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The Economic Implications: How Weather and Cost-Driven Disruptions Influence the Global Market

cost

The Economic Implications: How Weather and Cost-Driven Disruptions Influence the Global Market

Climate change is an issue that is felt on both a human and economic level. Environmental changes affect the global food supply, individual health, and the job market. Sudden and long-term changes can affect the production of much-needed resources, leading to a delay in delivery or the elimination of an essential product or service. Let’s examine how weather conditions can cause significant changes in the global market and what efforts are being made to regulate them.

The Effects of Weather Disruptions on the Supply Chain

For many businesses, the supply chain is an international issue. Domestic interactions can be costly, so outsourcing labor and resources across the sea is often an unavoidable task. For example, flood-related damage in China has a huge effect on crop yield, forcing the country to face a hefty $25 billion economic blow. This means businesses in the Western Hemisphere that rely on Chinese agricultural exports may not be able to produce necessary items for grocery stores or, say,  create holistic wellness items.

These types of events force businesses to look elsewhere for the materials, labor, and other areas of the supply chain they need to amend. For reference, let’s take a look at the restaurant industry. Climate change, among other factors like COVID-19, has given way to increased food costs. Essential items, like grain and meat, have risen in price. Avian flu and temporary price increases at the beginning of 2023 caused restaurants to eliminate a good portion of meat-based meals from their menus.

Supply issues like these mean employees are also not being offered wages in alignment with recent inflation and the rising demands of their jobs. This gives way to larger economic issues that can potentially restructure the way we do business globally.

How Extreme Weather Events Affect Transportation Costs

Climate change and extreme weather events don’t only affect things like food production. It plays a huge role in the cost of transportation. Transportation is a necessary part of doing business. You need a method of transferring resources to a processing plant and then the completed product to a warehouse where it is shipped to yet another location.

Ultimately, climate change affects multiple areas of transportation in the global market. Since burning fossil fuels contributes to climate change, it causes a cyclic effect on transportation costs. Extremely hot weather can affect the performance of oil refineries, which then causes a delay in fuel production, making gas prices higher.

Also, there is the matter of delivery fees, which affects both businesses and consumers. Consumers tend to foot the bill for delivery fees since it can be a huge financial blow for businesses to take care of this fee themselves. Unpredictable weather can affect air freight schedules, and unusual snowfall can prevent trucks from making deliveries in a timely manner. Evolving climate conditions force consumers to eventually pay more in delivery fees.

To lower transportation costs, businesses should consider using energy-efficient vehicles to stave off the growing fuel costs. Should this not be an option, you can also consider using a diesel delivery service, which ensures all trucks are receiving high-quality fuel on a set schedule.

Combating Climate Change

Though climate change isn’t something that can be altered by a single person or entity, businesses can still do their part to create a more sustainable global market through several strategies and innovative technologies.

First, consider optimizing your supply chain by staying local. Use local vendors to create a reserve inventory and try not to outsource a large portion of your business operations overseas. This will reduce fuel costs and benefit the local economy at the same time. Second, invest in sustainable technological practices. Using solar power for warehouses can have a significant impact on energy costs and lower greenhouse gas emissions. 

Agricultural industries can make adjustments to livestock handling as well to reduce negative environmental impact. Exploring lab-grown meat or creating an emphasis on plant-based meat alternatives for the restaurant and food industry can make a huge difference in issues like water pollution as well as toxic emissions.

Reducing your carbon footprint may not seem like the most cost-effective solution at first, but doing your part to combat climate change will only fare your business well in the long term. Consumers will be more apt to purchase your products or services if they see your practices are environmentally friendly. You will also end up financially benefiting from stable supply chain costs as climate change efforts increase.

The Big Picture

Eco-friendly business strategies are essential for increased performance and keeping costs stable across the board. Staying well-informed about sustainable supply chain practices and the location and environment of all areas of your business cannot be understated. At the end of the day, switching over to energy-efficient transportation options and investing in climate-friendly tech is just good for business – it provides a chance for future generations and industries to thrive.

global

World Bank and Global Fund Forge Stronger Collaboration to Address Climate Change’s Impact on Health

The World Bank and the Global Fund to Fight AIDS, Tuberculosis, and Malaria have inked a new Memorandum of Understanding (MoU) to enhance their collaboration in strengthening health systems in Global South countries. This partnership aims to facilitate more efficient, effective, and sustainable financing, particularly in the face of climate change. With over half of the global population lacking full access to essential health services, the collaboration focuses on climate and health priorities to combat diseases like malaria, HIV/AIDS, and tuberculosis (TB) by fortifying health systems.

World Bank President Ajay Banga emphasized the urgent need to confront the challenge of rising temperatures affecting infectious diseases and giving rise to pandemics. The collaboration with the Global Fund is viewed as a crucial step in building a coalition to address these issues comprehensively.

The joint effort will concentrate on reducing the burden of malaria, HIV/AIDS, and TB through improved health systems, ensuring better access to primary healthcare services for vulnerable populations. Climate change-related health risks are expected to force 132 million people into extreme poverty by 2030, with one-third of these impacts disproportionately affecting the poorest communities.

The World Bank and the Global Fund will advocate for increased financing for health, aiming to enhance country capacity for efficient and sustainable financing across health systems. This includes better public finance management and the use of various financing modalities, such as joint investments and blended finance.

Additionally, the collaboration will focus on strengthening the regional production and procurement of health supplies, emphasizing sustainable manufacturing in Africa and low- and middle-income countries. Ensuring access to essential health supplies is critical for preparedness and resilient health systems.

Since 2017, the two organizations have collaborated on blended finance transactions, supporting countries like India, Indonesia, Haiti, and The Gambia. These efforts have resulted in increased financing for TB care, improved detection of TB cases, better treatment coverage, and enhanced disease surveillance, contributing to stronger health systems overall.

COP27

Accountability for a Just Transition: COP27 must look Beyond Emissions

In the heat of Sharm El Sheikh, discussions started on 6 November that will determine how, over the next years, we address the defining challenge of our time: climate change. The latest United Nations Climate Change Conference (COP27) brings together political and business leaders, activists, civil society groups, international organizations and others, to set commitments that can quicken the action and adaptation needed to mitigate the impacts of climate change.

