Climate change is one of the biggest issues today for global chemical companies. Their supply chains — long, lean and increasingly complex — are especially vulnerable to disruptions from major storms, flooding, drought, rising temperatures and other climate-related events. As with most crises, climate change presents both risks and opportunities for the chemical industry. Successful companies and their suppliers are rethinking their supply chain strategies, helping to mitigate risk and support sustainability in the 21st century.
To address climate change, supply chains must become far more resilient. Supply chain resiliency depends on proper risk management practices and a systems approach. Companies also need to keep in mind that building resilience is an iterative and continual process. It requires a thorough understanding of the supply chain and its vulnerabilities.
A study of supply chain resilience by the World Business Council for Sustainable Development1 suggests five steps that companies can consider in developing a resilient supply chain:
Step 1. Map the supply chain and identify critical features
Companies need to identify the numbers, locations and diversity of organizations, products and business connections at each stage of the chain; identify interface points with other industries; and identify laws, policies and regulations that might affect critical features in the event of disruption.
Step 2. Determine weather-related hazards
Companies should consider what weather-related hazards have impacted the supply chain in the last five to 10 years, as well as weather-related hazards that are known to occur in the geographical areas where elements of the supply chain are located.
Step 3. Identify vulnerabilities and evaluate risks
Large companies often have an existing mechanism or framework for assessing supply chain risk. Extreme weather and climate change are additional elements which should be considered within such frameworks.
Step 4. Define and apply resilience building measures
Once the risks facing the company have been identified, resilience-building measures can be defined. They should ideally be conceived and applied with close attention to benefits and consequences across the supply chain system.
Step 5. Monitoring and review
The analysis process will be iterative, with monitoring and review an important aspect. Information should continue to be gathered to review and understand how the supply chain has been affected by extreme weather events, to interpret records of climate-related impacts to gain further insight into risk ratings; and to review the effectiveness of resilience-building measures.
The global chemical industry has built its success on being able to adapt to change, and climate change is only one of many challenges that will shape the industry for years to come. To support a greener future, chemical companies have taken steps to control energy consumption, develop energy-saving products, reduce greenhouse gas (GHG) intensity, and decrease their water footprint.
Supply chain sustainability also opens the door to key business opportunities. As an ‘industry of industries,’ the chemical sector is in a unique position to help other sectors improve their sustainability performance. In the same way, chemical manufacturers can find new ways to save resources, reduce business risks, and cut costs by working with their suppliers to improve resilience and remain competitive in today’s markets.
1Building Resilience in Global Supply Chains, World Business Council for Sustainable Development.