The COVID pandemic has been a test of the tensile strength of global supply
chains; but it is by no means a final exam. The long-term challenge of climate
change will continue to test supply
chains
for the foreseeable future. In the last year alone, flooding in Europe and
Asia, wildfires in California and freezing temperatures in Texas
each shut down significant parts of the supply chain. Add an ongoing
war
to the equation and it’s hard to imagine a product or supply chain not being
affected in the near term.
“You are the weakest link. Goodbye.”
In the early 2000s, this popular
catchphrase from the game show,
“Weakest Link,” was delivered week after week with icy detachment by host
Anne Robinson as she summarily dismissed losing contestants. It may have
made for good television, but it doesn’t make for good business partnerships.
Yet, this is the approach that many brands take when a link in their supply
chain fails. They look for ways to replace the weak link or redirect it through
an alternate route.
There are several problems with severing the weak links in your supply chain,
beginning with visibility. Most companies lack deep
visibility
into their global supply chain, particularly with tier 2 and 3 suppliers. As a
result, these links are rarely exposed until there’s a problem. Secondly, while
climate change is real, it’s still hard to predict what its impact will be and
where. There are geographic information systems (GIS) and weather models that
can provide some advance warning, but few businesses are using this data to make
supply chain decisions today. Finally, changing suppliers frequently carries
its own
risks
to the supply chain in the long run — especially when you consider the impact on
people’s lives.
Instead of immediately cutting out weak areas of the supply chain, access to
better data can help businesses make more informed decisions. This starts with
getting primary, high-frequency sustainability data from factories and partners
— not just tier 1 partners. Combining this information with impact data from
sustainability platforms and environmental data from GIS providers and
reinsurance companies before running it through the right analytic models can
help brands identify which supply chain partners are most vulnerable to climate
change
and when they’re most vulnerable. The question then becomes what to do with this
information: Do you use it to disengage from at-risk suppliers or reduce their
risk
exposure
to strengthen your existing supply chain?
Whether or not ‘tis nobler …
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The best way to mitigate the negative effects of climate change on supply chains
is to become better stewards of our natural and human resources, which brings us
to the issue of sustainability. Brands are under increasing pressure from
policymakers and consumers to ensure the use of environmentally and socially
responsible business practices across their entire supply chain. This does not,
however, mean that brands should become the primary enforcers of
sustainability, but rather supporters of sustainability.
Let’s look at what this means as it relates to climate change. There are several
things that brands can do to help their suppliers shore up their operations
against climate-related disruption: If a factory is exposed to flood risk,
brands may want to incentivize partners to create flood barriers or help them
qualify for low-interest loans to modernize their factories. This help doesn’t
need to take the form of direct financial
assistance
but could be enabled by creative arrangements, such as an annual production
commitment to suppliers that helps them secure those loans. Climate change
affects human resources as well, and could be addressed by ensuring that
factories have adequate heating/cooling during the cold/hot seasons.
Sustainability is more than donating a t-shirt
The challenge of sustainability is keenly apparent in the apparel industry,
where climate and social issues often go undetected because of a lack of data
reporting.
Giving t-shirts to factory workers may seem like sustainability in the form of
circularity, but its measurable effect is superficial. What workers really need
are better working conditions, job stability and access to low-interest loans.
Building a sustainable supply chain is a better investment for apparel brands
than creating redundant supply chains or constantly replacing those links that
are compromised by climate change.
It's important to remember that, while COVID and climate change may be the
agents of supply chain disruption, the real culprit is our growing appetite for
ever-cheaper products. The demand for low-cost
t-shirts,
toys and other items has pushed production and manufacturing into the farthest
regions of the world — many of which are vulnerable to increasingly heavy
weather and
harsh
conditions.
Untangling these supply chains and eliminating the most vulnerable links is a
solution that just creates more problems, because of the deep interdependencies
between regional producers and suppliers. Instead, we need to accept the fact
that brands are only as strong as the weakest link in their supply chain. You
can be a bully or you can be an umbrella; the choice is up to you.
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Published Sep 7, 2022 2pm EDT / 11am PDT / 7pm BST / 8pm CEST