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Wednesday, August 27, 2014

Are Companies and their Supply Chains Prepared for Climate Change?

Credit: Happyknappy at FreeDigitalPhotos.net

Credit: Happyknappy at FreeDigitalPhotos.net

Most supply chain managers are not doing much in the way of planning for climate change, according to a study conducted earlier this year by the MIT Sloan Management Review and Boston Consulting Group (BCG).

BCG has disclosed some details from the fifth annual global executive survey about sustainability and innovation (a full report is scheduled for release late this year). One conclusion is that while most companies acknowledge climate change as a concern, few are implementing plans to deal with it.

Less than half of the survey’s respondents regard climate change as urgent: 8 percent state it is “very urgent,” and 15 percent say it is “quite urgent.” Only 34 percent of respondents agree strongly or somewhat strongly that their companies are prepared for climate change risks.

These findings are not unusual. Most forecasts made by organizations are short term; even long-range outlooks rarely extend beyond five years. With climate change scenarios putting an end-of-century timeline on environmental problems, there is hardly a sense of urgency when it comes to strategic thinking — or capital investment — in this area.

Nevertheless, as the Philippines typhoon demonstrates, and natural disasters around the world in recent years have shown, short-range planning for destructive events is critical. Supply chain managers must develop contingency plans in concert with other departments in their companies to address sudden losses in manufacturing capacity, logistics and infrastructure, and economic and political stability.

Yesterday’s article covered the book Strategic Supply Chain Management, whose authors explain that successful companies are resilient and flexible in managing supply chains. They can rapidly shift manufacturing and supply operations when necessary and aggressively search for broad skills in the people they hire that include risk and performance management and building close relationships through their supply chains, in addition to forecasting, analysis, and processes documentation.

These strategies, which identify supply chain vulnerabilities based on where products are sourced, are much more practical than trying to account for the “big picture” of climate change. Hence, some of the initial findings of the MIT-BCG study are probably not that surprising. It would be interesting to know, when the full report comes out, what types of companies regard climate change as very urgent for their planning.

This is not to say that organizations should be aloof to long-range environmental issues. Considering “big picture” concerns such as climate change and its potential effects on business is fine, although many factors surrounding it, including the technology to adapt and overcome, will doubtlessly change in coming decades.

 

 

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