Holistic Views of Supply Chains- Part of The “E” in ESG

Supply chain problems are everywhere; cameras from  TV networks of all stripes are routinely panning the horizon at San Pedro Bay- where ships anchor awaiting berthing arrangements at terminals at the twin mega-ports at Long Beach and Los Angeles. Supply chains, by definition are composed of many links- the vessels are somewhere in the middle of a giant concatenation of links that might start at a factory in China, or Vietnam, and then end up with store shelves in Middlewhere, USA.

To my way of thinking, there are two ways of dealing with crises. You could have a Master, sort of a Wizard of Oz, hidden behind a booth (these days the booth would be virtual, so let’s say behind a firewall untouched by that massive Data Lake out there). That central figure could pull every string and make things happen in a set way. Obviously, that’s not happening.

Then, you have “the free market”/ “market forces” which ultimately explains everything going on, including way back deep into supply chains. That’s part of the challenge now- news media (and viewers) see vessels anchored. To use medical analogies, the ships are a symptom of the disease (not the problem) with origins coursing deep within the blood or nerves of the chain- like maybe at a warehouse located 500 miles inland from a port where workers go home at 6pm, causing trucks to wait overnight, etc. etc.

The 2020 -2021 disruptions, with shortages (I say “real or imagined”- they provide ways for sellers to juice the market, but that’s another article) abounding, have coincided with attention to ESG (Environment- Social – Governance) all over the place. The “E” part has already impinged on business as usual in multiple industries, as they develop strategies for decarbonizing. Now, I’ve been reading that cargo interests (known affectionately as Beneficial Cargo Owner, or “BCO”) like Ikea et. all are setting targets for greening of everything, including supply chains. The big BCOs have committed to “greener shipping” in the coming years. In our present age of digitalization, it is certainly possible to model the flows and handoffs to the different actors, as cargo moved from one link to the next, farther back in the chain beyond the quay; some of the big online freight booking platforms are effectively doing this already.

There have been early efforts to call out the Ikeas and Home Depots of the world on their ocean shipping alternatives- the first version I saw had ship manifest data (which names the importer) tied to together with an estimate of CO2 consumption based on the particular vessel (for example, the Ever Whatever) named in the manifest. In the news in the past week, I saw that the Biden administration was going to be jawboning big BCOs to speed up processes or remove constraints (like those above-mentioned 6pm guys). These impediments, which bring inefficiencies, are slowing down the movement of cargo, for example, around terminals or even at warehouses that may not be visible from the waterfront.

I would argue that these processes- going to links way farther back in the chain, into trucks, terminals and warehouses, may also be added to the “E” part of ESG ratings linked back to the big BCO’s with household names. Going beyond measures like how many tons of CO 2 are being emitted by the Ever Whatever (or the equivalent Maersk, CMA-CGM or MSC vessel, to name a few) picked up from ship manifest data, will give a better CO 2 picture to regulators, and to do-gooders who may wish to call out the carbon abusers.  If there are inefficiencies (including the problems caused by ships at anchor- but going way way beyond) they can be tied to emissions of carbon.  

Shipping gets in trouble for reasons to numerous to mention (see all my past columns), but those seeking to point fingers at the CO 2 abusers need to look at the whole supply chain, including the parts not floating around in San Pedro Bay.