginning of the pandemic.

Third, the COVID-19 pandemic has brought environmental, social, and governance (ESG) issues to the forefront, and CEOs are paying close attention to them.