Category: Global Events

By Michael Eddi & Harris Allgeier

Global supply chains continue to feel the string of an escalating trade war as China implements a new range of export restrictions targeting yet another important raw material: Graphite. The latest in a series of export controls levied by China, in a tit-for-tat battle of trade restrictions with the US, these new controls have significant ramifications for a swathe of industries including Aerospace & Defense, electric vehicles, and manufacturing.

In 2021, China produced 79.1 percent of the world’s natural graphite, despite only having 22 percent of global reserves. The new laws require export permits for two types of graphite, including high-purity, high-hardness synthetic graphite, and natural flake graphite and its products. These controls took effect December 1, 2023. (Click here to read a full translation of the new regulations)

The move comes on the heels of similar Gallium and Germanium export controls, levied by China in 2023. China’s Ministry of Commerce (MOC) has classified all these materials as dual-use items under export control. “Dual use” in this context means materials that have potential military and civilian applications.

Interos analysts looked at the possible impacts these new regulations could have for the electric vehicle and A&D sectors. We then created guidance for what supply chain leaders can do in response.

1. Graphite Restrictions’ Impact on Electric Vehicle Affordability

China produces nearly 100 percent of the processed graphite used to create battery anodes used in electric vehicles. The US is taking initial steps to help diversify graphite production. However the US currently has no domestic production of natural graphite and no domestic processing of graphite into anode materials for EV batteries. A potential graphite scarcity will reverberate through the entire production process, leading to higher overall production costs for EV manufacturers. This could impact the affordability of electric vehicles, reducing the adoption of clean energy transportation globally at a time when demand has already leveled off.

Furthermore, export controls on graphite from China could instigate a broader reassessment of supply chain strategies within the EV industry. EV firms might be compelled to diversify supply sources for critical materials, including graphite, to mitigate risks associated with sole-source dependency.

This strategic shift could involve exploring alternative global suppliers or fostering the development of domestic sources, to create a more resilient and distributed supply chain.

In South Korea, EV and battery manufacturers have been focusing on silicon anode materials as a key strategy to reduce dependence on Chinese graphite. This next-generation material is estimated to have “[…] an energy density about 10 times higher than the graphite-based anode materials currently used in most electric vehicle batteries  But it will be years before these materials can meaningfully replace Chinese graphite on a global scale.

The US is also investing in alternate graphite sources, with the Department of Defense awarding a $37.5 million contract to Canadian company Graphite One.

2. Graphite Restrictions’ Impact on Aerospace & Defense Operational Readiness

Graphite is used in a wide variety of various military applications in the A&D sector, including missile systems, jet components, body armor, and electronic components. Export controls on graphite could impact the operational readiness and capabilities of multiple defense systems. The strategic repercussions of this are even more severe during these times of heightened international tension, which inherently call for increased preparedness for conflict.

Domestically, the United States has looked to shore up its graphite extraction, refinement, and production capabilities via private entities. However these are a long way away from matching the levels currently imported from China.

3. An Increasingly Restricted Supply Chain

China’s new regulations will ensure a stable supply of graphite for its growing domestic industries. They will also offer the country greater economic control over other nations dependent on Chinese graphite. However, the decision to restrict graphite exports is considered by many as a retaliatory move, influenced by the US’s recent restrictions on exporting high-tech AI chips to China. The restrictions also come on the heels of several recent efforts by the Chinese government to limit access to critical raw materials used in semiconductors and advanced technologies.

China isn’t the only country to take a more protectionist stance on natural resources. Resource nationalization is sweeping across the Asia-Pacific region. In recent years Malaysia, Indonesia, Mongolia, India, and other countries have all implemented (or announced the intent to implement) legislation to secure critical raw materials (usually rare earth elements) for domestic industries and reduce dependency on external suppliers.

China’s restrictions are likely driven by multiple factors. These include a growing domestic need for the material, the regional/global push towards nationalization, and the US’ recent restrictions targeting China.

