It has been interesting to watch newly created heads of sustainability and corporate responsibility in major global companies taking a strong interest in supply chain risk.
Whilst the loss of suppliers and supplies due to natural catastrophe events and non-damage related perils such as industrial disputes and financial insolvency are still very much on the agenda, there is increasing focus on reputational risk in relation to sustainability issues.
If you look at the annual reports of many companies you will see strategies to ensure they have environmentally friendly and sustainable supply chains, or that they in fact already have a ‘green’ supply chain. The growing interest was reinforced when the Chartered Institute of Purchasing and Supply recently published the three most requested topics from its members:
How can sustainability translate into a risk then?
The supply chain disruption caused by natural catastrophes (nat cat) in recent years has driven the need to improve the availability and quality of risk data. This has not been restricted to nat cat related data, but includes information focused on carbon footprint, water usage and drought on a regional basis.
Suddenly the level of transparency in the supply chain has increased considerably and companies now face the reputational risk of being exposed to environmentally unfriendly supply chains.
When the reality does not meet expectations, it creates unhappy stakeholders and a negative reputational impact. This can affect future earnings and eventually destroy company value.