Supply chain strategy | Opinion

Supply chain climate change challenges

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Will this year be any different?

As interest in the Paris climate talks grows, it’s time business properly understood climate impacts on security of raw material supply

It’s an event described by many as the last great hope for tackling climate change. No wonder people are excited about what might (or might not) be achieved at the upcoming UN climate change talks in Paris.

As a backdrop, the world is already halfway towards the threshold that’s recognised as that which could result in the most dangerous impacts of climate change – a rise of 1C being recorded for the first time.

And the UN has announced that global annual concentrations of carbon are set to pass the 400 parts per million (ppm) mark sometime next year, reaching well above the scientifically decried 'safe' level of 350ppm.

It certainly adds more drama to COP21. It also calls further into question the level of urgency being shown, particularly by the business community

Solid business case

In most cases corporate carbon reduction projects come with a solid business case, even in the absence of effective carbon tax mechanisms. Cutting pollution pays; it’s that simple. But that’s only part of the story and there’s another very big reason that companies need to consider the warming of the planet: the risk to their supply chain.

Examples of companies taking this seriously are thin on the ground. A recent report, produced by the luxury fashion group Kering – which owns brands such as Stella McCartney and Gucci – and Business for Social Responsibility was timely acknowledgement that climate change is real and that its impact will certainly be felt across the apparel sector (and, in fact, they already are).

Thanks to Kering’s impressive environmental profit and loss account (EP&L) work, it knows that nearly three-quarters of its environmental impact – including carbon emissions – sits at the base of its supply chain. To get a better understanding, it commissioned research to explore how exposed a number of its key raw materials are to climate change risk

Small producer struggle

The findings were stark. Climate change is already making it harder for luxury fashion brands to source raw materials – and it will only get harder as small-scale producers continue to struggle against increasingly harsh environmental and social conditions brought about by global warming. Extra fine cotton, vicuña, and cashmere face the biggest risks because of the limited geographic scope of their production regions and their dependence on natural systems.

Asda (part of Wal-Mart) carried out a similar supply chain mapping process with PwC in 2014. Using models practiced by the Intergovernmental Panel on Climate Change, it found that a staggering 95% of its fresh produce category is under threat from the impacts of a changing climate. Next its multiple-processed food product lines will be assessed, before working up plans to de-risk its supply chain.

Partnership approach

Of course, investing in targeted raw material resilience is easier said than done and will require a mix of strategic partnerships and much closer supplier engagement to ensure a security of supply is sustainably maintained.

But it is essential across many sectors – from food and pharma, to apparel and retail. Any business not taking proper steps to secure supply chains in a changing world need to wake up before it is too late.

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