The context for COP27 could not be more urgent, as the latest IPCC report sets out in stark terms. Human-induced climate change is causing dangerous and widespread disruption, to the environment and countless people around the world. Increased heatwaves, droughts and floods are already a reality.

These extremes are causing cascading affects that have exposed millions of people to health risks, and acute food and water insecurity, especially in developing and emerging economies. These crises are inter-connected and those affected most are often the least to blame. For example, World Resources Institute analysis shows that, while many parts of Africa are at the forefront of climate change impacts, the continent accounts for only 3% of global CO2 emissions.

Prioritizing adaptation that protects the most vulnerable

How we address these challenges require holistic thinking, long-term strategies and clear accountability, to prevent and alleviate negative impacts. We cannot achieve that without widespread and comprehensive reporting by organizations on their climate impacts.

As UN Secretary-General António Guterres has set out, greater leadership is needed from governments and businesses, warning that efforts to keep the rise in global temperatures to 1.5 degrees above pre-industrial levels is “on life support”. And so, with good reason, the focus of reporting has been mostly on emissions, with widespread commitments by companies to reach ‘net-zero’ targets.

Yet focus on emissions reductions alone is not enough. If we are to avoid further escalation and consolidation of crises, we urgently need transparency and accountability on how a low-carbon transition, which supports the needs of workers and communities, is being prioritized. Beyond this, organizations need to explain how their strategies and business practices alleviate the impacts of climate change on those around them.

To this end, there are growing demands on companies to help the communities directly affected by their activities to become more resilient against the impacts of climate change.

Clarity on the climate data that matters most

At GRI, we urge all organizations to disclose their impacts on the planet, because transparency – through quality, comparable information – is an essential stage in identifying where responsibilities lie and contributing to global solutions to the climate crisis. Sustainability reporting can be a driver for better environmental performance. However, companies are not always reporting the data that matters most.

That is why, as the most widely adopted standard-setter for sustainability impacts, we convene stakeholders across the board in our standards development, to determine best practice. This is the approach we will again follow as we get ready for a major update of GRI climate-related standards.

A review will launch in 2023 and cover not only commitments and actions to mitigate greenhouse gas emissions, but also how to ensure a holistic view on adaptation and resilience to climate change. This will account for the physical impacts of climate change as well as the low-carbon transition on workers and communities. A key consideration here will be to connect the climate standards review to our current revision program for labor-related reporting.

Demands for more clarity and consistency on the most relevant climate-related impacts of organizations, from the local to the global levels, has been a key learning from our Sector Program – particularly in the Sector Standards for oil and gas (GRI 11) and coal (GRI 12). Alongside steps to mitigate emissions, these standards have extensive focus on achieving a just transition. The new Agriculture, Aquaculture & Fishing Standard (GRI 13), meanwhile, gives attention to how organizations enable adaptation and protect critical sources of food.

Our revision of the Biodiversity Standard (GRI 304) has shone a light on the inter-relations between the climate and biodiversity crises. This process is at an advanced stage – and the exposure draft for the revised Biodiversity Standard is expected to be released for public comment early December (during the UN Biodiversity COP 15). This updated standard will closely intersect with our work on climate standards.

‘Double materiality’ in climate disclosure

As demonstrated by our multi-stakeholder engagement, we believe standard-setting should not happen in isolation. To that end, our review of climate standards will not only build on our wider program to develop the GRI Standards, it will also see collaboration and alignment with the climate standards under development by the International Sustainability Standards Board (ISSB) and the recommendations of the TCFD, as well as new EU standards under the Corporate Sustainability Reporting Directive.

GRI reporting is focused on impact materiality  in terms of how the organization impacts on people and planet. We will ensure our updated climate standard(s) complement the financial materiality disclosures in the proposed ISSB standards, reflecting our commitment to a global comprehensive reporting regime in which impact and financial disclosure are on an equal footing.

When it comes to climate reporting, the interrelationship between impact on the organization and impact on the outside world is clear to see. Taken together, this ‘double materiality’ perspective – with both the inside-out and outside-in viewpoints taken into account – will be crucial in driving accountability for climate impacts.

GRI AT COP27

Together with partners, GRI is co-hosting two events at COP27, under the theme Towards a Global Comprehensive Climate Reporting System. The first event (Green Zone, 9 November) explores a vision for regional businesses, while the second event (Blue Zone, 11 November) will see GRI and the IFRS Foundation discuss the challenge from the perspective of financial and business leaders.

GRI is keen to hear from a multitude of stakeholders on their climate reporting needs and expectations. Margherita and Noora will both be in attendance in the second week of COP27, to gain early input on what impact-focused climate standards should look like. If you are traveling to Egypt, reach out and arrange a meeting.

ABOUT THE AUTHORS

Margherita Barbieri is a manager in the GRI Topic Standards Team, where she is leading the project to create climate change standard(s). Before joining GRI, Margherita worked in the food and beverage industry, specializing in marketing and sustainability. She also led the World Economic Forum circular economy initiative, Scale 360°, in Turin. She completed the Executive Program in Corporate Sustainability from Saïd Business School (UK), and holds an MA International Relations from the University of Turin (Italy).

Noora Puro is a manager for the GRI Sector Program, where she has overseen the developments of the GRI Oil and Gas and Coal Standards, and is currently managing the project for a Mining Standard. Prior to GRI, Noora specialized in corporate and sustainability communications, advising and preparing reports for multinational enterprises. She holds a MA Humanities from the University of Helsinki (Finland).

 ABOUT GRI

Global Reporting Initiative (GRI) is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing the global common language to report those impacts. The GRI Standards are developed through a multi-stakeholder process and provided as a free public good.

port houston

AS PORTS AROUND THE WORLD CLEAN UP THEIR ACTS, THEY DISCOVER PORT HOUSTON IS WAY AHEAD ON THEM

The United Nation’s Intergovernmental Panel on Climate Change (IPCC) has more than struck a nerve with its recent report that humans are to blame for the Earth heading for environmental disaster.

UN Secretary General Antonio Guterres said the report was “a code red for humanity. The alarm bells are deafening.” 

He further stated that, “This report must sound a death knell for coal and fossil fuels before they destroy our planet.” 