The restrictions are a perfect example of a growing nationalization movement, where nations increasingly view control over critical resources as essential for maintaining economic resilience and national security. Overall, these trends underscore the complex interplay between economic interests, geopolitical strategies, and the evolving dynamics of global trade. All of these play a crucial role when considering how to build a resilient supply chain.

 4. What can supply chain leaders do?

Supply chain managers in aerospace & defense, the electric vehicle sector, and other industries impacted by the new graphite export controls, or other recent trade restrictions, have several strategies available to them.

• Advanced Intelligence and Continuous Monitoring: Utilize leading vs lagging risk indicators to continuously monitor potentially impacted suppliers and identify any vulnerable portions of your supply chain. The Interos platform tracks 400M+ entities in real-time to pre-empt sub-tier risk for aerospace and defense, technology, and other sectors.
• Diversify Sourcing: Screen for alternative sourcing options for graphite from countries or regions not subject to import controls. Diversifying suppliers can help reduce the reliance on a single source and minimize the disruptions caused by import controls. This is also known as the process of identifying potential alternative suppliers that may exist within your industry’s periphery.
• Optimize Your Supply Chain: Review and optimize your supply chain to identify potential bottlenecks and vulnerabilities caused by export controls. Streamlining processes, improving logistics, and establishing backup plans can help ensure a smoother flow of materials despite regulatory constraints.
• Maintain Regulatory Compliance: Stay updated on fast-moving export regulations and ensure full compliance with the requirements. Engage in advocacy efforts and lobbying activities to influence policymakers and advocate for more favorable import control policies that align with the interests of your supply chain.
• Identify New Strategic Partnerships: Forge strategic partnerships with suppliers, distributors, and industry associations to collectively address challenges posed by import controls. Collaborative efforts can help leverage collective bargaining power and facilitate the sharing of resources and expertise.

To learn more about how Interos can help you manage regulatory compliance and identify latent geopolitical risk within your supply chain, click here.

By Joshua Clarke and Trevor Howe, Senior Operational Resilience Consultants

Multiple supply chain risks converged this week, with Hurricane Idalia spreading chaos in the Southeastern U.S. and a coup – over 6000 miles across the Atlantic – in Gabon threatening further disruption – particularly for the aerospace & defense sector.

Gabon’s military seized power yesterday following a controversial presidential election. Supply chain leaders are tracking the fallout as the country is the world’s second-largest producer of an essential material, manganese ore. The coup heralds both an uncertain time for industrial and commercial activity in the country and potential disruptions to global supply chains.

The Criticality of Manganese

Manganese is crucial for several industries including aerospace and defense, energy production and storage, and automotive – among others – because of its use as an alloying agent, metal coating additive, and as a cheaper, more ethically sourced alternative to cobalt. The shutoff of Manganese imports could impact everything from batteries to guns to automotive transmissions. Interos’ analysis identified over 155,000 US companies likely to be impacted.

According to the U.S. Geological Survey (USGS): “Because manganese is essential and irreplaceable in steelmaking and its global mining industry is dominated by just a few nations, it is considered one of the most critical mineral commodities for the United States.”

Between 2018 and 2021, 67% of manganese ore imported to the U.S. was from Gabon, compared with 19% from South Africa and 12% from Mexico. The U.S. is 100% reliant upon imports of manganese ore for apparent consumption.

Second African Coup in a Month Threatens Regional Stability and Vital Exports

This past Wednesday, Gabonese soldiers announced on national television they seized power in the African nation of Gabon and arrested recently re-elected President Ali Bongo, whose family has held power in Gabon since 1967. The soldiers behind the coup announced that they have canceled the recently certified election results.

The military announced that the country’s borders would be temporarily closed. This resulted in the anchoring of 30 commercial vessels off the coast of Gabon while they awaited the resumption of activity at the Port of Libreville.

