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Supply Chain Sustainability & Resilience in a Fragile Context
Executive Education / 23 June 2022
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Researcher & Project Coordinator at FS International Advisory Services
Dr. Cherkas is a Reseacher and Project Coordinator at the FS International Advisory Services. Her vast expertise extends to international project design and management; economic growth, innovation, technology transfer; networks and global value chains promotion, international competitiveness and business environment and finally, value-added management.

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In a rapidly changing world and conditions of severe economic shocks caused among the others by Covid-19 and the Russian war against Ukraine, many businesses, including but not limited to multinational corporations, are now forced to design and implement new strategies and develop the right skills to build resilience to disruptions throughout the value chains. The struggle to keep costs low and profits high is complicated by growing pressure from clients and consumers concerned about human rights violations and environmental footprints. A brand’s success increasingly depends on a factor of trust and transparency in supply chains.

Since the beginning of Russia’s aggression in Ukraine, with already a high level of volatility and disruption, global value chains experienced further severe shocks. The devastating war along with creating enormous human suffering exacerbated damages to the global economy through multiple channels, including international trade, financial flows, displaced people, inflationary pressures, and the shortage of commodities that reverberate through supply chains. As the frequency and scale of global disruptions increased, it became more difficult to restore the predictability of the model based on cost optimization.

Key Export Sectors are Facing Immediate Disruptions

Today, five major sectors such as food commodities, chemical products, metals, manufacturing, and energy face the most acute challenges, including the following:

  • Production cuts or shutdowns at many production facilities due to the destruction of productive capacity, lack of suppliers, and logistical disruptions leading to growing production delays and increase in costs [1].
  • Severe decrease of trade with Russia, following international sanctions or voluntary sanctions by businesses.
  • Accelerating inflation, especially in lower-income economies, worsens the current account and fiscal balances [2]. As people spend more on food, many households in developed economies could fall into poverty.

Sustainable Supply Chains as a Competitive Factor

Sustainable supply chains are more stable as they comply with the regulatory requirements and mitigate reputational risk. Key stakeholder groups such as customers, employees, investors, and business partners are increasingly taking into account social and ecological risks that make transformation towards a sustainable business a factor in a company’s success.

Every crisis creates new opportunities. Recently the European Commission announced a €300 billion plan to become independent of Russian energy imports by 2030 [3] which will accelerate the global shift to green energy.

As a result of the recent US Securities and Exchange Commission proposed rule on carbon disclosures [4], the demand for suppliers with lower carbon footprints or greener alternatives to existing products could rise, particularly in the USA. Europe’s growing focus on sustainability is not expected to decline any time soon. This adds additional pressure on global suppliers independently on location to shift their inventory management strategies in the coming years.

These factors will be a durable underlying source and major contributors to supply chain disruptions and reshuffling, which is expected to evolve over time. As the impact of the war in Ukraine continues to develop, these problems may further worsen. Therefore, one of the main considerations for business leaders is how to coup immediate disruptions while building resilience against the future ones.

A New Directive on Corporate Sustainability in Global Value Chains

On February 23, 2022, the European Commission adopted a proposal that requires companies to foster sustainability and responsible corporate behaviour by respecting human rights and the environment in their global value chains [5]. The directive establishes a corporate sustainability due diligence duty for the company’s operations, subsidiaries, and supply chains covering direct and indirect business operations. The proposed Directive will apply to the large EU (more than 500 employees and more than €150 mln turnover) and third-country companies, and smaller companies in certain high-impact sectors. The companies would have to ensure that their strategy and business model are in line with the Paris agreement [6] and contribute to the limiting of global warming to 1.5 °C. The Proposed Directive is going to complement the EU Taxonomy [7] and the Sustainable Finance Disclosure Regulations [8].

Building Resilience and Promoting Sustainability

The companies have to deal with volatility and uncertainty and develop new strategies to build optimal resilience and foster sustainability in their supply chains. Navigating in a volatile world became one of the main topics of this year’s Summer Academy which will cover key industry trends and current global challenges for companies and financial institutions. The Academy offers high-level panels, cutting-edge interactive training with industry experts, and networking sessions. The set of lectures focused on Supply Chain Sustainability and Resilience will explore ongoing disruptions of global value chains, the risks to the global economy, corporate sustainability due diligence, insights into the new investment landscape, design of structural resilience in supply chains, and shaping the future of sustainable value chains.

[1] The Impact of the War in Ukraine on Global Trade and Investment, World Bank Group

[2] Ukraine: ‘We need peace now’ declares Guterres, warning of global hunger meltdown, United Nations

[3] REPowerEU: Joint European action for more affordable, secure and sustainable energy, European Commission

[4] SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors, US Securities and Exchange Commission

[5] Just and sustainable economy: Commission lays down rules for companies to respect human rights and the environment in global value chains, European Commission

[6] The Paris Agreement, United Nations

[7] EU taxonomy for sustainable activities, European Commission

[8] Overview of sustainable finance, European Commission

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