“Climate change is already affecting every region on Earth, in multiple ways. The changes we experience will increase with additional warming,” said IPCC Working Group I Co-Chair Panmao Zhai.

The report also shows that human actions still have the potential to determine the future course of climate. The evidence is clear that carbon dioxide (CO2) is the main driver of climate change, even as other greenhouse gases and air pollutants also affect the climate.

“Stabilizing the climate will require strong, rapid and sustained reduction in greenhouse gas emissions and reaching net zero CO2 emissions,” said Zhia, in his comments when the report was released. “Limiting other greenhouse gases and air pollutants, especially methane, could have benefits for health and the climate.”

Aspects of the marine industry have been targeted in the past as culprits in the spread of CO2 emissions and other pollutants. In the past four or five years, ports throughout North America have been implementing programs to reduce emissions, through the use of electric terminal equipment, shore power and LNG facilities. Every bit helps. 

The Port of Houston, however, has elevated its game in the protection of the environment. Striving to do its part on climate change, Port Houston has been doing its share and more for nearly 20 years, long before climate change became the hot topic it is today.

On its website, Port Houston is described as a 25-mile-long complex of nearly 200 private and public industrial terminals along the 52-mile-long Houston Ship Channel. The eight public terminals are owned, operated, managed or leased by the Port of Houston Authority and include general cargo terminals and container terminals.

Each year, more than 247 million tons of cargo move through the greater Port of Houston, carried by more than 8,200 vessels and 215,000 barges. In 2019, the port achieved the No. 1 ranking in total waterborne tonnage in the U.S. and still ranks first in the U.S. in foreign waterborne tonnage. Port Houston is also home to a multi-billion petrochemical complex, the largest in the nation and second-largest in the world.

In 2002, the Port of Houston Authority became the first such entity in the U.S. to achieve an ISO 14001 certification for its environmental management system, which was an indication of the seriousness of its environmental efforts. 

So, what was the determination behind the environmental drive in the early 2000s?

“I think the port always had a view that if we don’t have a healthy environment, it is hard to have a healthy economy,” says Rich Byrnes, Port Houston’s chief port infrastructure officer, “and the mission of ports is to facilitate trade and facilitate commerce.”

Houston port officials’ views on a healthy environment and economy roll into their top concern over the Texas region’s quality of life, according to Byrnes, who also cautioned there is a public perception that the port authority has jurisdiction over more facilities than it actually does.

“We operate the public docks, which are primarily container terminals and general cargo terminals,” Byrnes clarified. The liquid bulk activities and 200 other docks and wharves are privately owned and operated by a few dozen major companies that also own the refineries and petrochemical complex.

“That puts us in an interesting situation because the public looks to the port, looks to us as representative of the Greater Port of Houston where 70% of the ships that come in are going to those private bulk facilities,” Byrnes says. “So, we realize we can’t do things alone.”

The chief infrastructure officer was quick to note that Port Houston is not going to solve climate change and the major challenges that have been highlighted in the UN report as those are global issues, but his team we will do what they can locally.

“We have neighbors and we have communities who are concerned about every dock and wharf that gets built and about noise, the light, the emissions that happen up and down the ship channel and we hear it all,” he says. “Whether or not we are responsible for it or not, we hear it because we have public port commission meetings and that’s a forum for the public to come in and say these are the things that are going right and wrong in the area. 

“Many times, it is not our jurisdiction, it may be the EPA or the Texas Commission on Environment Quality, but we hear it all. Our stance on the environment, including being the first port ISO Certified back in 2002, was all motivated because we are trying to be responsive to the port stakeholders who live and breathe around the port. I don’t know if the awareness of climate change back in the early 2000s was what it is today, so I won’t say those changes were motivated by climate change. They were motivated by a port responding to local stakeholders.”

It is part of the port’s mandate to work in partnership with the private companies along the ship channel as well as various agencies to develop programs to deal with climate change and unwanted pollutants, according to Byrnes.

Early this year, the port authority published an environmental leadership strategy with stated goals on what it wants to achieve in the near term and long term when it comes to clean air, water quality, storm water runoff and other ecological concerns.

“As part of that we are doing a whole bunch of things and the port has reduced its carbon footprint by 55% over the last four years,” Byrnes stated. “One of the big needle movers there was an electricity contract.” 

That’s a reference to the port having signed an electricity contract with Shell, which built a solar field in West Texas with the public grant.

“So, one thing we did,” Byrnes says, “we introduced electric vehicles to our fleet and those types of things.” 

Another partnership with the Texas Commission on Environment Quality, which was aimed at emissions reductions, resulted in a number of recommendations.

“One of the things that was implementable in the immediate term was to purchase an electric yard mule to move containers around the yards,” Byrnes recalled. “That technology we had tried about 10 years ago, but the technology at the time didn’t stand up to the workload pressures but we tried it again. It has been in our fleet for about six months now and we are seeing good performance, so we will probably continue to move in that direction.

Another port goal resulted in the launch of a “sustainability action team”—with an emphasis on “action,” according to Byrnes, who stressed that the authority wants the public to realize there are several initiatives in the works. One initiative involved invitations to about 140 different stakeholders for five, two-hour environmental workshops.

“We had about 80 participate from all walks of life—citizens, community and environmental advocacy groups but also the cargo shippers, beneficial cargo owners, the cargo carriers and industry partners,” said Byrnes. 

Through these workshops, there was a review of more than 100 sustainable projects at 70 ports around the world, which allowed Houston to match up its own projects with other global sustainability concepts.

“We took a sampling of that and said these are the types of things that can fit here in Houston,” Byrnes said. 

The authority spokesman said that during the workshops, “we asked a couple of simple questions. The first was what is important to the stakeholders and what can we do about it. The prime areas were clean energy, emissions reduction, community strengthening, circular economy and transparency. What we came up with was a list of 27 opportunities to either lead, partner or support different sustainability initiatives, and that lead, partner and support model was important because there are some things we can do inside of our own gates.”

Byrnes said the authority can introduce electric vehicles to its own facilities and reduce its own carbon footprint, but it can’t mandate billions of dollars to pipelines and others systems in the shipping channel because they belong to private industry.

“The things we can’t lead, we need to partner. So, we are having conversations with big oil companies and entrepreneurial startups around initiatives that would translate into the initial transition to hydrogen fuel cell vehicles, for example, helping ships transition to LNG or other alternative fuels.” 