Gabon’s top export is crude petroleum, accounting for 60.7% of its exports at approximately 200,000 barrels per day, making it Africa’s seventh largest oil producer. But there is more concern around manganese ore, which is Gabon’s other primary export.

The ore accounts for almost 23% of the country’s export activity, valued at $1.34 billion annually. The French mining firm Eramet, reportedly the top producer of manganese worldwide (having produced 7.5 mega tonnes of ore in 2022), announced shortly after the coup that it would temporarily halt all operations in the country, including the transportation of already-extracted ore.

A Flexible Transition Metal

Manganese ore is a key component in steel and alloy production because of its structure as a transition metal, which allows it to improve the strength, workability and wear resistance of partner metals. Manganese consumption in the U.S. is overwhelmingly focused on the production of iron and steel products, with 90% of manganese ore directed to this use. Beyond these applications, manganese is utilized for:

• Aluminum alloys – Manganese, alloyed with copper, silicon, tin, nickel and zinc, is used to create high-strength and lightweight structures in aerospace and defense applications.
• Stainless steel – Manganese, alloyed with silicon and nitrogen, is used to create oxidization-resistant steel.
• Batteries – Manganese oxide, usually a processed version of manganese, is utilized in dry-cell and alkaline batteries to prevent the formation of hydrogen in a battery, preventing possible combustion or explosion.
• Copper alloy – Manganin, an alloy of copper, manganese, and nickel, is utilized to create shunt resistors, with a low-temperature coefficient and resistance to sulfur, these resistors are useful for creating large currents.
• Potassium permanganate – Manganese is essential to the production of potassium permanganate, which is widely used in drinking water and wastewater treatment.
• Manganese phosphate – This type of metal finishing is mostly used within engines, transmission systems and gears to provide smoother overall operation while increasing the service life of treated components.

While the U.S. does maintain a domestic stockpile, disruption to manganese ore exports from Gabon could pose a material risk to American manganese refineries and manufacturers dependent on raw and refined manganese products. Manganese supply disruptions would most affect the following industries:

• Aerospace & defense – Safes, gun barrels and military helmets use steels with very high levels of manganese (up to 15%).
• Automotive manufacturing – Manganese is utilized as a safer, cheaper, and more ethical alternative to cobalt for use in electric vehicles.
• Manufacturing – In addition to iron and steel, manganese is used also as an alloy with metals such as aluminum and copper.
• Energy production and utilities – Manganese is widely regarded as one of the critical minerals for green transition technologies in the energy sector. It is essential for zinc-ion batteries, hydrogen fuel cells, and increased solar panel efficiency.

According to the USGS, manganese ore is consumed mainly by five companies at six U.S. facilities with plants principally in the Eastern and Midwestern States. Analysis by Interos suggests that these firms directly supply more than 200 U.S.-based customers and indirectly almost 155,000 as tier-2 suppliers.

Action That Affected Companies Need to Take

Since the coup, many countries in the international community have called for a return to Gabon’s elected government and to stability. Russia and China called for a peaceful resolution to the conflict, while France condemned the coup and called for a “commitment to free and transparent elections”.

Regardless of the coup’s ultimate outcome, the situation in Gabon – and the impact uncovered by Interos, is a stark reminder of how geopolitical turmoil (and a high degree of reliance on single/highly concentrated sources) can intersect with natural disruptions, like Hurricane Idalia, to threaten supply chains a world away.

At this time of uncertainty, companies can ill afford to sit idly by. Those that are dependent on manganese ore, particularly aerospace & defense organizations, need to identify where it is sourced within their extended ecosystem and understand their level of dependence on Gabon and suppliers operating in the country.

With its artificial intelligence-based software, Interos is well positioned to support supply chain risk management programs for companies around the world trying to address this issue. Interos provides continuous monitoring of suppliers with timely alerts so that companies can both get ahead of potential supply chain disturbances and be among the first to react to them.

