Sustainability & Supply Chain: Climate Change
by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling
Consumer and media concern with environmental and social issues in the supply chain is growing. As a result, businesses are becoming increasingly interested in reducing supply chain waste, optimizing packaging, and using renewable energy sources. The firms that are adapting to the demands of the market are being rewarded.
However, the focus on sustainability and supply chain has been focused on brand loyalty and value, rather than on supply chain risk. Regardless of scientific and political views on climate change, climate change and the supply chains they affect are inextricably linked. Businesses need to have an understanding of how this affects their supply chains and plan accordingly.
Changes in climate can impact commodity prices and availability especially in natural resource-dependent industries. Therefore, it’s extremely important for companies to assess and know the vulnerability of their suppliers. Just as companies need to have a real-time visualization of their supply chains, they also need to have real-time knowledge of supply chain risks from climate change. Supply chain analytics need to be used to gather actionable intelligence to develop forward-thinking strategies.
Just as Secretary of State John Kerry issued his first policy directive, highlighting climate change as an important issue, the 2014 Annual MHI Industry Report highlights supply chain analytics as an important, emerging necessity across all industries.
Brazil serves as an example of the linkage between climate change and supply chain. The country is the world’s largest exporter of coffee, sugar, soy, and cattle and is facing the worst drought in decades. In regard to coffee in particular, higher prices are looming and analysts fear shortages.
Climate change also affects population dynamics as conflicts over natural resources are more likely and damage to resource-based economies leads to human migration. Both of these can affect supplier availability, distribution, as well as costs and prices. Supply chain analytics allow companies to develop strategies to prepare for such disruptions in supply chain and be proactive rather than reactive.
More information on supply chain analytics and other innovations that drive supply chains are available in the 2014 Annual MHI Industry Report which can be downloaded at www.mhi.org.
