Supply chain resilience and anti-risk path exploration

On July 22, 2020, the 22nd Sino-European CSR Roundtable Forum, co-hosted by amfori and China Sustainability Tribune, was held online.

Since 2008, the Sino-European CSR Roundtable Forum has experienced many important historical events and changes, including the global financial crisis that broke out in 2008, the rise of the emerging technological revolution represented by artificial intelligence, the 2030 Agenda for Sustainable Development released by United Nations in 2015, and the COVID-19 pandemic we are now experiencing.

Against this background of continuous development and change, the focus of the Sino-European CSR Roundtable Forum has always been on sustainable supply chain development. In the context of the COVID-19 pandemic, the 22nd forum focuses on the "Challenges & Coping Strategies to Combat COVID-19 on Supply Chains". Distinguished guests from governments, international organizations, well-known companies and sustainability experts are invited to to share their perspective from strategic and practical level to improve the reliability of the supply chain, promote trade facilitation and smooth supply chain.

Policy guidance escorts supply chain recovery

Since the outbreak of the pandemic, the global supply chain has been under unprecedented pressure. Wang Yalin, Team Leader of Sustainable Business & Investment Team, United Nations Development Program in China, shared the finding of the Assessment Report on Impact of COVID-19 Pandemic on Chinese Enterprises released by UNDP in April this year. The report found that the outbreak of the pandemic has impacts of tighter cash flow, supply chain disruptions and declining market demand, etc. Up to a third of enterprises were expecting halved revenues in the first half of 2020.

To this end, the Chinese government has implemented various policies to support the rapid resumption of production in China, which had contributed to the stability of global supply chain. According to Xu Hua, Director, General Office, Department of Industrial Policies, Laws and Regulations, Ministry of Industry and Information Technology, the Chinese government mainly takes measures in the following aspects:

1. Strengthen organizational leadership. We established a working mechanism that runs horizontally and vertically, and cooperated with relevant departments, local authorities, industry associations, and leading enterprises to take actions to strengthen and revitalize different actors in the entire supply chain.

2. Facilitate the smooth circulation of the industrial chain. We leveraged the driving force of leading enterprises to revitalize both upstream and downstream players of the supply chain (includes many SME suppliers). Leading enterprises had a pivotal role to play - supporting the smaller players in the eco system of supply chain - beef up the production resumption and create the coordinated vibes and synergy from upstream and downstream.

3. Enhance market demand & better connect the Demand & Supply correlation. We adopted the "Internet plus" to stimulate traditional consumption and stabilize mass consumption while promoting the innovative business models.

4. Increase financial & tax exemption policy to assist businesses. We strive to support micro and SME business to overcome difficulties. 

With the accelerated implementation of various aiding policies, it has a positive outcome. The average production resumption for sizable business has reached 99%.

Christian Ewert, President of amfori, affirmed China's strong actions in response to the crisis in his welcoming address. According to a survey on the Impact of COVID-19 in Supply Chains conducted by amfori in April this year (the survey targeted both amfori members and producers in their supply chains in major sourcing countries on member enterprises and their supply chains in major purchasing countries), 90% of amfori members said that there had been “no change” to their sourcing from China or to product types during the pandemic, and China was in fact the first country in Asia to resume production and audit activity. 

He also pointed out that supply chains generally face the challenges of cancellation of orders by customers, blocked or delayed shipments due to lockdown, and cashflow issues. This global crisis could easily put corporate social responsibility (CSR) at risk. amfori is urging its members to make CSR their top priority. To support these efforts, amfori issued a set of Responsible Purchasing Practice (RPP) guidelines in April. Members need to engage producers and intermediaries, trade unions and civil society groups to minimize the negative impact on workers.

Enterprise practice accelerates supply chain transformation

Faced with the impact of the pandemic, the upstream and downstream of supply chains have also adopted a series of countermeasures, transforming themselves from perspectives of procurement, logistics and audit, and also exploring an innovative path for future sustainable supply chain management.