By Klaudia Kokoszka & Mackenzie Clark

Coverage of the Wagner Group’s recent attempted mutiny in Russia naturally focused on the threat it posed to President Vladimir Putin’s power. Less well known is the role played by Yevgeny Prigozhin’s mercenary organization in the global supply chain for gold.

Wagner has long been suspected of operating in parts of Sub-Saharan Africa. In that region, they have exploited vulnerabilities in the gold supply chain to enrich themselves and fund their operations. Recent attention on the group has spurred a U.S. Africa Gold Advisory targeting a major source of their funding.

Using the Interos platform we identified over 600,000 companies that rely on conflict minerals. This broad exposure highlights the degree to which the global economy depends on a raw materials trade that directly benefits paramilitary and terrorist groups. These associations also pose significant regulatory and reputational concerns for companies that rely on these supply chains.

A History of Exploitation

On June 27, the U.S. Departments of State, the Treasury, Commerce, Homeland Security, Labor, and the United States Agency for International Development (USAID) warned firms to be on high alert to potential exposure to illicit gold within their supply chains.

This advisory followed a U.S. Treasury Office of Foreign Assets Control (OFAC) decision earlier in the year to sanction companies engaging with the Wagner Group in the illicit gold trade. The group uses this trade to fund its expansion. The proceeds also, like the Russian government, pay for Wagner’s military activities in Ukraine.

Wagner has also been connected to numerous human rights violations in the plunder of natural resources from conflict-affected nations. The group has long been known to have a presence across Sub-Saharan Africa. They are often found in the Central African Republic (CAR). The CAR is designated as a “country of concern” under the conflict minerals provision (Section 1502) of the Dodd Frank Act.

Since 2010, the Act has established an SEC (Securities and Exchange Commission) disclosure requirement for companies that manufacture products using so-called “conflict minerals”. The conflict minerals list consists of  tin, tungsten, tantalum, and gold, and often referred to as “3TG”. These minerals originate from the Democratic Republic of the Congo and surrounding countries. These include Angola, Burundi, the CAR, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia.

These countries are at higher risk of exploitation by armed groups such as Wagner and Islamic State. These illicit entities finance their activities by taking advantage of vulnerabilities in the mining, processing, and distribution of conflict minerals. In the process, they are able to significantly enrich themselves.

Interos Supply Chain Data Analysis

We took a look at Interos’ global relationship platform data in conjunction with the National Resource Governance Institute’s Resource Contracts database. With this data, we mapped the extended supply chains of companies that hold 3TG mining contracts with countries of concern in Sub-Saharan Africa.

We identified over 600,000 companies that rely on conflict minerals either directly or indirectly, in the extended supply chain of the firms that hold these contracts. This includes 56 direct relationships to mining companies. It also includes 25,000 indirect buyer-supplier relationships in the second tier, and over five million relationships in the third tier.

These relationship networks quickly expand as you move away from the source of these minerals, which are generally several tiers deep within global supply chains.

Who Uses Conflict Minerals?

While the mining and processing of 3TG is based largely in the global south, the consumption of value-added goods containing these minerals, such as semiconductors, chips, wires, and batteries, is highly concentrated among Western Economies.

Of those firms that have direct relationships with the mining companies, more than three quarters are located in developing and growing economies. Over half are based in India.

Downstream consumers of conflict minerals are defined as those likely purchasing a post-processed and value-added product. More than three quarters of these are based in North America and Europe.

The United States is the single largest 3TG purchaser, representing nearly 45% of all downstream consumers. The second largest is the United Kingdom, representing over 9% of downstream consumers.

Based on these findings, the United States holds an extremely sensitive position in the supply chains of 3TG, and disruptions to and regulatory risks associated with these commodities will strongly impact U.S. firms.

A broad range of industries rely on conflict minerals, either directly or indirectly. Some of the most exposed industries, based on prevalence among downstream consumers, include software and communications (8%), construction (4%), vehicle manufacturing (3%), information services (3%), medical products (3%), household electronics (3%) and aerospace engineering (1%).

