We’ve already seen another year of tumultuous events from destructive wildfires and droughts through to floods and as a result, LinkedIn feeds are constantly filled with the call for action to save the planet. The planet will survive, as it has done for millions of years. Whether humans can, is another question.
However, whilst the impact is stark there still seems to be a disconnect for many on the impact this will have on business. And if we talk more about the risk to business, in many cases very real and short-term risk, maybe we can help galvanise board room discussions and action.
A report from PwC earlier this year (April ’23) concluded that more than half of global GDP is at risk from nature loss and degradation. Yes, 55%!
Let’s consider just one example. And the business risk. Deforestation. The EU has introduced new Deforestation Regulation (EUDR) which mandates extensive due diligence on the value chain for all operators and traders dealing with certain products. I know from discussions with clients and prospective clients the impacts of EUDR have not yet been fully considered.
“But it’s only if you’re in the EU”. Wrong! It is any company supplying into the EU or exporting from the EU.
“But I don’t use wood/timber, so it doesn’t impact me”. Wrong! EUDR covers a range of commodities from cattle and cocoa to palm oil and soya. It also covers derived products such as leather, furniture, and paper (packaging and books). Supply chains will be impacted at many levels and too few companies are engaging their suppliers about the potential risk.
The issue is not just timber, but a range of materials covered by biodiversity legislation, human rights legislation (such as UFLPA) and chemical legislation.
Furthermore, when I do hear discussion about the risk it is often focused on the ability to sell. I personally think the real risk is in the ability to buy. The ability to source the products and materials required. The legislation will (quite rightly in my opinion) force companies to source ‘green’ alternatives. But today, there is insufficient capacity.
The impact will be competition for these ‘green’ materials that will impact availability and costs. This is a real and short-term risk to business… not some future risk for the next generation of managers. Companies must act now to engage their suppliers to understand exposure to materials of concern. To ensure education within the supplier base as to the risks and to pursue green and competitive alternatives.
Do not blame the legislation. It will force more sustainable sourcing. The result will be more regenerative practices. It will accelerate the circular economy.
Sadly, too many of these terms don’t get discussed often enough around the board table. But when the discussion moves to: ‘..our suppliers cannot source the raw materials we need’ and ‘we’re seeing record inflation due to availability’ heads will turn. I predict we will see supply chain disruption to rival the last three years from Covid and the war in Ukraine.
You can get ahead of this. Engage suppliers. Understand risk and create action plans now that will allow the planet and business to thrive, sustainably.
The Supply Pilot Platform enables you to integrate engagement, data collection, and supplier capacity enhancement to recognise risks, drive change, and optimise impact. Find out more here.