Ms. Wang shared that, most enterprises tend to cut their production capability and cut costs to offset negative impacts of the outbreak. Some also upgrade products and services developing online sales channels. Especially, online businesses such as digital media, e-commerce, and online education have accelerated their development during the pandemic, which prompts traditional industries to expand online businesses and accelerate the digital transformation.

For purchasing practice, Caroline G. Bouisset, Head of Group Sustainability & Corporate Responsibility, Fristads Kansas Group, said that the impact of COVID-19 has magnified existing inequalities, systemic vulnerabilities, and challenges in supply chains. Thus sustainability as a marketing tool is gone — inherent sustainability is key. Fristads Group has taken some measures, such as, strengthening the quality control of purchasing products, increasing stakeholders awareness for social and environmental sustainability and using new technologies to improve the digitalization and transparency of the supply chain.

In terms of logistic service, Serena Guo, Head of Regional Logistics Service Greater China, Clariant, shared the company’s practice during the pandemic. Firstly, communication & information sharing: Clariant timely collects the pandemic prevention policy requirements of regional government departments on logistics and travel, and uses big data to obtain transport capacity and cost data analysis. Secondly, alternative solution: when air transportation is blocked, the China-Europe Express Trains is chosen to make up for the lack of capacity. Finally, Digitalization @ logistics: Clariant launched its logistics tracking platform in October 2019. The pandemic has accelerated the process of digital transformation to some extent.

As for on-site audit solution, GP Batteries International Limited (GPBI) has new tries. Dr. Chan Chi-wai Percy Corporate Quality Director of GPBI said that, GPBI uses amfori BSCI as key CSR framework for supply chain management system, which will further enhance its social performance, and allow its factories to initiate a BSCI audit in a more structured and effective manner. Due to outbreak of COVID-19, travelling is hindered. In order to meet customers’ on-site audit requirements, GPBI offers possible solution by remote auditing. Dr. Chan said that, remote auditing will be the future choice as it shortens costs and reduces the environmental impact associated with audit travel.

Reshape the sustainable future of supply chains

Every risk comes with an opportunity. On the one hand, the pandemic caused a huge impact on businesses, and on the other hand, enterprises started to think about the root causes of such public crises, the path to manage risks, and the need for a benign interaction between business and nature and more investment in SDGs.

As Ms. Guo said, “The pandemic is a stress test on the supply chain. It is a test of the ability to cope with stress. Enterprises can see the deficiencies in supply chain management and realize the importance of sustainability. In addition, it is a test of resilience. In the past, supply chain management prioritized factors such as products and costs. After the pandemic, it will focus more on stress resistance, resilience, policy factors, etc.”

Then, how to enhance the resilience and anti-risk ability of the supply chain in the post-COVID 19 era will be a topic for the global supply chain.

Ms. Wang from UNDP shared the business priorities for back better. First, develop green economy to rebalance nature, climate, and economy, and design nature-based solutions; second, conduct digital disruption and innovation. Investment in digital transformation during the pandemic has not only promoted the COVID-19 response but also paved the way for accelerated development after recovery; third, build a new social contract to create a more equal, inclusive and transparent social relations and governance system; fourth, strengthen social protection to uproot gender discrimination, including access to cash transfers, universal medical insurance and other basic services.

Admittedly, the adoption of technological innovation, such as, cloud technology, artificial intelligence (AI) and Machine Learning, will be a key driving force towards a more resilient supply chain management. Mr. Ewert said that, working closely with your business partners and stakeholders and international multilateral cooperation will be a key to overcome difficulties. Recently, China and the European Union reaffirmed their commitment to conclude a comprehensive bilateral investment agreement. Relying on responsible business practices, we will jointly realize a resilient, sustainable supply chain towards the future.

UNDP also bridges the gap between the government and businesses and has cooperated with UN Technology Bank, UNCTAD and WHO, etc., to establish partnership for innovation and financing, identify investment opportunities in recovery phase and guide enterprises to restructure their global business network for a sustainable future.
 

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