These industries alone make up over 40% of the companies vulnerable to a disruption in the conflict mineral supply chain. They include some of the largest global producers of technology, software, transportation, and heavy machinery. The adverse impact to these types of companies derives from their reliance on raw minerals in the parts and components of the finished goods they purchase and produce.

Though many of these firms are not directly purchasing from the companies responsible for mining conflict minerals, illicit behavior in their extended supply chain could still adversely impact their reputation, regulatory compliance, and ultimately their ability to predictably produce the finished goods they sell.

How Can Organizations Get Proactive About Conflict Minerals?

Recent events have highlighted the importance of increased due diligence for firms that rely on gold and other raw minerals sourced from conflict-affected regions. Companies looking to safeguard their extended supply chains should consider integrating the following recommendations into their procurement processes:

• Increase and improve supply chain due diligence efforts related to the mining of conflict minerals, especially related to upstream business relationships and raw mineral suppliers.
• Understand potential reputational risks to your firm associated with purchasing 3TG products from conflict-affected countries. This includes human rights violations, forced labor and environmental degradation among other concerns.
• Understand potential compliance risks associated with purchasing 3TG products from conflict-affected countries. Pay attention to sanctions violations, money laundering and smuggling, among other concerns.

Regulation and Supply Chain Furor Over Minerals to Increase

Last month’s attempted mutiny highlighted the tangled interdependencies of geopolitics, raw materials, and supply chains. The U.S. Africa Gold Advisory is the latest policy action in a growing tide of regulations and concerns over conflict minerals. This swell of regulatory activity is likely to continue, and a similar increase is expected regarding critical minerals (which include aluminum, lithium, and nickel). These concerns have been compounded by recent actions by China in restricting the exports of metals critical to semiconductor production.

By Kate Anderson, Scott DeGeest and Teddy DeWitt

Amid the coverage of the evolving U.S. banking crisis that has claimed Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank (FRB), and is now threatening PacWest, one aspect has remained largely hidden – the potentially massive supply chain impact of these failures.

Make no mistake, a banking crisis is also a supply chain crisis.

Interos data suggests that, thanks to the supply chain ripple effect, over 600,000 U.S. firms will be indirectly affected by the collapse of SVB and FRB alone.

Our research also indicates that, by considering banks as part of a larger supply chain and monitoring specific risk indicators, organizations – and especially their procurement leaders – can anticipate potential problems and banking failures well in advance.

So why are these banks failing? What does it mean for the broader supply chain? And what can organizations do about it?

The Banking Sector: A Supply Chain of Capital

As banks experience greater volatility, a tougher business environment and fleeing depositors, it becomes more difficult for them to obtain capital to distribute to their customers.

Much as supply chain disruptions limit access to vital goods, disruptions in the banking supply chain limit access to vital capital. This, in turn, impacts a whole range of day-to-day banking services that businesses rely on, including liquidity management, accounts payable services, lines of credit, foreign exchange services, and lending.

As with SVB, capital supply chain failures ultimately extend far beyond the financial sector and into the wider economy. Even companies not directly reliant on the bank’s capital were affected when they discovered that suppliers and service providers that banked with SVB were at risk. For example, users of Rippling – a major payroll platform – suddenly discovered that their operations were threatened by that supplier’s reliance on SVB.

Despite these impacts, companies seldom view financial crises through a supply chain risk lens. This is an oversight that, if corrected, could enable them to anticipate and prepare for these significant disruptions, rather than simply reacting after the event.

The importance of this kind of anticipation has become all too clear in the last few weeks and is likely to remain so given the prospect of additional volatility in the short to medium term – with regional bank stocks like PacWest continuing to slide.

So how can organizations use Interos’ data to understand the pinch in the capital supply chain that portended the collapse of FRB, for example?

