Historically, IT, automotive, retail and other commodity-producing businesses did not have to worry about deforestation. However, now more than ever companies do need to think about how global events impact them because their consumers are becoming increasingly eco-conscious and switching their buying habits.
Deforestation can increase operational costs and affect supply chains as consumers demand more sustainable products and investors insist that companies address problems sooner rather than later.
A new report from the Carbon Disclosure Product revealed a number of facts and data points regarding just how impactful deforestation can and will be on many companies' supply chains worldwide. Further, it touched upon the different strategies these companies plan to undertake to address their most pertinent supply chain concerns.
Many Companies Have Yet to Address the Problem
Dina Medland, a contributing writer for Forbes, asked an excellent question when she said, "why look ahead and rock the boat if you are a business with a seemingly reliable revenue stream?"
Unfortunately, many companies seem to not be taking seriously the potential impact deforestation can have on their operations. Less than 42 percent of the 200 companies surveyed noted they assessed the potential impact of their critical "forest-risk commodities" on their plans to grow over the next five or more years. And most companies don't look beyond a six-year window when it comes to evaluating potential risks.
However, in an always changing global economy, businesses need to stay vigilant about relying too much on a good thing - that is, if they're successful now, they may not be triumphant in the future.
"More than ever before, deforestation needs to be firmly on the boardroom agenda," said Paul Simpson, CEO of CDP, according to Forbes. "With a clear financial dependency on these forest-risk commodities, growing investor expectations, a changing regulatory environment and the rise of consumer campaigns impacting brand reputations, companies' deforestation actions are under intense scrutiny. Long-term profitability is at stake."
Companies Face Problems When Trying to Address Impact of Deforestation
CDP's study indicated many companies may not be ignoring the impact of deforestation on supply chains due to negligence or ignorance. Rather, for the past several years, the following obstacles have inhibited companies from addressing their forest-risk commodities:
- Weak governance and compliance enforcement of national deforestation policies.
- Traceability systems.
- Limited availability of certified materials and their costs.
Here's How Companies Can Fix This Supply-Chain Vulnerability
Some companies are looking to take pressure off their supply chains by working with partners beyond the first tier, although the report noted this number is not nearly high enough. And others have publicly stated they plan to eliminate forest-risk goods from their supply chains.
While these are important steps, companies should also consider the type of in-house tools they use to manage risks ranging from consumer and economic pressures to tactical in-house and external obstacles. Businesses might be able to upgrade many of their existing devices that involve barcode labeling, field service professionals and inventory management operations.
These enterprise data collection systems can help streamline procedures, making operations run more efficiently and thus allowing businesses to focus on substituting forest-risk products for more eco-friendly options.
If companies aren't sure which solution is best for them, they must start by identifying key weaknesses in their supply chain. From there they can look for systems that best meets their needs, whether that's integrated ERP solutions like SAP and Oracle, supply chain accelerators (voice picking, warehouse automation) or other programs specifically made for the industry. Finally, they'll need to integrate these into their business. This will take time some time, but with patience companies can begin to transition from a 20th-century business model to one that is more current and appropriate.