Since 1910, Australia’s climate has warmed by just over one degree Celsius, leading to an increase in the frequency of extreme weather events.
Since 1910, Australia’s climate has warmed by just over one degree Celsius, leading to an increase in the frequency of extreme weather events. Not only are these events, like bushfires and flooding, destructive to all of Australia’s inhabitants, but also impact things like the moving of goods domestically and abroad. These are critical elements for our modern economy.
The record wildfires in Australia, and droughts across Australia and Asia, are just a few recent examples of extreme events that have had knock-on effects around the world. This is due to supply chain disruptions with everything from lumber to semiconductors to chocolate. There is no sector or geographic region that is, nor will be, immune from the effects of climate change.
It is becoming easier to see the direct impact that consumer-facing sectors are dealing with from climate-influenced supply-chain disruption, especially since the pandemic began. The nature of global manufacturing and agribusiness, with its interconnected web of supplier and customer relationships, further exposes these sectors to climate risks. The full reason behind these climate change disruptions are enormously complex, but the forward looking research is quite clear. These climate change patterns are only increasing, and with it, increased probability for supply chain disruption.
So how can businesses tackle climate change with supply chain planning?
Cut emissions and lower risk for disruption.
Apple, Coles, and Woolies, among many other companies, have pledged to cut emissions from operations to net zero by a certain date. With the supply chain touching anywhere from sixty to eighty per cent of an entire business at all times, a holistic, integrated approach is needed. Looking at the impact of the environment from product development through to post-sales and service, is requried. In the past, supply chain leaders have prioritised a ‘just-in-time’ mentality to minimise assets and reduce costs and inventory. Today, such an approach may not achieve the broader corporate ESG goals. Higher costs may be required to deliver marginal improvements in emissions or water performance. Given the somewhat scarce nature of the most ‘sustainabile’ or ‘environmentally concious’ goods, this could also create an opening for more supply chain disruption risk, not less, due to single sourcing of materials, poor supplier performance, or other risk exposure.
Think about the long-term, but act now.
It is all well and good for organisations to make long-term goals, but sustainability is a collective responsibility and we do not have a long runway. In August, the United Nations Secretary General Antonio Guterres said about the latest IPCC Climate Report, that we are now in a ‘code red’ for humanity. With greenhouse‑gas emissions from fossil-fuel burning and deforestation choking our planet, there is an imminent risk of hitting the 1.5 degree Celsius threshold in the near-term. Not only is it the government’s responsibility, but it’s also the businesses’ responsibility to help reach commitments set at COP26.
One way for businesses to help is to adapt their supply chain decision-making. From end-to-end network design, to sourcing, to product development and long-range demand and capacity planning, it is crucial to act now for long-term effects. By using advanced planning tools that allow for scenario planning, this helps balance resource efficiencies with top-down requirements at the pace in which your business is moving. This incorporates sustainabile thinking into supply chain operations. As an added bonus, through holistic, connected planning, businesses can better gauge the impact of weather changes to plot and pivot away from some of these potential disruptions. This can take up to several months, and derisk all of business operations by taking a long-term, environmentally minded approach.
Align your people, profits & the impact on our planet.
Supply chain emissions are on average 5.5 times as high as a corporation’s direct emissions. The very problems supply chains are good at solving, such as moving raw materials around and shipping finished goods around the world with ruthless economic efficiency, can also be delpoyed to better the environment. Empowering your organisation’s employees, partners and customers around the world through the usage of technology will help them make a difference in running smart campaigns to derisk operations from climate disruption.
According to McKinsey, supply chain impacts account for more than 80 per cent of greenhouse gas emissions and more than 90 per cent of the impact on air, land, water, biodiversity and geological resources. Adopting new supply chain tools and capabilities today, will allow business leaders to achieve their climate change and business goals. The way business leaders respond to and plan for climate change today, will define the way they drive better decision-making tomorrow. The time to act is now.
Evan Quasney, Global VP, Supply Chain LoB, Anaplan.