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Does Your Supply Chain Have ‘Hidden Dependencies’ on Nature?

Source: Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, the World Economic Forum

Businesses worldwide will suffer supply chain disruption as biodiversity loss reaches alarming levels — even if they don’t rely directly on sourcing products from nature, according to a report from the World Economic Forum.

More than half of global GDP results from moderate or high dependencies on nature, and many supply chains have “hidden dependencies” on nature’s biodiversity, the report explains, meaning an industry’s supply chain operations may rely on nature to a much greater extent than the industry itself.

The graphic above shows six industries that receive at least 85% of their direct value without significant dependence on nature (chemicals and materials; aviation, travel and tourism; real estate; mining and metals; supply chain and transport; and retail, consumer goods and lifestyle), however, more than half of the value of their supply chains results from a moderate-to-high dependency on nature.

Business leaders have a crucial role to play” in responding to the world’s deteriorating biodiversity, the report argues. It recommends adopting a risk management approach for “systematically identifying, assessing, mitigating and disclosing nature-related risks to avoid severe consequences.” 


What Businesses Can Learn From Pursuing Global Goals at a Local Level

Source: Two Decades of Impact, the World Economic Forum and the Schwab Foundation for Social Entrepreneurship

Larger corporations stand to learn from social improvement organizations in how they approach problem-solving and create tangible change: They address some of society’s most difficult issues by tailoring solutions to communities. 

More than 600 million people have benefited from social entrepreneurs’ work, be it from gaining access to clean water or finding opportunities to pursue education, according to a report from the World Economic Forum, which convenes for its Annual Meeting this week. “Extraordinary impact has been achieved where the traditional approaches of markets … have failed to empower and include communities,” the report notes. 

Organizations understand the structures and interconnectivity of issues in the communities they work in and aim to address them through “contextually relevant models,” rather than from a broad, theoretical perspective, the report says.

It calls this the “decade of delivery” for the SDGs. As more businesses incorporate social positions and impact into their identity and purpose, they have the opportunity to explore alternative models of creating social change, for which local organizations have provided the blueprint.

Climate Inaction Is Heightening Global Risk for Businesses

Failure to effectively tackle climate change is raising alarm bells among macro-level risk experts. Respondents to the Global Risks Perception Survey, published by the World Economic Forum in its annual Global Risks Report, identified climate inaction as the leading global risk, as illustrated in the above interconnections map.

Climate change is seen as having a causal effect on other global challenges, such as involuntary migration, as more than “20 million people a year have been forced from their homes by extreme weather such as floods, storms, wildfires and hotter temperatures,” according to the report.

The climate crisis has also strained geopolitical dynamics across the world — for example, melting Arctic ice is causing “tension between countries already at odds over unresolved maritime and land boundaries,” the report says.

Further, climate change is triggering biodiversity loss at an alarming rate, intensifying health risks: The report notes “an estimated 50,000–70,000 plant species are harvested for traditional or modern medicine, and around 50% of modern drugs were developed from natural products.”  

“Nature-related risks are undervalued in business decision-making,” it says, as “the destruction of nature will inevitably impact bottom lines.”

Environment Dominates the Risk Outlook of Younger Stakeholders

Economic, environmental and domestic political risks all dominate the short-term concerns of respondents to the Global Risks Perception Survey. Its results are presented in the 2020 Global Risks Report from the World Economic Forum, produced with support from Marsh & McLennan and other partners. 

The first column shows risks that are expected to increase by the WEF’s multistakeholder community, while the second column shows the concerns of WEF’s younger constituents. 

It illustrates the different priorities of each group, with the latter being much more focused on climate change and its impacts. 

Economic confrontations and their effects on trade — complicated by protectionism and the lack of a resolution to 2019’s trade war — mostly concern the group of WEF multistakeholders, along with the potential for a recession in a major economy.  

Economic inequality and social issues are another focal point: The domestic political fractures and protests seen in 2019 are expected to continue as people demand more from and remain critical of their governments. Without social stability, countries will find it more difficult to address key global issues, the report says. 

The interrelated nature of global risks complicates their potential solutions, for example, “a growth in nationalist policies risk[s] preventing meaningful action,” against climate change, the report notes. 

Failure to Mitigate and Adapt to Climate Change Is No. 1 Risk of the Decade

“‘Failure of climate change mitigation and adaptation’ is the No. 1 risk by impact and No. 2 risk by likelihood over the next 10 years,” according to the 2020 Global Risks Report from the World Economic Forum, which was produced with support from Marsh & McLennan and other partners. The graphic shows climate and environmental events as highly likely to occur — and with significant impact. This is the first time environmental risks have dominated the concerns of industry stakeholders, the report says.  

Global temperature increases are on track to rise by 3 degrees Celsius by the end of the century, the report adds — “twice what climate experts have warned is the limit to avoid the most severe economic, social and environmental consequences.” A “planetary emergency” is cited as a near-term consequence, and includes “loss of life, social and geopolitical tensions and negative economic impacts.”

Biodiversity loss is the second most impactful and third most likely risk scenario of the next decade. “The current rate of extinction is tens to hundreds of times higher than the average over the past 10 million years,” the report says, which could lead to the “collapse of food and health systems” and “the disruption of entire supply chains.”

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