Why extreme weather threatens your business – and what to do about it

Global supply chains are increasingly vulnerable to severe weather incidents, says Megan Stoffer, with growing risks to the core business. Only a change in the approach to social responsibility in procurement will protect your business.

The last decade or more has not only seen accelerating globalization in supply chains, it has fundamentally changed their nature. Today sourcing is not simply inputs to the production process such as wheat, steel, or fossil fuels. It now includes manufactured components, whole finished products and even front-line services such as customer call centres. Elements once seen as essential to core operations are now routinely brought-in, dramatically adding to the risks inherent in a vulnerable supply.

The recent whirlwind of extreme weather events provides the necessary context in which to discuss supply chain weaknesses, including an unprecedented heat wave triggering wildfires in Australia and the largest snowfall in 20 years in the Middle East. While these events fuel the climate change debate, they also highlight the vulnerability and risk within complicated global supply chains and remind us that a sustainable supply chain requires looking beyond supplier operations to assess external forces that limit the long-term ability to meet supply needs. Focus must not only be placed on monitoring the impact of your suppliers on the environment, but also on assessing the impact of the environment on your suppliers. Hovis bread has been forced to confront this challenge head-on regarding their wheat supply. Limited by low yields in the UK, they have been forced to back out of their pledge to use only UK wheat and to import wheat from EU countries. Additional flooding already threatens their ability to return to this commitment in the near future.

The increasing importance of climate changes to supply chains can also be seen in the impact on transportation channels.  After Hurricane Sandy damaged the Northeastern United States,  fuel shortages plagued the region’s gas distributors because pipeline damage restricted Gulf Coast supplies, port damage blocked foreign imports, and electricity outages limited the ability to refine gasoline and distribute it to customers.

Predictions suggest that extreme weather events (if they can still be considered extreme) are here to stay. To combat these challenges, in addition to similar threats to the core business, companies need to anticipate these changes and modify their approach to social responsibility in procurement. Emphasis must switch from working to influence others’ behaviour down the supply chain, thus making an impact outwards, to trying to protect your own business from others’ impacts on you. Accounting for potential complications and mitigating procurement risks can ensure the sustainability of these channels in the new normal of severe weather events. For example, as part of their Plan A, Marks & Spencer conducted a “supply chain climate adaptation” risk assessment to review the potential implications of climate change on their food and merchandise supply through 2030. Now, they are integrating this information to guide future sourcing decisions. Taking these steps can help to build a more stable and sustainable supply chain as we continue to progress into a world of extremes. Your core operations are at stake if you get it wrong.

Megan Stoffer is an intern at Corporate Citizenship