Supply chain resilience in the era of climate change– MIT

Supply chain resilience in the era of climate change– MIT

15 Jan 2020

Climate change can upend supply chains in obvious ways — sudden floods, flash fires — as well as through secondary repercussions like a migrating workforce or infrastructure in need of a retrofit. And those scenarios and others stand to directly affect a company’s bottom line.

How to harden your supply chain and build resilience — the ability to bounce back from disruption — throughout your organization? Here are five ways to brace for the storms that loom on the horizon:  

  1. Engage in deeper, long-term collaboration with suppliers: A company is only as good — and as protected — as its suppliers. Forward-looking companies are already engaging suppliers around health, safety, and environmental issues. Nike, for example, has adopted a lean manufacturing approach where they say to their suppliers, “We’re going to work with you to improve the productivity of your factory”. In the process, Nike can also suggest to suppliers ways to improve worker health and safety, or to reduce environmental footprints. “This may mean committing to longer supply contracts, but it also means you gain influence with your suppliers. However, this tactic can lead to a lack of diversification among suppliers.
  2. Extend your risk horizon to adapt to long-term changes: Given that not every climate change incident is an extreme, sudden event such as a fire — it could be a long-term “combination of droughts, pests, flooding” all companies should add long-term data on climate change to create more robust risk-mitigation plans.
  3. Take stock of geographic threats: Companies need to think ahead in terms of geography, possibly retaining existing facilities but also operating other facilities in less disaster-prone areas. It’s clear that supply chains are going to be much more volatile and risky.
  4. Start lobbying: Companies need to lobby policymakers to do their part.
  5. Do your part to reduce emissions: While analyzing, relocating, and hardening your supply chain, why not decarbonize at the same time? Microsoft, for instance, recently pledged to go carbon negative by 2030.