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A study of 12,000 suppliers in the US, China and Taiwan that served 100 Original Equipment Manufacturers (OEM) of technology, automotive and consumer goods found that 49% of suppliers experienced an increase in climate variability, with the proportion much higher in China and Taiwan (93%) than in the US. The most at-risk suppliers are those whose disruption would have major impact on the OEM’s revenue.
Recently, there has been extreme weather events across the world. In August 2022, extreme flooding in Pakistan saw the tragic loss of 1,500 people and negatively affected more than 33 million more. The floods were caused by monsoon rains that have been linked to melting glaciers that followed severe heat waves, all of which have been directly attributed to human-caused climate change. Despite Pakistan contributing less than 1% of global greenhouse gas emissions.
“What we saw in Pakistan is exactly what climate projections have been predicting for years.” Dr Friederike Otto
The floods have also impacted how the United Nations food aid is transported to Afghanistan, previously much needed food aid was delivered to Afghanistan via Pakistan.
What can you do to mitigate climate-related risks from your supply chain?
Organisations need to understand the impact of losing suppliers through climate and other risks associated with business to ensure climate continuity plans are in place should a supplier be unable to deliver their goods or services.
One way of mitigating climate related risks is to map out your suppliers that directly or indirectly support your organisation. Understand and collect all the critical data including; costs, risks, delivery times and carbon footprint of each supplier. This data can be used to get ahead of any supply chain disruptions ahead of time.
Examine the vulnerability of each supplier and how their local region could be affected by extreme weather patterns and local geopolitical risk factors.
Integrate technology that ensures you can process the data you’ve collected on your suppliers to proactively monitor and prepare for extreme weather events.
By utilising a supply chain whose response to climate risk will ensure not only business continuity but will provide a competitive edge and advantage. Procter & Gamble (P&G) were affected by Hurricane Katina however their purpose-built facility was built with climate risk in mind. P&G were among the first manufacturers to restore operations following Hurricane Katrina due to their facility being designed to withstand 130 – 140mph winds and therefore held their 40% share of coffee sales within the US consumer market.
There are huge benefits to ensuring your supply chain has elements of climate continuity plans in place, disruption due to severe weather is the biggest climate change issue facing organisations currently. However climate change and it’s affects will vary from country to country and from location to location within that country. The level of risks faced by organisations will also vary.
Extreme weather events will continue to impact supply chains across the world unless more is done to minimise climate change. The Procurement Bill 2022 can be the lever for change if we can ensure that it’s amended to legally enshrine environmental obligations onto the Public Sector to make environmentally friendly procurement decisions. As it stands, there are no environmental obligations, we’re actively encouraging procurement professionals, stakeholders and the wider community to sign the petition. This will ensure that taxpayers’ money is spent in an environmental and climate friendly manner.