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Climate now a supply chain cost

SAN FRANCISCO: A new report says climate change is now a material risk for many companies as more than 50 percent of carbon emissions are produced by their supply chains.

According to the collaborative think-tank Business for Social Responsibility (BSR), there are five main areas of supply chain climate risks that companies across all industries should consider:

BSR supply chains• Physical risk to suppliers' assets and operations;
• Reduced availability or increased costs of inputs;
• Changing regulations in sourcing or distribution markets;
• Climate-related disruptions in communities that impact supplier workforce availability and productivity;
• Stakeholder, or reputational, risk.

In addition to general risks, the BSR report has identified sector-specific risks in three areas: food, beverage and agriculture; information and communication technology; and consumer products.

Based on responses from its 250 corporate members, BSR suggests a three-step process to maximize a company's ability to move quickly to address their risks and opportunities.

Step 1: Identify supply chain priorities that offer the greatest opportunity for creating supply chain resilience - including areas of high GHG emissions and high climate vulnerability.

Step 2: Take action and develop targets by looking internally, integrating climate considerations into the overall procurement, sourcing, and supplier management processes. Engage and require suppliers to take action by encouraging or requiring them to get involved with climate resilience programs or asking them disclose their own climate performance.

Step 3: Monitoring, evaluating and reporting via "robust metrics" helps a company understand how well different actions are contributing to achieving targets, effectively addressing climate priorities, and whether there is any need for a company to amend its approach.

Announcing the release of the report, BSR Supply Chain Sustainability director Tara Norton cited a recent comment from AXA France CEO Nicolas Moreau who said his company has seen the intensity of extreme-weather events increase within clients' supply chains, causing serious disruptions in their ability to produce and deliver products and leading to higher costs.

"Moreau's comment [brings] into sharp relief the reality that climate change is already upon us and that there is a strong business case for companies to take immediate action on climate impacts in their supply chains," declared Norton.

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