Invisible costs in the footwear supply chain. There are costs tied to climate risk (floods and excessive heat waves, etc.) being absorbed by the materials’ chain, along with supply delays and financial volatility. But they are also those for a growing demand for transparency, traceability and accountability of emissions. The footwear industry, because of its peculiarities, is the one most exposed to a range of risks and regulatory changes that will reshape its future.
Invisible costs
For economist and climate strategist Scott Kelly, of British firm Risilience, “The footwear industry is at the center of multiple converging climate risks. It’s exposed on all fronts: not only to physical threats, such as heat waves, floods and supply chain disruptions, but also to increasing transition pressures in a rapidly changing regulatory landscape. And then investors’ scrutiny, litigation risk and changing consumer sentiment”. Kelly considers footwear to be one of the industries with a whole range of risks to address. And these are factors that are redefining what it means to remain competitive, reported Footwear News.
Climate risks
Based on Risilience data, the footwear sector is uniquely exposed to climate risks, starting with the sourcing of raw materials. A single pair of shoes can contain dozens of components, assembled by globally fragmented supply chains dependent on climate-threatened raw materials. The increasingly prolonged and severe drought, for example, has reduced cattle herds in parts of the Americas and Africa, limiting the supply of hides. The same can be said of cotton and rubber. Floods and excessive heat waves threaten areas where global footwear production is concentrated.
Regulatory challenges
Another stressful element for the supply chain comes from the adoption of regulations to ensure transparency in production. Companies will have to disclose detailed information about their products, emissions, and their plans to mitigate their impact. At the end of the life cycle, footwear faces another challenge, which is related to material recovery. “Billions of shoes are discarded each year and the vast majority end up in landfills or incinerators. Most are almost impossible to recycle. Designed for performance and price, not to last: modern shoes are intrinsically against circularity, by definition”, Kelly points out.
The solutions
For the economist, the challenges and risks are increasing, and the chain is already having a real impact on costs. What do brands need to do? “Take decisive action by integrating climate resilience into their design, procurement and governance. By doing so, not only will they mitigate risks, but define the next era of leadership in the footwear industry”, he concludes.
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