Water scarcity and extreme weather conditions are among the biggest environmental risks that companies are faced with today. These risks have the potential to cause major sourcing disruptions to the supply chain and create an unsafe working environment for employees. To help mitigate these threats, companies should strive to build resilient supply chains through proper environmental risk management and planning. In particular, companies looking to gain a greater competitive advantage and safeguard against environmental risks should consider two key areas of focus: commodity sourcing and health and safety issues.
Companies sourcing from facilities faced with environmental threats run the risk of a disruption to their supply chain. Take the case of a major drought, supplier commodities, like agricultural crops that depend on consistent water supplies, are impacted resulting in decrease in production, the inability to fulfill commitments for production, and major monetary losses for companies and suppliers.
To safeguard against disturbances in production, companies should evaluate environmental risks for specific commodities to help inform their sourcing decisions. In doing so, companies and suppliers can leverage industry risk to identify potential areas of concern and prepare accordingly. For instance, companies can develop a flexible approach by identifying backup suppliers, efficiently managing supplier relationships, and developing contingency plans.
As a solution, UL’s Responsible Sourcing group offers a customized Environmental Country Commodity Risk Index. This is a report derived from the assessment of potential environmental risks and issues that may arise in or affect the production of specific commodities, as well as other risks specific to that sourcing country. UL’s Environmental Country Commodity Risk Index creates a custom-built baseline for understanding and evaluating environmental threats to help inform companies on sourcing risks and build more resilient supply chains.
Health and Safety
The health and safety of facility workers are significantly impacted when exposed to environmental risks. For example, facilities or regions facing water scarcity challenges may not have sufficient water supplies in order to extinguish fires in or near facilities. The negative impacts of factory fires on worker health and safety, production processes, and supply chains are limitless.
As a planning and preparedness measure, companies should assess fire safety at facilities based on prioritized environmental risks and countries. As such, UL’s Responsible Sourcing group’s Fire Safety Audits provide companies with a lens of visibility into fire safety conditions at a given point in time, while building company reputation and gaining a competitive advantage.
Other environmental risk factors that cause potential health and safety threats are chemical and hazardous materials. Hazardous waste management practices, such as proper storage of waste, should be incorporated into facility assessments to allow companies to gain valuable insight into potential health and safety risks and/or concerns in their supply chain.
Both commodity sourcing and health and safety planning are important actions to build into a resilient supply chain. It is essential to first prioritize environmental risks by evaluating trends for specific commodities in different countries, and then utilize those risks to perform assessments on at-risk facilities. This two-step system provides a holistic set of tools to help identify and mitigate environmental risks allowing for companies to build resiliency, flexibility, and leadership within their supply chain and the industry.
For more information on UL’s risk services, contact the UL Responsible Sourcing group or email us at RSinfo@ul.com
Contribution by Sarina Tounian
Sarina Tounian is a Program Specialist, Environmental Responsibility with UL’s Responsible Sourcing group