In December 2019, a large, multinational retailer saw a strange shift in demand for its products occurring in Asia. Using advanced AI, the company immediately began assessing the situation and mapping contingency scenarios.
By January it was clear these impacts were due to Covid-19 and come February, the company was running tests on new operational models in all departments. By March the company had executed a herculean, and successful, pivot to weather the incoming storm, from securing their supply chain to a wholesale, operational shift to digital.
This is a clear-cut example of resiliency planning. And as we experience the devastating fallout from Covid-19, communities, companies, and markets should use this as an opportunity to become more resilient to future shocks.
While the sweat and investment that goes into insuring against shocks sometimes doesn’t reap immediate returns, the benefits, when called upon, are manifold; they can be the difference between a company’s survival or its bankruptcy.
“What we know about the companies who will come through this crisis is that they have long prepared for shocks through forward-thinking supply chain and sustainability leadership,” says Peter Bolstorff, Executive Vice President of Development for the Association for Supply Chain Management (ASCM).
Supply Chain: The First Port of Call
Supply chains are particularly vulnerable to shocks from large events such as Covid-19 and climate change. As a result, supply chain professionals have long been on the front lines of developing resilience for their companies.
“Leaders in supply chain resiliency are building more tightly woven public-private collaborations as shocks like Coronavirus reveal how interrelated and complex this work is. We also know that they are updating their risk management playbooks and pivoting to enable digital operations, among other things,” says Peter Bolstorff.
Finding good training in sustainable practices is, thus, key for supply chain professionals, and organizations serving the profession are scaling to meet the need. The ASCM, for example, offers an enterprise certification for sustainability that complements the Dow Jones sustainability index, mapping to dozens of different criteria, and enrollment numbers continue to grow (the ASCM is also providing important resources to its members regarding COVID-19).
Another challenge facing supply chain professionals--as well as sustainability professionals in general--has been the dizzying array of sustainability measurement and reporting systems. These have made finding a common language, to break down internal barriers and organizational silos, difficult.
“Speaking a common language between departments, from accounting and finance to supply chain operations, is critical to climate risk and sustainability work,” says Tory Grieves, VP of Analytics at The Climate Service.
“We’ve found that empowering directors of sustainability to engage with risk managers and supply chain professionals within their organizations, helps climate risk to be more effectively incorporated into enterprise risk management.”
If Resiliency Had a Shape, it Would be Circular
Dell Technologies had worked for years to diversify its supply chain, a result of trade war realities and a long-term commitment to sustainable practices. As a result, when China was shuttered due to Coronavirus, the company’s supply chain and operations were better prepared, according to Trisa Thompson, SVP and Chief Responsibility Officer for Dell Technologies from 2008-2018, currently a Board Member of the Green Electronics Council.
The largest recycler of e-waste in the world, Dell began removing plastics and other components from old units and adding them to new units several years ago, according to Thompson.
“A move like this proves to be extraordinarily beneficial during times of crisis, like the supply chain disruptions the world is experiencing as a result of Coronavirus. Companies need to change their thinking, from waste as a liability to waste as an asset; they need to understand and pursue the tangible benefits of circular production and operations,” says Thompson.
Local sourcing—a close cousin of circularity—is also often in the purview of sustainability departments and today, in some cases, this work is saving lives. Local communities, for example, have experienced extensive benefits from groundwork laid to secure and build local food systems.
“One of the unique aspects that we have seen thrive during this time of COVID-19 pandemic is our local food system in Orlando,” says Chris Castro, Director of the Office of Sustainability & Resilience for the City of Orlando.
“Over the last few years, we have worked to develop a robust urban agriculture program -- enabling front-yard farming, backyard chickens, and converting vacant public land into community gardens and urban farms. Over the last 3 weeks, my Office has worked to aggregate local fruits and vegetables grown in Orlando and help distribute to local community partners working with families in need.”
Will Resilience Inform Tomorrow’s HR?
A doubling down on supply chain resiliency and an increase of interest in circular operations are two outcomes we are likely to see as a result of Covid-19 shocks, and there will be others. One major driver of future change is the largest ever surge in the number of workers operating from home.
There are, of course, a variety of implications that will result from this wholesale move to telecommuting, including a dramatic reduction in carbon emissions. A 2016 study conducted by Dell, “The Sustainability Benefits of the Connected Workplace,” provides a prescient look at potential implications if companies chose to alter policies long-term to allow for, or to encourage, more work-from-home.
Designed by Dell “to learn how to measure the positive outcomes arising from the use of our technology,” the study focuses on the impacts of Dell’s own work-from-home initiatives. “While these programs are known for their effectiveness at improving work-life balance for Dell employees, they also have sustainability-related benefits,” according to the study.
The Dell employees averaged working-from-home a little more than 9 ½ times per month (compared to a national average of 2.3 times per month). And the benefits--including one metric ton per year CO2e reduction for each employee and reduced per year gasoline consumption of 175 gallons, saving a collective $12 million per year—can be extrapolated; if more generous work-from-home policies extend beyond the Covid-19 crisis, not only would environmental benefits be significant, but companies’ (and society’s) exposure to climate risk—both physical and transition--could be reduced.
The Growing Strategic Advantage of Resilience
While Covid-19 is currently the most expensive, disruptive, profound shock facing markets, many of the impacts will be temporary. In contrast, shocks resulting from climate change are not and are only predicted to get worse. In fact, climate impacts have already caused extensive damage to economic systems.
“Disruption to the supply and delivery of goods has increased 29% since 2012 due to weather-related events, and in 2017 the USA was the region most impacted,” says Trisa Thompson. “Further, survey data from The Carbon Disclosure Project shows that the 200 largest businesses in the world anticipate $1 trillion in impacts to their businesses as a result of climate change in the coming years.”
The work of sustainability officers is helping to mitigate these risks, but more than that, it is also helping to capture important, competitive opportunities presented by the changing landscape.
“Sustainability considerations are now directly impacting sales. RFPs across a wide array of industries are starting to weight CSR performance. Before I left Dell last year, 70% of our RFPs had some sort of ESG disclosure mandates,” says Thompson.
“Sustainability, and the resilience it builds, is no longer nice to have. Today, more than ever, it critical for doing business.”