The goal would be for the partners to become carbon neutral through, for instance, proper sourcing and blending of the materials going into the feedstock.

As for the supporting concept, “There are of major initiatives going on right now,” Byrnes said. 

For instance, in June the Blue Sky Maritime Coalition, which Port Houston co-founded, was launched. It is a collection of about three dozen companies with a focus on de-carbonizing shipping. Byrnes said the port authority can support this initiative “by making sure our initiatives are aligned with those initiatives. We are also joining the international agencies’ hydrogen ports coalition, which is similarly about exchanging ideas and practices to transition to clean energy.

“The other thing we are doing is working with the Center for Houston’s Future around the hydrogen economy and its transition,” Byrnes continued. 

That work will deal with questions such as how to accelerate Houston as a hub, all the installed infrastructure that comes with technology as well as the jobs and skills that will be absolutely suited to introducing new forms of energy and energy management.

“If there is going to be a place to contribute to the implementation of hydrogen and ammonia, it will be a place like Houston,” Byrnes added.

In discussions on environmental issues and suggestions to reduce carbon emissions, the overall reaction from private entities has been positive, according to Byrnes.

“I think they enthusiastically joined in our sustainability workshops, and as we did some homework we didn’t have to look far to find their own sustainability reports and strategies,” he said, noting almost every company along the ship channel has such goals, most of which are published. “So, we took a look at what they are doing and aligned to that. Some of these are ocean carriers, some who either own or charter ships; they are moving to cleaner fuels, driven a bit by IMO 2020, low Sulphur fuel requirements, also engine manufacturers or ship owners moving to alternative fuels, either LNG-powered ships and even ammonia powered ships.”

Byrnes added that companies whose business is clearly in the oil and gas sector “are not going away any time soon, but they are all focused on what the future holds and preparing themselves strategically, so they have sustainability initiatives.”

He went on to make this point about oil and gas companies: “When we talk about sustainability, climate change and impacts, there seems to be a lot of vilification of the fossil fuel industry. There is an angle here in Houston that some of the companies promote and that is it is in the national interest to export energy. And they like to make money doing it, but when we export natural gas to places like India and China, that is replacing wood, coal and dung in people’s homes and things like that. So, there is actually a net benefit to positioning fuel. While these companies all have sustainability goals, their business is doing some good things as well.”

While ports around North America and globally have over the past five years moved to more environmentally sustainable practices, it would appear Port Houston, with its many initiatives, investments and dialogue with numerous stakeholders, has carved itself a leadership role in the marine ports’ climate change battle.

“We like to say we are an environmental leader and what that means is being vigilant and always looking for what else we can do,” says Byrnes. “And that’s what we are focused on this year, 2021.”

As for the next five to 10 years for Port Houston with respect to the environment “we will keep doing what we are doing, but I think we are maybe at a tipping point. There have been a lot of ideas that have been talked about for the past several years, that are ideas whose time has come,” he says. 

One example is the transition to cleaner fuels for ships, with an ever-growing number of vessels transitioning to LNG and other alternatives.

 “As a port, we are going to try to facilitate the acceleration of this energy adaption so we can get to a lower emission transportation industry in this area,” said Byrnes, adding there is a lot of “pioneering work ongoing.”

global supply chains

How Will Climate Change Affect Global Supply Chains?

The world relies on global supply chains, but these networks are prone to disruption. Disease outbreaks, worker shortages, technological issues, and more can all cause substantial delays and expenses, but one factor is more threatening to supply chains than any other. Logistics professionals today must consider the impact of climate change.

Carbon dioxide in the atmosphere is increasing more than 250 times faster than in the last Ice Age, mostly due to human activity. That’s led to rising temperatures, glacial ice loss, sea-level rise, extreme weather events, and more. As climate change worsens, these factors will grow more severe.

Here’s how that could affect global supply chains.

Declining Supplies

One of the most disruptive effects climate change will have on supply chains is on the supply side. Rapidly warming oceans and increasingly extreme weather have already started to affect multiple industries, decreasing their output. As this trend continues, supply chains will have fewer and fewer reliable sources for some products.

For example, New York’s registered lobster landings decreased by 97.7% between 1996 and 2014, thanks to warmer oceans. Similarly, droughts have hampered agricultural production, with products like rice and coffee seeing dramatically smaller harvests. Supply chains will have an increasingly difficult time finding sufficient sources to meet demand as this problem grows.

Extreme weather events could reduce global supplies even faster. Wildfires in North American forests are a severe threat to the lumber industry, and they’ll become more frequent as climate change worsens. Hurricanes, flooding, and similar events will have a similar effect on oceanic and seaside industries.

Workplace Disruptions

Climate change also poses a threat to the workplaces that sustain global supply chains. The most straightforward way this would happen is through temperature-related worker exhaustion and illness. Every increase of 1° Celsius could reduce worker productivity by 1-3% for those outside or without air conditioning.

While those percentages seem small, they could add up to the equivalent of 80 million job losses by 2030. That would result in global losses of $2.4 trillion. Rising sea levels and extreme weather would also displace many workers, making it difficult for some warehouses and other facilities to maintain adequate staffing levels.

These facilities themselves could face physical damage as well. Inclement weather events like tornadoes, hurricanes, floods, and fires have all become more frequent and severe amid climate change. As those trends continue, the workplaces that supply chains rely on could see increased physical damage, disrupting workflows and lowering output.

Over time, some entire facilities could become unusable. If sea levels rise by just 1 meter, 80 airports could be underwater, limiting supply chains’ transportation options.

Transportation Risks

That leads to the next effect of climate change on global supply chains. Transporting parts and products across the world will become an increasingly challenging and even dangerous task. All of the previously mentioned severe weather events would delay transportation at best and endanger employees at worst.

Many of climate change’s effects on transportation aren’t dramatic but are still damaging. For example, climate change has increased the frequency and intensity of heavy rainfall. That alone can slow ground transportation, cause storms at sea, affect ocean transport, and delay flights, causing global disruptions.

Of course, the rising frequency of extreme weather events will also cause substantial transportation delays. Flooding will make ground transportation impossible in some areas until the waters subside and emergency responders clear the damage. Hurricanes and other storms will delay or reroute flights.

