The COVID pandemic has been a test of the tensile strength of global supply chains; but it is by no means a final exam. The long-term challenge of climate change will continue to test supply chains for the foreseeable future. In the last year alone, flooding in Europe and Asia, wildfires in California and freezing temperatures in Texas each shut down significant parts of the supply chain. Add an ongoing war to the equation and it’s hard to imagine a product or supply chain not being affected in the near term.
In the early 2000s, this popular catchphrase from the game show, “Weakest Link,” was delivered week after week with icy detachment by host Anne Robinson as she summarily dismissed losing contestants. It may have made for good television, but it doesn’t make for good business partnerships. Yet, this is the approach that many brands take when a link in their supply chain fails. They look for ways to replace the weak link or redirect it through an alternate route.
There are several problems with severing the weak links in your supply chain, beginning with visibility. Most companies lack deep visibility into their global supply chain, particularly with tier 2 and 3 suppliers. As a result, these links are rarely exposed until there’s a problem. Secondly, while climate change is real, it’s still hard to predict what its impact will be and where. There are geographic information systems (GIS) and weather models that can provide some advance warning, but few businesses are using this data to make supply chain decisions today. Finally, changing suppliers frequently carries its own risks to the supply chain in the long run — especially when you consider the impact on people’s lives.
Instead of immediately cutting out weak areas of the supply chain, access to better data can help businesses make more informed decisions. This starts with getting primary, high-frequency sustainability data from factories and partners — not just tier 1 partners. Combining this information with impact data from sustainability platforms and environmental data from GIS providers and reinsurance companies before running it through the right analytic models can help brands identify which supply chain partners are most vulnerable to climate change and when they’re most vulnerable. The question then becomes what to do with this information: Do you use it to disengage from at-risk suppliers or reduce their risk exposure to strengthen your existing supply chain?
The best way to mitigate the negative effects of climate change on supply chains is to become better stewards of our natural and human resources, which brings us to the issue of sustainability. Brands are under increasing pressure from policymakers and consumers to ensure the use of environmentally and socially responsible business practices across their entire supply chain. This does not, however, mean that brands should become the primary enforcers of sustainability, but rather supporters of sustainability.
Let’s look at what this means as it relates to climate change. There are several things that brands can do to help their suppliers shore up their operations against climate-related disruption: If a factory is exposed to flood risk, brands may want to incentivize partners to create flood barriers or help them qualify for low-interest loans to modernize their factories. This help doesn’t need to take the form of direct financial assistance but could be enabled by creative arrangements, such as an annual production commitment to suppliers that helps them secure those loans. Climate change affects human resources as well, and could be addressed by ensuring that factories have adequate heating/cooling during the cold/hot seasons.
The challenge of sustainability is keenly apparent in the apparel industry, where climate and social issues often go undetected because of a lack of data reporting. Giving t-shirts to factory workers may seem like sustainability in the form of circularity, but its measurable effect is superficial. What workers really need are better working conditions, job stability and access to low-interest loans. Building a sustainable supply chain is a better investment for apparel brands than creating redundant supply chains or constantly replacing those links that are compromised by climate change.
It's important to remember that, while COVID and climate change may be the agents of supply chain disruption, the real culprit is our growing appetite for ever-cheaper products. The demand for low-cost t-shirts, toys and other items has pushed production and manufacturing into the farthest regions of the world — many of which are vulnerable to increasingly heavy weather and harsh conditions. Untangling these supply chains and eliminating the most vulnerable links is a solution that just creates more problems, because of the deep interdependencies between regional producers and suppliers. Instead, we need to accept the fact that brands are only as strong as the weakest link in their supply chain. You can be a bully or you can be an umbrella; the choice is up to you.