Climate change as supply chain risk

A new study from the Carbon
Disclosure Project (CDP) shows that suppliers could do more to
increase their awareness of supply chain risks related to climate
change. According to the CDP’s Supply Chain
Report, only 58 percent of suppliers to the 34 CDP member
companies considered that climate change posed a risk to their
operations, while one third said it posed no risk. The CDP posits
that this shows a lack of understanding from suppliers to the
business threats from climate change.

At first glance, the thinking of those 33 percent of suppliers
seems forgivable. Sure, they must be thinking: the polar ice caps
are probably melting, but not fast enough to worry about next
quarter’s shipments from China not having a port to dock at. But
CDP’s take on what constitutes climate change risk is broader than
huge shifts in temperature. According to Frances Way, head of
supply chain at CDP, risks posed to a company’s supply chain
from the impacts of climate change include extreme weather events,
water scarcity, regulation, and associated cost volatility.

Under this broader view, the risk is apparent. New regulations
meant to curb emissions could impact supply chains within months,
not years. And even in terms of actual climate change, while it
would take decades for something like rising seas to close ports,
one or two freakish weather events that throw land transport into
chaos will have us talking about climate and supply chain risks
quicker than you can say Jack Frost.

The CDP’s study is worth taking a look at. While some conclusions
might be a tad over-blown, the core findings are extremely relevant
to manufacturing enterprises and their sustainability initiatives.
One salient tidbit from the CDP: between 40-60 percent of
companies’ total greenhouse gas emissions reside outside their
direct control and are found within the supply chain through
activities such as processing, packaging and transportation. That
means collaboration with suppliers is paramount to green efforts,
and will surely help reduce supply chain risks.