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VA L U E CHA I N R I S K AND B I OD I V E R S I T Y L O S S
Global trade and the integration of a globalised economic system has been an overarching narrative of human development over the last two centuries. Across the world today, one fourth of global production is exported. 84 Value chains connect continents, countries and companies with multinational corporations involved in over 80% of global trade. Even during the pandemic-stricken year of 2020, international shipping moved 10.65 billion tons of cargo across the globe. 85 Yet several recent crises have highlighted the fragility of the global value chain system. Value chain risk and resilience is front of mind for multinationals, financial institutions and, increasingly, the general public. Value chains are complex networks of organisations, people, activities, and resources which are involved, on the upstream end in the harvesting of rawmaterials and production and transport of goods, and on the downstream end, in their sale, consumption and final disposal. 86
The spread of Covid-19 in early 2020 in Wuhan reverberated across global supply chains. Data analysts reported that at least 51,000 companies around the world had one or more direct suppliers in the impacted region of China. 87 In March 2021, the Ever Given container ship blocked the Suez Canal, which connects Asia and Europe and carries 13.5% of the world’s freight. 88 During the six-day blockage, 369 ships were halted in a tailback, 89 holding up an estimated USD 9.6 billion of global trade each day. 90 Autumn 2021 saw supply chain crises around the globe as national economies emerged haphazardly from the 18-month-long economic standstill caused by the Covid-19 pandemic. 91 While consumer demand for non- essential goods increased in many import countries with high levels of vaccination, production of these goods remained low in export countries that were struggling with vaccine shortages. 92 According to data analysis of US e-commerce, in October 2021 alone, US customers saw over two billion out-of-stock messages online. 93 Parts of China experienced energy outages as factories struggled to keep up with the surge in demand. 94
Supply chain issues were exacerbated by floods in Europe, 95 wildfires and heatwaves in North America 96 and drought in East Africa. 97 This type of disruption is a forerunner of value chain disruption to come. The IPCC predicts that average global surface temperature will continue to increase until at least mid-century unless there are deep reductions in greenhouse gas emissions in the coming decades. 98 With every 0.1°C increase in average temperatures, the frequency and severity of extreme weather events and natural disaster multiplies, with impacts on every ecosystem on the planet. 99 95 Germany floods: Dozens killed after record rain in Germany and Belgium, BBC News, 15 July 2021. 96 Gabrielle Canon,What the numbers tells us about a catastrophic year of wild- fires, The Guardian, 25 December 2021. 97 The drought ravaging East African wildlife and livestock, BBC News, 03 Decem- ber 2021. 98 Climate Change 2021 - The Physical Science Basis, IPCC, 2021. 99 Ibid.
As this report goes to press, the Ukraine crisis threatens global security and trade in unimaginable ways. Value chain risks are now exacerbated and magnified on a near- daily basis.
Nature-related risks to business
Biodiversity loss, too, has the potential to cause severe disruption to businesses and value chains.
87 Business Impact of the Coronavirus, Dun & Bradstreet, February 2020. 88 Jade Man-yin Lee and Eugene Yin-cheungWong, Suez Canal blockage: an analy- sis of legal impact, risks and liabilities to the global supply chain, MATECWeb of Conferences, 2021. 89 Mary-Ann Russon, The cost of the Suez Canal blockage, BBC News, 29 March 2021. 90 Justin Harper, Suez blockage is holding up $9.6bn of goods a day, BBC News, 26 March 2021. 91 Dominic Rushe et al., How the supply chain crisis is affecting six big economies, The Guardian, 2 October 2021. 92 Ibid. 93 Adobe: Shoppers Have Seen Over 2 Billion Out-of-Stock Messages Online, Ado- be, 11 September 2021. 94 Primrose Riordan et al., China’s energy crisis threatens lengthy disruption to global supply chain, Financial Times, 17 October 2021.
The World Wildlife Fund (WWF) has compiled a framework for nature-related risks to business, 100 identifying risks cited in corporate reporting, disclosure frameworks and risk analysis tools as a proxy for the materiality of nature-related risks across sectors.
84 Esteban Ortiz-Ospina and Diana Beltekian, Trade and Globalization, Our World in Data, October 2018. 85 Tannis Thorlakson et al., Companies’ contribution to sustainability through global supply chains, PNAS, 12 February 2018. 86 The Value Chain, Institute for Strategy and Competitiveness - Harvard Business School.
100 The Nature of Risk: A Framework for Understanding Nature-Related Risk to Business,WWF, 2019.
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