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Building resilient supply chains amidst climate change

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Building resilient supply chains amidst climate change

The impact of climate change on global supply chains in recent years has been severe. Extreme weather has led to disruption in production cycles, an increase in costs and an adverse impact on the triple bottom line of companies.

COVID-19 has further exposed weaknesses in supply chains. According to the World Bank's Global Economic Prospects forecast, the world economy contracted by 4.3% in 2020. E&Y's report ‘Managing the impact of COVID-19 on India's supply chains–Now, Next and Beyond,' states that the current health pandemic has been a wakeup call for companies in India to manage scarce resources effectively and plan comprehensively for an uncertain future. It is likely that climate change will cause more pandemics in the future.

With the government's campaign of a self-reliant India— ‘AatmaNirbhar Bharat Abhiyaan'—companies have an opportunity to capitalise on India's strong economic fundamentals and young demographic, while building resilient supply chains and strengthening value chains. This will help achieve the five pillars we want to focus on to become a $5 trillion economy with world-class infrastructure, technology-driven systems, a dynamic and young demographic, and high-demand, robust supply chains.

Here's a look at key interventions that companies can make:

Reducing carbon emissions

Reducing carbon emissions is a critical element of the broader goal of managing climate change, number 13 of the United Nation's Sustainable Development Goals (SDGs). As the third largest emitter of greenhouse gases, India needs to take decisive steps towards clean energy.

India is part of the global framework to reduce climate impact in a holistic manner by the 2030 deadline under the Paris Agreement. The targets include reduction of greenhouse gas emission intensity of GDP by 33-35% below 2005 levels; shift at least 40% of India's power capacity to non-fossil fuel sources; and by means of additional tree cover, create a ‘carbon sink' of 2.5 to 3 billion tonnes of CO2 equivalent.

At the policy level, India announced at the World Sustainable Development Summit 2021, a target to achieve 450 gigawatts (GW) of renewable energy by 2030. Leading from the front, in 2020, on the occasion of the India CEO Forum on climate change, 24 leading Indian conglomerates including the Tata group, Reliance, Mahindra, ITC and ACC have made a pledge to go carbon neutral—an agenda which aligns to the Paris Agreement of net-zero emissions.

Embedding sustainably in supply chains

AB InBev, the world's leading brewer, through its Smart Agriculture Goal aims to skill, connect and financially empower 100% farmer-partners by 2025, thus strengthening and empowering their supply chain. The company works directly with over 20,000 farmers in 13 countries across five continents to grow hops and grains, including 1200+ farmers in India.

In collaboration with scientists from the Indian Institute of Wheat & Barley Research (IIWBR), the company upskilled Indian barley farmers, educating them about sustainable and scientific farming methodologies. Over 1,000 farmers were introduced to best practices of storing harvest and integrated pest and disease management, while over 400 families received training on vermi-composting and building kitchen gardens.

AB InBev has also joined hands with technology companies to amplify this effort. Kisan Hub, an agri-food industry tech company that solidifies the supply chain from the grower to the producer in a key partner. With BanQu, block-chain technology, AB InBev is embedding transparency in the system by simplifying the process of growing and supplying.

Implementing forward-looking environmental initiatives to protect supply chains

Anticipating climate hazards and providing for vagaries in nature helps mitigate long-term risk. Tata Coffee is a member of global body, Conservation International's Sustainable Coffee Challenge, which has a goal of making coffee the world's first globally sustainable agricultural product.

Tata Coffee's operations cover 19 estates, with 13 in Coorg. In their Polibetta Estate at Coorg, Tata Coffee maintained the region's hydrological balance by dynamic water harvesting techniques. The area suffered from over-exploitation of ground water and scanty rainfall, thus threatening livelihoods of the plantation workers and the crops.

The company identified areas to create water catchments for rainwater harvesting and rejuvenated lakes and ponds, as well as made locals water literate. This project has enabled the company to recharge the groundwater and has built self-reliance in irrigation, harnessed run-off water and distributed water pipelines to locals, creating a positive impact in the region.

By taking a long-term, solution-oriented view of climate threats, a company can mitigate, if not prevent, climate risk. A McKinsey Global Institute case study, ‘Could climate become the weak link in your supply chain?' states that exposure to extreme heat and humidity in India will have a massive impact on outdoor sectors. By 2030, it is projected that India will lose 5.8% per cent of working hours that equals a staggering 34 million full-time jobs, because of global warming, especially the agriculture and construction sectors, according to a UN labour agency report.

Proactive measures by policymakers, corporates, and the industry as a whole can help prevent this, by leveraging their scale and resources, to take the right action to build a resilient supply chain.

Bibliography

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