Daily Times

In today’s dynamic environment, companies are exposed to a wide range of risks, like never before, in operating their supply chains. One of the major sets of risks that an organization faces today is environmental risks.

Given the rapidly changing environmental conditions and increasing laws and regulations about sustainability, companies need a proactive approach to identify and make counter-strategies to mitigate these risks. Without having proper right risk aversion strategies, the supply chains can be wrecked by environmental factors. Environmental risks are present throughout the lifecycle of a product and if not tackled efficiently, can have serious consequences like legal actions, penalties, disruption in supply chain and negative projection of the company. It is extremely important to analyze the risk one’s suppliers possess for the environment and how can it affect the company’s operations in the long term.

Environmental risks are present in different forms and can affect supply chains in various ways. First, extreme weather and natural calamities pose a great danger to the smooth functioning of supply chains. Earthquakes, floods, extreme hot and cold temperatures can make it difficult to transport the materials through the supply chain and can halt the operations. In the US, California’s wildfires and Carolina’s hurricanes caused much damage to businesses and disturbed their supply chains as did in the recent earthquake in Kashmir. To top it off, global climate change has been causing an increase in natural disasters like storms and floods, etc. to a great extent.

Second, the excessive and wrongful extraction of raw materials can also have negative results. Companies can face legal actions from government, NGOs, local community or other pressure groups which in result will cause disturbance or even closing of the entity thus disrupting the supply chain. The unethical extraction of Mica from India’s deadliest mines to illegal extraction of groundwater by bottled water companies can result in being sued or forced to shut down operations.

Third, if the workers work in a hazardous environment it can cause health issues and absence from work along with the extra cost thus disturbing the supply chain operations. Exposure to dust, fumes, radiations, loud noise and chemicals like lead, mercury, arsenic, etc. can cause various diseases and ultimately stop the operations.

Many of the environmental risks are inevitable and organizations cannot avoid them, but they can always come up with ways to mitigate them. They should make strategies for minimizing the risks and ensuring the smooth flow of their supply chain operations. All the environment-related legislation made by governments and other regulatory bodies should be followed. Organizations must avoid illegal and unethical practices for smooth and long-run business. Negative environmental impacts should be reduced for instance carbon emissions can be reduced, waste must be disposed of properly and treatment of chemicals to be careful to protect the environment. To avoid the dangers of natural disasters, companies must choose their location, mode of transport strategically making sure it’s a win-win situation. It should be flexible & responsive enough to absorb changes and capable enough to avoid any distortions in the supply chain.

The writer is currently enrolled in the MS Supply Chain Management Program at Bahria University in Islamabad.