It does seem ironic that Chinese citizens are experiencing the best air quality they’ve enjoyed for many years because of the coronavirus and its effects on industry in that region. I’ve even seen comments that if the world lost 2 or 3% of its citizens, that might be “a good thing”, as it might at least take some pressure off climate change and our destruction of the natural world.
Even if that bleak outcome does not come to pass, there are still some big questions about the long-term effect of the pandemic. At one extreme, we might argue that it will be a 6-month wonder, forgotten quickly as stock markets and firms pick up by the end of this year, and we all go back to normal, except we will all be better at washing our hands. Others are convinced it will have lasting effects.
I interviewed a very senior finance executive recently (more to come on that soon, I hope) who looked me in the eye and said, “we have to de-globalise our supply chains”. He was a pillar of the business establishment, but is working now on issues around climate change reporting and has become a powerful advocate for change.
When he looks at the way our business environment works, with raw materials, foodstuffs, semi-manufactured and finished goods shipped from one side of the world to the other in their millions of tonnes, he sees huge carbon emissions and climate change impact. To reduce that, we need to look at our assumptions about globalised trade, and consider whether more of what we buy (as corporates or individuals) should be sourced from closer to home.
Now, add that idea to the related issues we are seeing with the coronavirus, as firms in Europe or the US struggle to get parts and materials from China and south-east Asia generally. Or India announces that it will restrict exports of certain drugs that we really need in the UK (but aren’t made here at all these days). Are these major issues also going to make firms or even governments think hard about how much reliance we want to have on distant trading partners (or even close at hand partners)? How self-sufficient and resilient should a modern nation aim to be, when a single virus can paralyse the world?
Then add in the third factor that might contribute towards a change in global trading strategies – the rise of protectionism. Some are already seeing a future where countries and businesses will have to choose whether they want to be in the orbit of China or the US. Trump or Xi Jinping? You might not be able to have it both ways, as the UK government is trying to do with its Huawei strategy.
Taken together, climate change, coronavirus and the China crisis (sorry, I couldn’t resist the alliteration!) could mean we are at a classic tipping point. We’ve had 30 years or so of uninterrupted growth in global trade and an approach to business that relied on outsourcing (at micro and macro levels) and global approaches to sourcing and selling. Perhaps that is about to change. If it does, there may be some positive “procurement with purpose” outcomes, but there will also be real challenges for business executives, including senior procurement leaders. Start thinking now, I’d suggest.