Building Resilient Supply Chains

CLIMATE CHANGE IS HERE.

Climate change is one of the most critical and relevant topics discussed at all levels of decision-making, both private and public. It refers to a sustained shift in conditions, reflected in a broad range of changes happening across the planet like rising sea levels, intense droughts, severe fires, melting polar ice, or extreme and unexpected weather events. The cause of the current climate emergency is mainly due to humans burning fossil fuels, such as natural gas, oil, and coal. Burning these materials releases greenhouse gases that, in turn, trap heat in the Earth’s atmosphere. Limiting the global temperature rise to 1.5°C would maintain the current living climate. However, if the current carbon dioxide emissions continue growing at the current rate, the global temperature could surge to 4.4°C by the end of the century. To avoid reaching 1.5°C, we should reduce greenhouse gas emissions by 7.6% per year between 2020 and 2030, and to stay below the two degrees Celcius limit, emissions must fall by 2.7% per year. The Earth is an interconnected system, and people experience climate change in various ways, but it globally affects the ability to grow food, health, safety, and work.?

How does climate change impact global supply chains?

How should companies behave to make them resilient?

https://www.tnpconsultants.com/expertises/business-excellence/supply-chain/

UNDERSTANDING SUPPLY CHAINS

The supply chain (SC) covers everything from product development, procurement, production, distribution, logistics to the information systems needed to coordinate these activities. They enable everything’s output, from cellphones to food and clothes. We identify modern SCs by expanding global reach, the specialized inputs made in increasingly specific locations, and reduced inventories for just-in-time production. Companies have streamlined their chains, making them efficient and cost-effective. These characteristics make them vulnerable to the slightest disruptive effects of climate change.?

The global presence of supply chains causes them to emit large amounts of greenhouse gases, mainly from raw materials and from transporting the goods worldwide for transformation or customer delivery. For example, systems to produce, package, and distribute food generate a third of greenhouse gas emissions. If left as-is, they will increase by 40% by 2050. It is therefore essential to intervene wherever possible to avoid further harmful effects.

THE IMPACT

Climate change is already affecting SCs in terms of cost, quality, speed, and responsiveness, thus leading to higher prices or shortages for consumers. However, companies could see this as an opportunity to improve their current SC and reduce attached costs if they adapt to physical and regulatory risks, meet changing customer expectations, protect workers, and adopt new technologies. For example, the price of an espresso cafe in Italy, a country that drinks about 6 million cups a year, will increase from 1 euro to 1.50 euros in 2022, due to the drought and then the frost that affected Brazil’s arabica production. However, producers, importers, and bar owners see a chance to choose better quality coffee stored in sustainable packaging and served in an innovative multisensorial experience. Furthermore, according to a recent report from the United Nations Development Program, climate change will make it difficult for people to get to their jobs, meaning that by 2030 the productivity will decrease, costing the global economy 2 trillion USD.

A structured assessment of the SC helps identify high-risk and quickly impacted areas, such as points where greenhouse gas emissions are high. Nine international companies such as Amazon, Ikea, and Unilever have already moved to decarbonize the highly polluting shipping industry by pledging to only move cargo on ships using zero-carbon fuel by 2040. More than 160 firms with a cumulated 70 trillion USD in assets have jointly decided to move towards net-zero emissions reaching the Paris Agreement goals. By identifying and acting on where they have the most impact and influence, companies, with the help of key partners, can address climate-related risks in their supply chains while creating value and developing a competitive advantage.

TNP, STRATEGIC PARTNER FOR CHANGE

TNP, as an expert in strategic and operational business changes and as an independent consulting firm, makes a significant commitment to the results it co-builds with its partners and customers to ensure sustainable performances. TNP’s knowledge and experience can help its clients strengthen and create a more resilient supply chain by:?

• Raising awareness through workshops and communication to support employees at all levels on climate-related issues. TNP’s experience has confirmed that change is more likely to be adopted if it comes from within.
• Establishing value chain emissions baseline and exchanging data with stakeholders. TNP’s proven track record in defining the client’s comprehensive emissions baseline is significant in moving towards sustainability and decarbonization.?
• Helping companies engage in deeper, long-term collaboration with their suppliers to create a comprehensive green strategy. Using TNP’s green sourcing management and carbon footprint calculation solutions, clients can identify their suppliers’ climate change mitigation strategies and buy more responsibly.
• Striving for low or zero greenhouse gas emissions in supply chains is crucial to reducing climate change and its associated risks. A top luxury company with TNP’s expertise is establishing ways to reduce its CO2 emissions in the logistics and transport sectors.?
• Studying the risk horizon to adapt to long-term changes. Analyzing global warming trends and their impact on the resources needed to produce goods and services will help create more robust risk-mitigation plans. TNP, with a digital partner, has already collaborated with several clients to trace its prime resources throughout the SC.
• Adapting to new EU regulatory measures scheduled for early 2023 to improve the reliability, comparability, and transparency of ESG ratings. The flash ESG diagnostic turnkey solution offered by TNP has been and will continue to be strategic for European companies wanting to comply with the new legislation.?

The primary objectives of successful supply chain management are producing and timely delivery of quality goods or services that provide value to customers. Climate change, however, is a systemic risk that will continue to disrupt each of these supply chain factors. Companies can build resilience and increase their likelihood of business sustainability through awareness, identification, prioritization of affected parts of the SC, impact evaluation, and partnering with green transformation experts such as TNP.??

Author:?Maria Alejandra Isturiz

References:

Banna, Christian. “Caffè fino a 1,50 a tazzina: così il clima fa volare il costo dell’espresso”, Corriere della Sera Torino, October 17, 2021,? https://torino.corriere.it/economia/21_ottobre_17/cosi-clima-surriscalda-tazzina-l-espresso-non-piu-low-cost-bf09ed60-2f76-11ec-bd6a-15e70609c741.shtml

“Key Findings.” United Nations, United Nations, https://www.un.org/en/climatechange/science/key-findings.?

“The Causes of Climate Change.” NASA, NASA, August 30, 2021, https://climate.nasa.gov/causes/.?

Thomas, Daniel. “Amazon, Ikea and Unilever pledge zero-carbon shipping by 2040”, BBC, October 20, 2021,?https://www.bbc.com/news/business-58970877

Toroitich, Isaiah, et al. Edited by Matthew McKinnon et al., United Nations Development Program, 2016, pp. 3–28, Climate Change and Labour: Impacts Of Heat In The Workplace.?

Wei, David, and Chase, Marshall. “Climate and Supply Chain: The Business Case for Action” BSR, September 2018. https://www.bsr.org/reports/BSR_Climate_and_Supply_Chain_Management.pdf