Using Interos Supply Chain Data to Identify the Banking Capital Market Pinch

Volatility is a measure of how much a stock price moves over time. Increasing volatility indicates higher perceived risk, and can be an indicator that the overall risk, and potential vulnerability, of the business has increased.

Chart 1: Stock Volatility of Regional Banks

Source: Interos Analysis

In addition, an analysis of metrics from the Interos platform showed FRB’s liquidity access steadily decreasing from June 2022, driven by an increase in its use of non-financial trades (see chart 2).

Chart 2: Liquidity Access Score for First Republic Bank

Source: Interos Analysis

Identifying the Ripple Effects on the Wider Supply Chain

Capital constraints ripple through the broader supply chain ecosystem, as was evident during the collapse of SVB, and now FRB.

Interos’ resilience platform documents 3,000 direct (tier-1) business relationships for SVB and FRB. But it also shows almost 600,000 indirect (tier-2) connections. These are companies that don’t bank directly with SVB or FRB but have a supplier that does.

For example, suppose Acme Corp. banks with SVB and provides IT services to Bravo, Inc. A failure in SVB would potentially disrupt payroll for Acme Corp., which might limit the services that Acme can provide to Bravo.

Without visibility into its extended supply chain, Bravo would be unable to anticipate the ripple effects of this failure.

Once a firm at the center of a capital supply chain disruption has been identified, the Interos platform enables procurement professionals to identify which tier-1 and tier-2 suppliers rely on that firm for vital goods and services.

How Organizations Should Respond to Potential Bank Failures

To respond to a capital supply chain disruption and get ahead of future problems, procurement organizations should do the following:

• Identify essential tier-1 and tier-2 suppliers that use regional banks.
• Coordinate contingency plans with these suppliers to address liquidity crunch issues and concerns about inventory management in the event that their banking partners experience a credit pinch.
• Review the recent credit history of capital suppliers (regional banks) to look for signals of distress such as increases in non-financial trades.
• Monitor the financial situation of your own banking partner(s) for any declines in access to liquidity.

Network effects, high volatility, and liquidity crunch issues will continue to be a problem for regional banks – with PacWest just the latest example – in the near term.

Owing to their smaller and often more concentrated deposit bases, regional banks are more susceptible to supply chain disruption from capital flight.

Interos’ approach to this type of risk, as described here, integrates financial data with supply chain network data and news alerts to flag potential problems in advance and provide guidance on navigating the aftermath of a crisis.

By Geraint John

As the annual Earth Day takes place again on April 22nd, the world faces an all-too-familiar message: we are not doing enough to confront the impact of climate change and human-inflicted damage to our fragile environment.

Global supply chains, as the engine room of trade and economic growth, are a major source of carbon dioxide emissions, deforestation, water and natural resource wastage, and pollution  – which explains why national governments are busy introducing laws to regulate companies’ activities more tightly.

In the European Union, for instance, legislation currently in progress includes:

• A carbon border tax on greenhouse gas emissions associated with imported products to begin operating from October 2023.
• A ban on imported products linked to deforestation from 2024.
• A Corporate Sustainability Reporting Directive that will require around 50,000 companies to disclose environmental impact data and set improvement targets.

In the United States, current proposals include:

• New Securities and Exchange Commission (SEC) reporting rules. These include disclosure requirements for CO₂ emissions in listed companies’ supply chains (so-called Scope 3 emissions).
• Tough new Environmental Protection Agency (EPA) limits on tailpipe emissions from fossil-fuel-powered cars and other vehicles.

This surge in regulatory activity will, over time, certainly force many firms to improve their environmental practices. But those leading their procurement and supply chain organizations need to go beyond compliance with these laws if change is to be effective on the scale required.

Coming to Terms with the Impact of Supply Chains on the Environment Is No Small Feat

To mark Earth Day 2023, Interos conducted an analysis of its ESG risk-scoring data, ranking the best and worst countries based on their performance against a dozen environmental attributes — which will be published soon (check back here for a link).

