Guest writer Jessica McGoverne, Director of Policy and Corporate Affairs at Sedex explains the importance of building resilient supply chains in the face of extreme weather events caused by climate change.
In January 2021, the Rhine, Europe’s second-largest river, burst due to heavy rainfall and snowmelt. This triggered a halt in river shipping for several days. Throughout that year water levels on the Rhine, which was facing a long-term drought, dropped so low that cargo ships were forced to load just half their usual capacity to avoid running aground. In 2022 water levels on the river remain so low that some vessels can no longer sail it even when empty. This year has also brought record-breaking heat, wildfires, storms and more across the world.
Climate change is increasingly creating these extreme-weather challenges for supply chains. The greater frequency and severity of such events interrupt production and transportation, disrupt local areas, workers and communities, and ultimately raise operating costs. With the extreme effects of climate change persisting until at least 2060, according to the UN’s World Meteorological Organisation, the smart move for business leaders is to prepare supply chains against these impacts.
This priority emerges alongside companies’ increased focus on building more socially and environmentally sustainable supply chains. The pressing issue of climate change, growing legislation around business sustainability, investor scrutiny on environmental, social and governance (ESG) areas, and evolving consumer demands are key drivers of this. Research suggests that 85% of consumers have become ‘greener’ in their purchasing in recent years.
However, while some of these drivers emerge over several months, extreme weather events have a more immediate impact on operations within supply chains – and businesses must be ready to respond. Using the right data, tools, and technology to build in-depth visibility of a supply chain enables better preparation and decision-making around extreme weather events, both increasing resilience and supporting sustainability goals.
Building supply chain visibility
The right data increases a business’s visibility across its supply chain to better understand how extreme weather events may affect it. This visibility is also an essential component for advancing corporate social and environmental goals and reducing negative impacts on people and the planet.
Sophisticated technologies enable companies to gather, store, analyse and report on relevant information from supplier sites across global networks. From workers to site locations and activities, different extreme weather events affect these in different ways. Armed with insight on these areas, business leaders can prioritise where they need to prevent harm, increase protections, and take action to drive sustainable change.
Understanding climate risk – and opportunity
Global supply chains can themselves drive climate change, deforestation, pollution and water insecurity, exacerbating the related business risks. Decisions about global supply chains also have the power to drive environmental sustainability at scale.
A data-led risk analysis tool enables businesses to understand environmental risks across the countries and industries in their supply chain, and make informed decisions accordingly. For example, our risk tool indicates the agricultural sector in some countries has a higher risk of water stress than of forced labour, while rising temperatures are making already-dry regions even drier. Understanding suppliers’ activities and working with them to introduce more water-efficient processes increases a company’s resilience against this risk, reduces the strain on local water resources, and may even save energy costs – a triple win.
Holding this information about supplier sites also allows a company to benchmark operational processes. They can identify sites that have higher-than-average utility use compared to others performing the same operations and draw innovative solutions from energy-efficient sites to replicate elsewhere.
Recognising social impacts
With climate change a high-profile issue, and environmental impacts often being more straightforward to measure than social, it is easy to focus on the ecological aspects of sustainability. But social issues are equally critical and inextricably linked to environmental concerns. People, including workers, also play an essential role in defining and implementing the solutions to protect communities and businesses against social and environmental issues.
Workers and their communities suffer negative impacts of climate change and extreme weather, affecting the availability, ability, and resilience of the workforces that our supply chains depend on. Noise, air, and water pollution can negatively affect workers’ health both at work and in their communities. Pollution in any form, deforestation, illegal land grabs and environmental degradation reduce people’s ability to live in an area, driving migration and changes in resource and labour availability.
Certain groups of people are also more vulnerable to the negative impacts of climate change, which can then increase risks of exploitation. Isolated communities, minority ethnic groups, indigenous people, migrant workers, seasonal workers and women are all disproportionately affected by climate change and environmental risks (IPCC).
Understanding these risks begins with gathering data about the locations and workforces of sites in a supply chain, collating it, and analysing it to build a picture of the social risks across suppliers’ work sites. Site-level distinction is essential – two factories next door to each other can have different workforces, altering the risks these workers are exposed to and what the right solutions look like.
Make informed decisions to build resilience
Just recognising extreme weather risks is not enough to protect the people and activities in a supply chain, nor are environmental commitments enough to satisfy stakeholders’ increasing demands. Climate change remains an urgent issue – investors, regulators, and consumers expect companies to play their part in combatting it by demonstrating action, impact, and meaningful change.
Data on a company’s activities, suppliers, work sites and employees across the whole supply chain is imperative for doing this. It enables companies to identify and manage environmental issues, anticipate and protect against the impacts of extreme weather events, and show progress in a transparent, credible way.
Using the right technology to build a better understanding of supply chains, identify issues and measure performance has the power to drive operational, reputational and financial benefits, supporting long-term business sustainability and robust, responsive supply chains.
About the Author
Jessica joined Sedex in January 2018 and is responsible for Sedex’s corporate communications, public relations and public policy. This involves facilitating events, researching and analysing industry trends and responsible sourcing issues, and supporting organisations with knowledge to progress, and improve the lives of people impacted.
Jessica has over 10 years’ experience working in public affairs, crisis communications and stakeholder engagement. She has led a number of development campaigns for multinational companies, and implemented stakeholder consultation strategies on behalf of the Australian Government around land rights and land use.
Jessica holds a Bachelor of Communications and a Master’s in International Development from the University of Sydney, and is a passionate human rights advocate. Originally from Australia, Jessica loves exploring new cultures and travelling new countries in her spare time.