These delays will ripple throughout the supply chain and the industries that rely on it. Time-sensitive shipments could turn to waste in the face of slowed transport. Manufacturers will have to slow production in light of part shortages. Events like this already occur, and climate change makes them more common.

Rising Costs

Many of these factors will also contribute to rising operational costs throughout global supply chains. For example, as workplaces face rising worker shortages due to environmentally driven displacement, and suppliers decline, output will likely fall. As their output decreases and demand stays the same, they’ll have to raise costs to make up for it.

Supply shortages alone could have a tremendous impact on costs. The price of coffee futures nearly doubled in July 2021 as record droughts struck Brazil. Similar price hikes could affect the cost of items supply chain organizations need, like trucks, equipment parts, and fuel.

As extreme weather displaces employees, staffing costs may rise as well. Supply chains may have to offer higher wages to entice workers to remain in the area or move, raising their ongoing expenses. Some smaller companies may not be able to adapt in this way and face going out of business.

How Can Supply Chains Respond?

Climate change will undoubtedly have a tremendous negative impact on global supply chains. Many of these trends have already started to take shape. In the face of these threats, supply chain organizations must take steps to adapt to a changing world and lessen their environmental impact.

One of the most important changes is to decarbonize the supply chain. Switching to zero-emission vehicles would take a considerable amount of greenhouse gas emissions out of the equation, fighting climate change. With electric vehicles boasting ranges above 400 miles today, this option is becoming increasingly viable, too.

Switching to renewable energy in warehousing operations will further decarbonize supply chain operations. Logistics companies can encourage other businesses to follow suit by partnering with green manufacturing facilities, eliminating their third-party emissions as well.

Supply chains must also become more resilient to minimize disruptions from near-term environmental hazards. Distributed sourcing, asset and environmental monitoring, supplier due diligence, and creating formal disaster recovery plans can all help. Steps like this can cause a company to lose just 5% of its revenue amid a disaster, compared to 35% for an unprepared party.

None of these steps can happen in isolation. Supply chains are complex, interconnected networks, and climate change is similarly multifaceted. As logistics companies seek to improve their own operations, they must partner with other organizations for more cohesive, global action.

Climate Change Is a Serious Threat to Global Supply Chains

Climate change is the most significant threat facing global supply chains today. It’s already causing shortages and disruptions in some industries, and these challenges will only grow more frequent and severe if organizations don’t take action.

The threat of climate change is grave, but it’s not inevitable. If supply chain companies and their partners can embrace more sustainable operations, they can mitigate climate change and protect future operations. The world and the global economy will be better off for it.

carbon

States With the Least Carbon-Intensive Economies

World leaders convened in Glasgow this November for the 2021 United Nations Climate Change Conference. Facing the intensification of global climate change, the negotiators reached an agreement that explicitly commits to reducing the use of coal, limiting other greenhouse gas emissions, and providing support to developing countries most impacted by climate change.

The Glasgow conference reflected heightened urgency around climate change as the effects of carbon emissions have accelerated and become more severe in recent years. A 2021 report from the Intergovernmental Panel on Climate Change found that without rapid reductions in greenhouse gas emissions, warming above 1.5°C is almost inevitable. This level of warming would have disastrous effects in the form of sea level rise, more severe weather events, and harm to agricultural systems and human health.

While there is still much work to do, the good news for the U.S. is that many states and the country as a whole have begun to reverse the growth in carbon emissions. Government policy to limit emissions and advancements in lower-emission technologies across the economy have helped turn the trends in the right direction.

Much of this progress has taken place over the last fifteen years. Total CO2 emissions peaked in 2007 at over 6 billion metric tons, but that figure fell to around 4.6 billion metric tons in 2020. One of the big contributors has been decarbonization in electric power generation due to the decline of heavy-emitting coal and the rise of clean energy sources like wind and solar. Over the last decade, these factors have reduced CO2 emissions associated with electric power generation by around 36%. And this trend also contributes to emissions reductions in the main “end-use” sectors—transportation, industrial, residential, and commercial—that consume electricity. Residential and commercial have seen the sharpest declines, with emissions dropping by more than a quarter since 2010 across both sectors combined.

Encouragingly, these declines have taken place even while the U.S. population and economy have continued to grow. From 1970 to the mid-2000s, carbon emissions and GDP grew together, with the pace of GDP growth exceeding that of carbon emissions. More recently, the steady upward trajectory of GDP has continued while carbon emissions have ticked downward. Since 2007, total energy-related CO2 emissions are down by 23.9% while real GDP has increased by 17.7% in the same span. These trends help alleviate concerns that reducing carbon emissions necessarily means limiting economic productivity, and many U.S. states are proving that economic growth in a less carbon-intensive economy is possible.

The data used in this analysis is from the U.S. Energy Information Administration and the U.S. Census Bureau. To determine the states with the least carbon-intensive economies, researchers at Commodity.com calculated total CO2 emissions per GDP. States with a lower value were ranked higher. In the event of a tie, the state with lower per capita CO2 emissions was ranked higher.

Here are the states with the least carbon-intensive economies.

State Rank CO2 emissions per GDP (tons per $ million) CO2 emissions per capita Total CO2 emissions (tons) Largest source of CO2 emissions
New York 1 123.6 9.0 175,900,000 Petroleum
Washington 2 135.9 10.2 77,000,000 Petroleum
Connecticut 3 136.8 10.5 37,600,000 Petroleum
California 4 148.0 9.0 356,600,000 Petroleum
Massachusetts 5 158.1 9.4 64,600,000 Petroleum
New Hampshire 6 158.9 10.5 14,300,000 Petroleum
Vermont 7 163.9 9.4 5,900,000 Petroleum
Oregon 8 164.5 9.5 39,900,000 Petroleum
New Jersey 9 198.0 11.9 105,400,000 Petroleum
Maryland 10 200.3 10.2 61,700,000 Petroleum
Rhode Island 11 206.5 10.5 11,100,000 Petroleum, Natural Gas
Hawaii 12 249.7 14.4 20,500,000 Petroleum
Arizona 13 252.1 13.1 93,900,000 Petroleum
Illinois 14 253.0 16.7 212,200,000 Petroleum
Maine 15 254.9 11.0 14,800,000 Petroleum
United States 287.2 16.2 5,297,400,000 Petroleum