The key finding from this analysis is that even the “best performing” countries – and the companies headquartered there – have their work cut out to meet net-zero emissions, limit temperature rises to 1.5°C, and hit other key environmental targets.

Research by the Carbon Disclosure Project (CDP) reveals that supply chains are not yet contributing at anything like the scale required to effect meaningful change. Data it collected from thousands of firms in 2022 shows that:

• Only 41% reported any Scope 3 (supply chain) emissions, compared with 72% for Scope 1 or 2 (internal operations). This is despite the fact that Scope 3 emissions are typically more than 11 times greater.
• Just 36% of reporting firms were able to calculate Scope 3 emissions for purchased goods and services.
• Relatively few companies currently provide detailed reporting on water consumption or deforestation in their own operations, let alone in their supply chains.

The CDP welcomes the regulations mentioned earlier, which will force many more companies to measure and report their broader supply chain environmental impact. But it argues that “the necessary cascade of action down the supply chain is just not happening”.

Compelling direct (tier-1) suppliers to provide data and make improvements isn’t sufficient. Active engagement, incentivization, and collaboration with a targeted group of direct and indirect (tier-2+) suppliers are necessary to drive change.

Just 39% of companies engage their suppliers on climate-related issues, says the CDP, while 23% do the same for water. The figure is higher for deforestation (69%), but this is tempered by the fact that relatively few firms disclose data on this issue.

ESG and Procurement: From Compliance to Engagement and Continuous Monitoring

A separate report on sustainable procurement by the United Nations Environment Programme also notes the growing body of legislation, but cautions buyers against a “superficial compliance oriented approach”.

It urges them to look beyond the needs analysis, supplier selection, and onboarding stages of the procurement cycle, where most activity takes place today (see chart), and put more emphasis on post-contract supplier management.

The need for continuous monitoring and intervention along the supply chain, rather than just one-time certification, is as important in environmental performance as it is for other types of supplier risk, such as labor standards and cybersecurity.

How Procurement Leaders Can Make ESG Progress

Chief procurement officers (CPOs) face plenty of complex challenges as they work to improve environmental sustainability in their organizations. Collecting relevant data and measuring results is certainly not the smallest one.

But, aside from it being “the right thing to do”, there are real business benefits to be gained. These include creating lower-risk, more resilient supply chains. Organizations will also enjoy commercial advantages over rivals in terms of innovation, customer perception, and sales. They also have greater attractiveness to stakeholders such as investors and employees.

A new study by Bain and Ecovadis also found that companies “at the forefront of sustainable procurement,” which focus on their suppliers’ environmental practices, are more profitable – by an average of three percentage points over other firms.

Practical steps CPOs can take to make progress on this journey include:

• Raising internal awareness of supply chain-based climate, water, deforestation, and other environmental issues. This includes both within their own teams and others they work with.
• Designing incentives to ensure that buyers and category managers pay sufficient attention to sustainability considerations at different stages of the procurement cycle.
• Writing climate, water, and other requirements into supplier contracts and including sustainability KPIs in scorecards and regular performance reviews.
• Harnessing technology to identify the highest-risk supply chain dependencies. Also, collecting environmental data to conduct analysis and support decisions.
• Engaging suppliers not only to disclose and share information about CO₂ emissions, water usage, and other activities, but also to encourage and incentivize them to take action to improve their environmental footprint.

Actions such as these mark a big change from the “traditional” procurement focus of lowering costs and ensuring supply. But CPOs in leading companies are increasingly staking their reputations and careers on it.

For the sake of our planet, the efforts of these leaders and others need to become a source of celebration on future Earth Days.

By Klaudia Kokoszka and Geraint John

Companies doing business in France should expect further disruption to supply chain operations after the country’s Constitutional Council ruled today that controversial pension reforms could proceed into law.

The move by President Macron’s government to increase the state pension age from 62 to 64 has led to mass protests and strikes across France in recent weeks. The protestors include trade unions, political activists, and citizens opposed to the change.

