Published on October 15th, 2013 | by Nathan10
UK Companies Failing To Factor In Possible Effects Of Climate Change On International Supply Chains, Research Finds
The majority of large UK-based companies are failing to factor in the possible effects of climate change with regard to international supply lines, new research from the Carbon Disclosure Project has found. This is in spite of the fact that around 70% of them have significant overseas operations.
It’s been predicted, by a number of notable organizations and individuals, that climate change will have a significant impact on global trade, international relations, war and conflict, and supply chains. While the local effects of climate change will no doubt be considerable — especially in certain areas of the globe — perhaps the most significant effects will be felt on the global stage. Given that the current globalized system, which encompasses nearly every aspect of modern human life (for those in the “developed” world anyways), even minor disturbances to the system can have considerable effects on society. The 2010 Russian wildfires serve as an excellent example — the wildfires, which were caused by the hottest recorded summer in Russian history and record levels of drought, resulted in the destruction of 1/5 of Russia’s grain crops.
While the local effects were certainly significant — 56,000 people killed and a great number of homes/farms destroyed — the effects on our globalized system were, arguably, much greater. As the result of the fires and subsequent crop loss, Russia, one of the world’s largest wheat exporters, completely banned wheat exports. Many researchers consider this ban — the huge spike in wheat prices as well as subsequent food shortages in wheat importers that followed it — as being one of the primary factors in the development of the Arab Spring and the subsequent civilians/coups in Egypt, Syria, etc.
So, certainly climate change is already having an effect on international supply chains, and will no doubt continue to do so far into the future. Seems like something that you would want to take into consideration if you ran a business that relied on such supply chains, doesn’t it?
On that note… The latest FTSE350 Climate Change Report from the CDP states that about 48% of the companies that responded to its investor-backed requests for information on emissions and climate policies do not engage with their supply chain on emissions, or climate change, and report no indirect risks from climate change, “suggesting companies are not sufficiently assessing their whole value chain.”
Some key findings from the report:
- “UK companies’ greatest risk from climate change likely to be global, not local: 69% of the FTSE 350 have international operations across 145 countries, exposing them to regulatory, physical and other climate related risks. Most report risks (86%) and opportunities (82%) but over a tenth of companies (13%) report no risks at all, indicating inadequate integration of climate change management into business strategy.”
- “Short-term planning persists: respondents are looking primarily at direct, shorter-term risks, with only 32% of companies reporting risks and 14% opportunities with timeframes of ten years or more.”
- “Just over a third of respondents report indirect risks, compared to nearly three quarters reporting direct risks, suggesting companies are not sufficiently assessing their whole value chain.”
Paul Simpson, chief executive at CDP, states: “Clearly a large part of the operations of UK companies are international and are insufficiently accounted for by companies when considering their environmental impact. There are advantages, such as reduced costs and increased resilience that these companies can benefit from by looking more comprehensively at their value chains and taking a longer term view.”