 

For more information, a detailed methodology, and complete results, you can find the original report on Commodity.com’s website: https://commodity.com/blog/states-carbon-emissions/

HFCs

EPA Issues Final Rule to Phase Down HFCs as White House Announces Measures to Prevent Illegal Imports

The United States Environmental Protection Agency (EPA) has finalized a rule intending to reduce the production and consumption of hydrofluorocarbons (HFCs) in the United States by enforcing a cap and phasedown program under the American Innovation and Manufacturing (AIM) Act. According to the EPA, the final rule will phase down U.S. production and consumption of HFCs by eighty-five percent over the next fifteen years. Beginning January 1, 2022, allowances will be required to produce or import HFCs. The first of such allocations are to be announced by the EPA by October 1, 2021. The AIM Act instructs the EPA to issue a fixed quantity of transferrable production and consumption allowances, which producers and importers must hold in quantities equal to the amount of HFCs they produce or import. Alongside the EPA’s final rule, the EPA and other federal agencies under the Biden Administration announced additional actions intended to reduce consumption of HFCs, with a focus on curtailing and controlling illegal imports.

The final rule establishes HFC production and consumption baselines, a statutory phasedown schedule of allowed production and consumption, and the EPA’s approach to allocating and allowing transfer of allowances. According to the EPA, a global HFC phasedown is expected in order to avoid the most severe consequences of climate change. Producers and importers of HFCs should begin to consider how to adapt their businesses to the phasedown and how to take advantage of potential HFC alternatives. According to the phasedown schedule, steep reductions in allowances are planned for 2024 and 2029 to bring HFC production and consumption down to thirty percent against the baseline.

The EPA will set the initial allocation for each producer and/or importer based upon the individual entity’s production and/or import for the highest three-year period during the 2011-2019 period. The AIM Act had originally established the baseline to be the three-year period of 2011-2013, but the proposed rule published by the EPA in May 2021 had modified that to 2017 to 2019. Now with the final rule, the EPA has determined that using the average of the highest three years in the 2011 to 2019 window would ensure an equitable phasedown consistent with prior phasedowns.

The Administration announced the formation of an interagency task force consisting of the EPA and the Department of Homeland Security (DHS) to prevent and disrupt illegal importation of HFCs into the United States. The announcement of measures to prevent illegal imports follows reports of a surge in illegal trade in HFCs in Europe due to the European Union’s strict regulation of the greenhouse gases. The White House nods to this issue in its fact sheet on the matter, referring to “rates of noncompliance similar to what has been observed in other countries…” With the issuance of the EPA’s final rule, the U.S. has adopted a similar policy on HFCs but aims to avoid the enforcement issues observed in Europe, which have undermined the purpose of HFC regulations.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

carbon supply chain

What Would a Post-Carbon Supply Chain Look Like?

Businesses worldwide are pushing for more sustainable practices. As the threat of climate change has worsened, it’s become clear that industry as a whole must move away from carbon emission-generating practices. This movement has significant implications for supply chains.

Today’s supply chains are far from carbon-free. An organization’s supply chain often accounts for 90% of its greenhouse gas emissions when taking overall climate impacts into account. From diesel-powered trucks to natural gas-generated warehouse power, these networks rely heavily on fossil fuels.

It can be hard to imagine supply chains without these resources, but it’s not impossible. Here’s what a post-carbon supply chain would look like and how companies could achieve it.

Electric Vehicles

The most obvious difference between today’s supply chains and a post-carbon one is their vehicles. Transportation accounts for 21% of total global emissions, and freight constitutes a considerable portion of that figure. Almost all trucks that move freight today use fossil fuels, but post-carbon transport will be electric.

Electric trucks will likely be the first type of carbon-free vehicles to appear in supply chains. General Motors has already established goals to produce zero emissions, and electric road vehicles are increasingly common. Post-carbon supply chains will bring electrification to more than just trucks, though.

Ships and airplanes will also be electric. Their longer routes will require more efficiency, so they may rely on technologies like fuel cells or solar power instead of batteries. Regardless of the specifics, every vehicle in the post-carbon supply chain will be electric.

Green Power Sources

While vehicles may be the easiest culprit to pinpoint, they’re not the only source of emissions. Supply chains consume a considerable amount of energy, most of which comes from fossil fuels. In fact, if 125 multinational companies increased their supply chain renewable energy by 20%, they would save more than 1 billion metric tons of carbon emissions.

In a post-carbon supply chain, all energy would come from renewable sources. That would likely mean using various technologies, as sustainable power has varying effectiveness in different applications. Solar, wind and hydroelectric power would all play a part in the transition to zero-carbon operations.

A truly zero-carbon supply chain would also use renewables to generate power for its electric vehicles. Creating batteries or hydrogen for fuel cells requires energy, and this too must be green for supply chains to be truly sustainable.

Sustainable Sourcing

A more easily overlooked aspect of post-carbon supply chains is how sustainability plays into their corporate partnerships. A truly zero-emissions supply chain must ensure its suppliers are also carbon-free. Otherwise, it would still be investing in emissions-producing activity, albeit indirectly.

Industrial sectors like manufacturing are responsible for 29.6% of total emissions in the U.S. If a supply chain moved products from a company with such a significant carbon footprint, one could hardly consider it carbon-free. In a truly post-carbon supply chain, all connected sources are also zero emissions.

Ensuring these connections are sustainable requires a considerable amount of transparency. As such, post-carbon supply chains will require regular audits from involved parties to verify their sustainability. They’ll likely also employ technologies like Internet of Things (IoT) trackers and blockchains to keep operations transparent.

How Can the World Move Toward Post-Carbon Supply Chains?

These factors may seem like lofty goals right now. Today’s supply chains have a long way to go before they can say they’re truly carbon-free. Thankfully, however far-off these sustainability targets may seem, they are achievable. Companies can start acting now to move toward them.

Recognizing the business incentives for removing carbon from the supply chain can help encourage further action. According to one study, 84% of global consumers are more likely to make purchase decisions based on a company’s sustainability practices. Similarly, 61% are willing to wait for longer delivery times if they know it’s better for the environment.

