Good OM Reading: Sustainable Supply Chains

Climate change is once again rising up the global agenda. Physical climate, and regulatory and consumer preference changes expose supply chains to growing levels of climate risk. This new 21 page report, called Supply Chain Sustainability Revealed, by Accenture, discusses threats and opportunities for companies at the top of supply chains. Findings include: (1) High levels of climate risk in key supply chains, and inadequate supplier response; (2) Supply chains in the US, China, and India are considered ‘vulnerable’; (3) Suppliers in India and Canada are not doing enough to manage climate change risks;  (4) Suppliers in Brazil have done the least to manage climate exposures and recent water shortages; and (5) Suppliers who demonstrate a high propensity to collaborate with supply chain partners to reduce climate risk and, and who invest in emission reduction initiatives, deliver the greatest ROI.

The  report also shows an increasing level of climate risk management within supply chains, which in turn is generating better climate risk outcomes. Water risk remains a concern – despite its potential for shocks – with 45% of exposed companies surveyed not carrying out a water-risk assessment.

The report states that the onus for changing lies with the customers, the large multinational companies like Wal-Mart whose procurement spending drives the global economy. Accenture writes: “Leading companies already understand their ability to drive change among their suppliers. It is incumbent upon more of their peers to require that their suppliers measure and disclose their carbon footprint, and work with their suppliers to find and, if necessary, incentivize emission reduction initiatives.”

Suppliers, meanwhile, should recognize that it is in their own interest to embrace more sustainable modes of operation. Not only do these offer a means to reduce costs by driving efficiency in resource use, but sustainability is likely to become a key differentiator in the marketplace. The report also urges policymakers must acknowledge their responsibility, and provide regulatory support to encourage companies.