BALTIMORE, MD, January 20, 2023 – New audio is available for media use featuring L. Beril Toktay of the Georgia Tech Scheller College of Business. She is a Professor of Operations Management, Brady Family Chairholder, and a Regents’ Professor. Toktay serves as the Faculty Director of the Ray C. Anderson Center for Sustainable Business. She’s the Interim Executive Director of the Brook Byers Institute for Sustainable Systems. Toktay talks about climate change and the supply chain. This content is provided by INFORMS, the largest association for the decision and data sciences. What follows are four questions and responses. These responses were provided on January 19, 2023.
Question 1: How does climate change affect the supply chain?
Time Cue: 0:34, Soundbite Duration: :43
“Climate change leads to disruptions and supply interruption risk. Disruptions? Those can happen for two reasons. One is when effects of climate change impact production or when effects of climate change affect facilities or the logistics network. So, an example of the first would be that a buyer has a contract for an agricultural product, but its production volume dropped because of drought or excessive heat or flooding. An example of the second would be when a series of extreme weather events like hurricanes, delayed product delivery by air rail or truck, or damage to a facility owned by the company or its suppliers.”
Question 2: What have companies done in the past to address climate change in the supply chain?
Time Cue: 1:23, Soundbite Duration: :37
“To address the risk that climate change poses for their supply chains companies basically invest in becoming more resilient to disruptions. This could take the form of having multiple suppliers. It could mean having a mix of foreign and domestic capacity to assure supply. Or it may mean holding more inventory nearer to the sales point to avoid logistical delays due to weather interruptions. Companies may also assess the risk to their facilities and try to mitigate against those. And finally, they might look at additional insurance to address financial risk.”
Question 3: What should companies do now to mitigate the impact of climate change?
Time Cue: 02:07, Soundbite Duration: 1:25
“When we say mitigation basically, we mean engaging in actions that reduce carbon dioxide emissions so that the collective of all companies doing this is going to help the planet as a sum to mitigate climate change. So, with that in mind when companies are systematic about this, they look at their Scope One emissions, which means everything that's emitted by the facilities or trucks that they own; Scope Two emissions, which is emissions that come from purchased electricity for their operations; and Scope Three emissions which is everything in their supply chain including upstream and downstream. So, mitigating the impact of climate change might mean trying to optimize your fleet operations so that - or switching to hybrid vehicles, for example or electric vehicles. Scope Two emissions means trying to be much more energy-efficient so that you purchase less electricity, or you might invest in solar onsite. Scope emissions means holding your suppliers accountable for their emissions or looking at how your own products are designed so that during their use phase they use less energy and create less emissions. So, there is a very wide range of strategies that any given company can pursue.”
Question 4: What can we expect from those measures?
Time Cue: 03:39, Soundbite Duration: 2:04
“I tend to think of that as at an individual firm level and at the industry Level. So, how do we know things are working at the firm level? When investors are convinced that the firm has a proactive climate action strategy that is generating value for its shareholders and its stakeholders, and this translates to that company being more valued in the market and having more customers. When we look at it more in the aggregate, we're more interested in this part this entire industry shifting its practices. Are they collaborating pre-competitively to change policy, or to build capacity in a particular region so that they have access to more green energy. And it's especially that kind of collective action that I expect to see from companies engaging in climate action. Here in Georgia, we have a great example of a collective action. It’s facilitated by the center I direct, the Ray C. Anderson for Sustainable Business. And it’s called the Drawdown Georgia Business Compact. This is basically a statewide business consortium that’s aimed at achieving a just, prosperous, and sustainable transition to net-zero carbon emissions in our state by 2050. And what this compact does is create a platform from which companies may take individual and collective actions to that end. Some of the companies that you might recognize in the compact include Accenture, Amazon, Anthem, Delta, Coca-Cola and so on. We’re also very excited that we have a number of small- and medium-sized companies, and start-ups, and that by coming together to tackle climate change as a collective is very exciting to us.”
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[email protected]
443-757-3578