Interest in sustainable supply chains will grow when more organizations realize these benefits. As this trend gains momentum, here are a few ways supply chains can start moving toward zero-carbon goals.

Improve Visibility

The first step in moving away from carbon is improving supply chain visibility. Companies can’t effectively become more sustainable if they don’t know the extent of their current unsustainable practices. Audits and studies can reveal where carbon emissions come from in a supply chain, guiding further action.

Organizations must also ensure their emissions monitoring is an ongoing process. Without continuous checking, they won’t be able to tell how different actions impact their overall goals. Periodic audits and implementing IoT sensors to track carbon emissions can ensure ongoing transparency.

In that spirit, supply chains should start improving visibility between partners. Asking for suppliers to offer proof of their sustainability initiatives will encourage broader action and help reduce emissions on all fronts.

Invest in Green Technologies

Some aspects of the post-carbon supply chain, like electric vehicles, aren’t applicable right now. While options may be limited today, more investment in these technologies will speed their development, making sustainability more viable quicker.

Many companies have already begun to invest in green technologies. Maserati has invested more than $867 million to refurbish its production hub to produce electric cars. As more money flows into these innovations, efficient, low-cost, carbon-free technologies will become available sooner, aiding a faster transition.

Green energy is a technology, not a resource. As such, it will only become cheaper and more efficient over time. Consequently, while some of these technologies may not be viable business choices now, they will be eventually, especially with more funding.

Collaborate

Since supply chains are so interconnected, it will take increased collaboration to push them away from carbon. Decarbonization is also a considerable undertaking. The transition will be far easier and faster if companies can work together toward a common goal.

Collaboration can mitigate the financial burden of decarbonization. Similarly, it can help some companies overcome any qualms they may have about the risks of going green. Climate action experts highlight that shared responsibility translates into reduced risk, at least in people’s perception of it.

In addition to collaborating with other related companies, supply chains can partner with environmental organizations. They can help show where improvements can be made, guiding more effective action.

Supply Chains Must Become More Sustainable

Supply chains are essential to virtually every industry, and they often produce some of the most emissions. As such, these operations must move away from fossil fuels as companies seek to become more sustainable.

The post-carbon supply chain seems like a lofty goal, but it’s attainable. When organizations realize these things are possible, they can start moving toward a better future.

wine

Climate Change: The French Wine Disaster & Beyond

Complex supply chains around the world make countries dependent on others for essential items, including food and drink. When it is interrupted, the effects are felt globally. We’ve already experienced the turmoil that disrupted supply chains can have during the COVID-19 pandemic. For example, Finance Minister Bruno Le Maire issued a statement to the nation’s supermarkets urging them to stock French products.

There are a few instances other than COVID-19 where disasters have interrupted the supply chain, causing economic damage. Agriculture tends to take the biggest financial hits and losses during disasters such as extreme weather, which are becoming more frequent, intense, and complex. Between 2008 and 2018, agricultural disasters cost developing countries more than €908 billion, having a profound effect on the livelihoods of smallholder farmers who were already struggling against large corporations.


Electrix, a producer of coffret électrique encastré for the food industry, takes a look at the French wine disaster and other events around the world that had an impact on food and drink.

The wine disaster

Unseasonal frost hit France this year, seeing a usually warm April suddenly struck by freezing temperatures and bitter frost. The initial record-warm early spring resulted in vines and fruit trees blooming earlier than they would usually, and they were then ruined by an unexpected bout of cold temperatures. Research has found that as the world’s temperature rises, the timing of seasons will change and become more severe.

Vineyards in Bordeaux, Burgundy, Provence, and the Rhône Valley were affected and resorted to lighting thousands of fires and candles near the vines and trees in an attempt to keep them warm overnight. Sadly, many winemakers have reported a 100 percent loss on their yield.

French agriculture minister Julien Denormandie commented: “This is probably the greatest agricultural catastrophe of the beginning of the 21st century.” Meanwhile, Prime Minister Jean Castex pledged €1bn in aid to winemakers and farmers. It may take years for some vineyards to recover.

France’s wine industry has already been dealing with the effects of COVID-19 and decreased demand from restaurant orders, as well as previously battling with Donald Trump’s tariffs on key French goods, including wine and cheese, which resulted in a near 14 percent drop in French wine and spirits exports last year. Furthermore, due to the effects of climate change, the flavors of wine will likely change or, in some cases, disappear forever. Merlot, for example, could become a thing of the past due to the grapes used in that particular wine being less resilient to changing weather patterns.

Thirsty crops exhausting groundwater

Rice is the primary source of food for more than three billion people every day and is helping prevent the world’s food crisis from getting worse. Sadly, there is a risk of rising food insecurity for such a staple food.

India is experiencing both a water and agricultural crisis that has been developing for decades. Rice is one of the thirstiest crops that exist – farmers use 15,000 liters of water on average to grow one kilogram of paddy (rice plant). Rice is draining northern India’s Punjab of its groundwater, with the ground expected to be exhausted by 2039 and become comparable to a desert. A fifth of the world’s population lives in India, who only have four percent of global water while simultaneously being the largest user of it with 90 percent of their water used for agriculture.

India isn’t the only country struggling to grow rice due to a lack of water – countries in Southeast Asia such as China are facing the same challenge. Climate change is making extreme weather like flooding and droughts happen more regularly, making water difficult to source. Scientists are looking to develop new strains of rice that require less water and are more resilient to drought and climate change.  Plus, water technologists in New Delhi are looking to design water management techniques that use no more than 600 liters of water for one kg of paddy.

Increased breeding of rodents in Australia

Australia has faced the brunt of climate change, ranging from bushfires that devastated 27.2 million acres of land to damaged food and crops due to the largest plague of mice ever seen. Australian farmers are used to a mouse plague every ten years or so; however, with the planet warming up, they could become more regular with more mice than ever. The temperatures create the perfect breeding ground for the rodents, which then go on to destroy crops.

Farmers are even forced to burn their crops which have been infested with mice and mice urine.

A disaster-resilient future is possible if we develop sustainable agriculture. Preparing for risk management can help in reducing agriculture’s vulnerability to natural disasters and climate change.