Hundreds of thousands of people took part in demonstrations on Thursday, ahead of the council’s decision. One group of protestors stormed the headquarters of luxury goods giant LVMH in Paris.

The protests of the past month have impacted oil refineries, utilities, railways, and financial services firms, among others.

French Protests Are Spread Across the Country

France currently has one of the lowest retirement ages among developed economies. French people, on average, stop work four years earlier than in countries such as Germany, Spain, the U.K., and the U.S. Despite this, the proposed reforms have attracted strong opposition, some of it violent, in many parts of the country.

Interos analysis of data from the Armed Conflict Location & Event Data Project (ACLED) shows that protests have taken place in more than 450 different locations across France (see map). Numbers involved range from a few dozen people in small towns to tens of thousands in major cities such as Paris and Nice.

Examining the Supply Chain Impact of Protests

Source: Interos Insights using data from Armed Conflict Location & Event Data Project (ACLED), 2023. Image Copyright: © OpenStreetMap,Data is available under the Open Database License. 

Almost five million businesses have operations in the areas affected, according to Interos’ data. The biggest impacts of labor demonstrations so far have been property damage, disrupted operations, and transport problems. Some of these have already had ripple effects along supply chains.

Strikes at oil refineries owned by Esso and TotalEnergies had a negative impact on global markets in March. 500,000 barrels of daily processing capacity – 0.5% of global oil consumption – are thought to have been affected.

Disruptions at a lesser scale have occurred at nuclear, thermal, and hydropower plants operated by firms such as Engie and EDF. These disruptions have reduced French power capacity by 15.6 gigawatts.

This week, the transit of goods flowing on the Rhine river was disrupted for the second time during the protest period. Workers cut power to the Kembs lock south of Strasbourg, France and near the German and Swiss borders. This has halted all river traffic through the area since Wednesday evening. The Rhine remains one of Europe’s busiest rivers and a disruption of this type could heavily impede cross-border trade.

To illustrate the scale of supply chains at risk, according to Interos insights, the affected firms mentioned in this article have at least 360 direct customers, 68 thousand second-tier customers, and 18 million third-tier customers. Even small changes in supply chains of this magnitude may cause notable ripple effects.

French Action Part of a Global Pattern of Unrest

The events in France are part of a growing trend of labor strikes, public protests, and general civil unrest across Europe and around the world this year.

In Germany, protests and strikes have taken place in nearly 70 different locations since mid-March. They have been primarily concentrated in the airline, rail, postal, and public education sectors.

Industrial action has also taken place in the U.K. in these and other sectors such as healthcare in recent weeks. There workers are demanding substantial pay increases to counter high inflation and the cost-of-living crisis.

Italian trade unions, meanwhile, have organized a national rail strike today against what they see as worsening working conditions and insufficient pay.

In Israel, thousands of people continue to protest against judicial reforms initiated by the Netanyahu government. Political grievances have also been motivators for protests in Nigeria and Peru in recent months. These have created a moderate risk to global trade in commodities, particularly petroleum and precious metals.

How Organizations Should Respond to Supply Chains Disrupted by Protests

Procurement leaders and organizations with supply chain operations in France and other affected regions should:

• Ensure they have visibility of both critical direct (tier-1) suppliers and indirect (tier 2, 3+) suppliers that could be impacted by strikes and civil unrest.
• Keep communication lines open with key supply partners in order to get early notification of any disruptive events.
• Review alternative sources of essential materials, parts, products, and services from suppliers in other geographic areas.
• Monitor geopolitical events and risks in France and other strike-affected countries especially closely over the next few weeks.

With inflationary pressures stemming from Russia’s war in Ukraine and other sources continuing to be felt in many economies, it is possible that civil unrest could spread further across Europe in the near term. Organizations therefore need to be ready to respond quickly to additional disruption along their extended supply chains.