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Supply chain expert asserts need for organisations to know their supplier’s supplier
LONDON (July 14, 2023) — Oliver Chapman, CEO of supply chain specialists OCI and the fastest growing company in the United Kingdom1, comments on the implications of rising global temperatures:
"According to the World Metrological Organization, the first week in July saw the highest average temperatures on record, following the hottest June ever recorded. Although data of this nature only goes back to 1979, climate scientists believe they have a pretty good understanding of temperatures going back thousands of years. It is quite possible that we have just witnessed the hottest period on Earth since Homo sapiens first took step.
"With this being an El Niño year, it should come as no surprise that temperatures are rising like never before. Sadly, we also see extreme events such as flash floods in India, tragically killing 41 people; flooding in Japan and northern Spain; and ruined crops in Kansas, among many others. These disastrous events, paired with consequent shifts in geopolitics, are certain to upend the stability of supply chains.
"It is quite ironic that the world should experience such extreme weather at a time when there has been something of a backlash against ESG.
"But whatever you want to call it—ESG, sustainability or something else—it is clear that the effects of climate change are increasing and accelerating. As these climate events become more overt, there will be a public backlash against organisations which do not adopt sustainable practices.
"And this takes us to the supply chain.
"Organisations must ensure the supply chains they steward are as environmentally friendly as possible, whether they approach sustainability ethically or expediently.
"There are several steps organisations can take.
"They can thoroughly audit their supply chain and apply what OCI calls ‘KYSS’ - know your supplier’s supplier. It is not good enough to look carefully at direct suppliers; organisations need to carry out due diligence focusing on the sustainability credentials of every actor in a supply chain. They can do this, in part, by factoring in ESG scores throughout the chain. Organisations can also take a closer look at these actors, their reputation on social media, and their press coverage, especially coverage local to where they are based.
"The business and sustainability objectives of managing a supply chain are often aligned as well.
“Organisations can look at the geographical spread of a supply chain; the greater this spread, the more likely it is that the chain's carbon footprint is higher than it needs to be. In any case, there are important financial benefits to limiting the geographical spread of a chain. If components, raw materials and finished products spend a lot of time in transit, then this can constrict cash flow, limiting the speed with which an organisation can scale production.
"Finally, organisations can look at the type of transport used in the supply chain - for example, whether transport is as fuel efficient as possible or even electric when viable (plus how that electricity is produced).
"There is no such thing as perfection, especially when striving for sustainability. It will be extremely difficult to eliminate carbon dioxide emissions from the supply chain altogether in the next few years. Organisations can, however, focus on optimal solutions today as they will take time to implement.”
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