Chapter 7

The Future of Supply Chains

Warnings

In 2018, two separate studies published in the Proceedings of the National Academy of Sciences warned of the increased likelihood of simultaneous crop failures in business-as-usual warming scenarios.

Climate Impacts on Supply Chains

As atmospheric carbon dioxide reaches levels not seen in as much as 3 million years, the impacts of global heating are being increasingly felt across the world.

Even under the most optimistic decarbonisation scenarios, we will see markedly increased risks of extreme weather events, heatwaves, bushfires, floods, droughts, tropical storms and so on in the coming decades. The movement of goods and people, production of food, extraction of materials from the earth, location of industrial centres, are all likely to witness profound disruption.

One of the supply chains most critical to human welfare is that of food. Agriculture both contributes to global heating – principally through land-use change (e.g. deforestation), soil depletion, and ruminant methane emissions – and stands to be particularly badly affected by physical climate shocks. A warming climate may ultimately require major shifts in global food production, as rainfall patterns, temperatures, growing seasons, and soil quality undergo dramatic change. This will have huge implications for food retailers and other actors in food supply chains.

When the researchers looked at the four biggest corn exporters—the U.S., Brazil, Argentina and Ukraine—they found that the likelihood of all four suffering yield losses of 10 percent or more at the same time rises from about 7 percent at 2°C warming to 86 percent at 4°C warming.

It is possible too that supply chains, including agricultural supply chains, will need to be shortened, reversing the globalising trend. Research on climate-resilient cities, for instance, has demonstrated the importance of sourcing food from the city-region, and keeping material flows within that same region. We will look at circularity and (re)localisation of supply chains in due course.

Case Study: Locusts in the Horn of Africa

In early 2020, plagues of locusts spread across the Horn of Africa, threatening the food supply of tens of millions of people.

Such unprecedented swarms are thought to be the result of ‘a prolonged bout of exceptionally wet weather, including several rare cyclones that struck eastern Africa and the Arabian Peninsula over the last 18 months’. These weather events in turn are due to warming oceans.

Decarbonising Supply Chains

As noted earlier, companies’ supply chain GHG emissions are, on average, around 5 times as high as their direct emissions.

With companies increasingly seeking to ‘green’ all aspects of their business, and societies demanding action to curb emissions, the deep and swift decarbonisation of supply chains will be a key trend in the next decade. This presents challenges in a number of sectors, and also in the shipping and logistics stages of material supply chains. Our two case studies – shipping and cement – reflect on two industries that face different hurdles to the rapid decarbonisation required over the coming years.

Case Study: Decarbonising Shipping

Most visions of zero-emission shipping – a sector which is responsible for perhaps 3% of global carbon emissions, and huge disturbance to marine ecosystems – centre on hydrogen or ammonia-based liquid fuels, possibly combined with battery systems, replacing the ‘bunker fuels’ used today.

By contrast, EcoClipper, a private enterprise based in the Netherlands, envisions a return to an ancient technology – sail. EcoClipper’s cargo target group are businesses, most of which are small to medium-sized companies with a link to sustainability, ecological produce or fair trade. Having completed proof-of-concept, EcoClipper is now looking for investment to fund its first vessels.

It may well be that both ideas prove fruitful; in an industry as large as global shipping, it could take all shapes and sizes to achieve decarbonisation of this stage of supply chains.

Case Study: Decarbonising Cement

Cement manufacturing represents 7% of annual GHG emissions, and is the second highest industrial contributor to GHGs after steel production.

Two thirds of global cement production is used for buildings, with the remainder typically used for roads, bridges and other infrastructure needs. It is therefore a key part of infrastructure supply chains, and the chemical and heating processes used in its production are major sources of CO2 emissions.

Decarbonisation is currently being pursued through a range of measures: carbon capture; switching from coal to low-carbon fuels such as gas or biomass; and new concrete chemistries that require less cement and greater energy efficiency.

Other solutions in development include hydrogen-based production, using electricity as the main heat source, and alternative cement chemistries.

One company, Hoffmann Green Cement Technologies, is pioneering methods which makes its product the lowest-carbon cement in the world, by a factor of 5. Hoffmann’s technology is based on changing the composition of cement so that it does not contain clinker, the main source of CO2 emissions in traditional cement production, as well as creating a cold and clean cement manufacturing process (no firing of raw materials). Hoffmann listed on the Euronext Growth market in Paris in late 2019, and is currently scaling up its production capacity; its first site in Cormicy, just north of Reims, is almost unrecognisable as a cement manufacturing facility – with no kilns nor chimneys!