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Sources

http://www.fao.org/news/story/en/item/1381672/icode/

https://www.axios.com/french-wine-disaster-climate-change-1f86c34c-917c-4d86-b126-73f7618316a9.html

https://www.france24.com/en/20200328-france-issues-call-to-buy-french-as-coronavirus-erodes-single-market

https://www.theguardian.com/food/2021/apr/15/agricultural-disaster-two-billion-worth-of-french-wine-production-lost-after-cold-snaps

https://www.foodandwine.com/news/france-wine-vineyards-frost-damage-2021

https://www.foodandwine.com/news/france-wine-vineyards-frost-damage-2021

https://www.downtoearth.org.in/news/water-use-is-excessive-in-rice-cultivation-30352

https://apnews.com/article/india-climate-change-business-science-environment-and-nature-52a57d80d1dcb85f508cfd5f80120870

https://www.bbc.com/future/bespoke/follow-the-food/a-staple-food-to-withstand-disaster/

https://theprint.in/economy/rice-the-one-grain-thats-keeping-the-worlds-food-crisis-from-getting-worse/653855/

https://www.bbc.co.uk/news/world-australia-50951043

climate change

Climate Change Plans and the Impact on Global Trade

Changes in our planet’s climate are the most significant threat to almost any business. Climate change directly affects companies’ costs, as eco norms require many firms to look for environmentally friendly materials and processes.

The resilience of companies to new climate changes depends on a risk management process, a ready-made business plan, and a laid-out governance structure. Alas, many companies don’t have access to relevant climate information, so they don’t plan for or mitigate physical risk.

Facilities, supply chains, working networks, customers, and markets are the first targets that suffer from physical climate risk. For example, supply chains “break down” when natural disasters are affected by a rapidly changing climate.

How does climate affect production?

Climate change significantly increases the price of any production, reducing the speed with which supplies can be delivered. The quality of the goods and services produced also suffers.

Also, production and deliveries are entirely “broken” in timing due to minor delays in components and goods. Companies need to best manage the uncertainty associated with possible significant disruptions occurring in supply chains.

Assessing supply chain risks

Many companies are accustomed to assessing their supply chains from factors related to policy, regulatory, market, and technological nuances. Any unforeseen change in any of these areas puts the supply chain at significant risk, threatening companies’ ability to operate.

Weather is similarly considered in short- and medium-term supply chains. This data helps companies search for other suppliers and enter new financial markets. Proactive forecasting activities allow for short-term changes in supply chain decisions. Alas, this activity is considered inefficient, ad hoc, and short-sighted.

Annual adjustments with supply chain investments that lack long-term understandings of weather and climate trends will become highly problematic. This approach should be bypassed these days. Companies better start understanding the medium- and long-term physical risks in the climate environment.

Instead of planning a year, companies would do well to look a couple of years ahead and invest in those sources at the least risk from the climate.

Decarbonizing Supply Chains

While supply chain decarbonization processes are complex, many firms can capitalize on multiple climate issues by implementing such methods.

Companies in sectors that are most user-driven have higher per-chain emissions than direct emissions. By encouraging suppliers to create zero-emission supply chains, companies can increase their climate footprint to ensure that emissions in the sectors where the situation is most problematic are reduced to accelerate steps to combat climate change.

It’s no secret to world leaders that decarbonizing supply chains look very difficult in practice. Even the leading companies have difficulty with the necessary data and setting goals and standards that their suppliers adhere to.

Involving the entire (fragmented) supplier landscape can be an almost impossible task. The situation looks complicated if the emissions are at the beginning of the chain and collective action is needed to eliminate them.

More than half of the world’s greenhouse gas emissions come from food, construction, clothing, consumer goods, electronics, automotive, trucking, and more. Indirectly, the share is often controlled by a few companies. End-consumer spending will not be able to increase spending in supply chains with zero.

Remarkably, about 40% of each of these supply chain emissions can be reduced by taking advantage of cyclicality, efficiency, and renewable energy sources that will have minimal impact on the price of all products. With zero emissions in the supply chain at the end-user, costs would increase to a maximum of 4%.

Supply chain decarbonization problems are solvable with many steps for each company:

-Create a comprehensive baseline emissions plan that will be gradually filled with actual supplier information;

-Setting ambitious with comprehensive emission reduction goals;

-A complete review of product design options;

-Revision of geographic supply strategy;

-Setting ambitious purchasing standards;

-Working together with suppliers to co-finance emission reduction levers;

-Working together with peers to agree on sectoral goals that increase impact with leveling the playing field;

-Leveraging economies of scale by increasing demand to lower the price of green solutions;

-Developing internal governance mechanisms where emission reduction will be a guiding mechanism.

Preparing supply chains for climate change

Supply chain management needs to be directed toward preparing for the unknown to ensure greater competitiveness and relevance in an ever-changing industrial landscape.

Many companies are now implementing solutions that address the industry’s role in mitigating supply chain risks due to climate change.

There are ways to protect supply chains from physical climate risk. Since most of the population lives near the coast, there is a risk that sea levels will rise, there will be more storms, flooding, and hurricanes, which only exacerbates the growing dangers.

Buying/building a property in a coastal area that lacks coastal flood risk mitigation infrastructure will not be the best idea to implement.

The electric commerce industry uses more materials in packaging that are suitable for recycling or biodegradability – an encouraging sign that consumers are concerned about climate change.

As the dialogue on climate change occurs among consumers and businesses, it is becoming increasingly clear that addressing climate change is already necessary.

Smart contracts and Global Trade: future effect on climate change plans

In recent times, bitcoin and the rest of the blockchain network have triggered the sustainable development of many industries in Global Trade. Smart contracts that run on blockchain will provide the world with just the right new ways to combat climate change and its effects.

However, many companies have missed the potential of smart contracts that are fully trackable, transparent, and irreversible in self-executing contracts that only work on blockchain to combat climate change.

It is no secret that blockchain companies are in no way affected by what happens in the environment. For example, day trading altcoins consistently break records among enticed traders. Smart contracts can help create globally accessible and automated reward systems that directly reward companies for engaging in sustainable practices (regenerative agriculture, carbon offsets, and so on).

The fight against climate change needs a more considerable change in habitual global consumption, and smart contracts could be just the right tool to encourage participation in areas of global “green” direction.