Health crises, geopolitical tensions and climate disasters have gradually disrupted supply chains and global logistics. Increasingly, disruptions are affecting all sectors of the economy in turn. The shortage of components first affected the electronics-consuming industries, creating cascading delays in sectors such as the automotive, aeronautics and connected object manufacturing industries, with accumulating economic consequences. Shortages are now affecting many sectors of the global economy, as consumption needs increase further in some supply chains and raw materials become depleted. For example, from the production of bicycle parts to lumber to the extraction of rare metals, all sectors have come under pressure.
Household consumption in developed countries, which could have been boosted by government support during the pandemic, is now constrained by these shortages, which prevent purchases from being made or even discourage consumers from purchasing certain products. This is causing a slowdown in the global economy and bottlenecks in some over-demanded sectors.
Globalisation and sustainability: nitro and glycerine
The trend towards sustainable development and the manufacture of products from natural, recyclable and non-polluting materials is increasing demand in sectors that are already under pressure: wood, steel, cardboard, organic fibres, etc. However, these raw materials are massively produced by a handful of countries which are also subject to other pressures (geopolitical, energy, pandemic, etc.). As demand for these sustainable resources increases, their price soars and some become unobtainable. “The price increase then impacts all economic actors and gradually reaches the consumer. The prices of goods coming out of Chinese factories have risen by an average of 13.5% over the past year, their highest increase in a quarter of a century,” says Coline Pavot, Head of Responsible Investment Research at La Financière de l'Echiquier.
But that's not the only factor: the globalisation of supply is a reality that developed countries have not sufficiently anticipated: “Our supply chains are globalised, just like our consumer society. Your jeans may have travelled up to 65,000km, or one and a half times around the world, before they landed in your wardrobe.”
“These figures reveal the sad reality of our consumer society. Cotton grown in Uzbekistan can be spun in Turkey and dyed in Bulgaria. The fabric can then be woven in Taiwan and the jeans assembled in Tunisia before being delivered to Belgium,” says Pavot. This creates a hyper-specialisation of countries and increases our dependence on them.
“While the last paracetamol factory in Europe closed in 2009, it took us 10 years to realise that more than 80% of the world's production of this painkiller came from India and China. The crisis we are going through is acting as an indicator of the complexity of corporate supply chains and their blatant lack of control over it,” Pavot says. Sustainability is in vogue, but at what cost? From a sustainable perspective, sourcing implies industrial relocation, which is a key element. Pavot alerts companies to the need for better control of this supply and value chain, with a twofold aim: to help the global economy, and to protect national sovereignty. An example of this? In France, the 2030 plan focuses on the circular economy to secure the supply of materials such as plastics, wood, rare metals and earth materials.
If companies become more aware of their power to have a positive impact on their suppliers and of their responsibility to control their social and environmental impacts, Santa Claus will be able to fill the Christmas trees in the years to come.
This story was first published in French on Paperjam. It has been translated and edited for Delano.