Climate Change Risks and Supply Chain Responsibility: How should companies respond when extreme weather affects small-scale producers in their supply chain?

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What role can companies play in strengthening the capacity of small-scale producers in developing countries to adapt to climate change, and in doing so, make their global value chains more resilient? While some leading companies have made progress in taking greater responsibility for what happens throughout their supply chains, there has been little discussion about the threat that climate change poses to the livelihoods of small-scale producers. Through interviews with three companies: Starbucks, Marks
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  OXFAM DISCUSSION PAPERS JUNE 2012 Oxfam Discussion Papers   Oxfam Discussion Papers are written to contribute to public debate and to invite feedback on development and humanitarian policy issues. They are ’work in progress’ documents, and do not necessarily constitute final publications or reflect Oxfam policy positions. The views and recommendations expressed are those of the author and not necessarily those of Oxfam. For more information, or to comment on this paper, email advocacy@oxfaminternational.org www.oxfam.org CLIMATE CHANGE RISKS AND SUPPLY CHAIN RESPONSIBILITY How should companies respond when extreme weather affects small-scale producers in their supply chain? JODIE THORPE POLICY ADVISER, OXFAM GB SHELLY FENNELL INDEPENDENT CONSULTANT What role can companies play in strengthening the capacity of small-scale producers in developing countries to adapt to climate change, and in doing so, make their global value chains more resilient? While some leading companies have made progress in taking greater responsibility for what happens throughout their supply chains, there has been little discussion about the threat that climate change poses to the livelihoods of small-scale producers. Through interviews with three companies: Starbucks, Marks & Spencer, and The Body Shop, the paper examines how smallholders involved in coffee production in Colombia, sesame in Nicaragua, and cotton in Pakistan have been affected by climate change and what it means for the companies’ businesses . From this research, Oxfam identifies key actions for companies to begin to address the challenges to small-scale producers, and raises questions for further discussion.  2 Climate Change Risks and Supply Chain Responsibility CONTENTS 1 Introduction 3 What we did 4 What we found 5 2 Our three case studies 6 Case study 1: Starbucks and arabica coffee 6 Case study 2: Marks & Spencer (M&S) and cotton 8 Case study 3: The Body Shop and sesame oil 11 3 Conclusion 15 Investing in adaptation 15 Five actions companies can take 16 Five questions to think about 18  Appendix: interviewees 21 Notes 22    Climate Change Risks and Supply Chain Responsibility 3 1 INTRODUCTION What happens when floods, droughts or disease wipe out the crops of small-scale farmers? What does it mean for their livelihoods and food security, and for the wider community? And, where small-scale farmers are selling into global value chains, how do companies respond when adverse weather events affect production? With climate change driving such events to become more frequent and more intense, this discussion paper explores these pressing questions. While focusing on adaptation, the case studies presented in the paper are also a reminder that strong international action over the next few years is essential to reduce global greenhouse gas emissions and prevent catastrophic climate outcomes. The International Energy Agency warned in May 2012 that the door is already closing on the possibility of keeping global warming within two degrees Celsius, a limit beyond which scientists warn the climate could become unstable. 1  Unless we change course, experts predict a 15  – 30 per cent decline in agricultural productivity in the period up to 2080 in developing country regions that are most exposed to climate change. But the decline could be as much as 50 per cent for some countries. 2   Although much of the discussion around climate change focuses on future risk, Oxfam is aware that in developing countries, hundreds of millions of farmers  –  many of whom are women 3    –  and their communities are already   suffering from the effects of changing weather patterns on their livelihoods. Many areas are witnessing increasing frequency of natural disasters, food shortages and drought, with adverse impacts in areas such as health, water and food security.  Almost without exception, the countries that already struggle to feed their people are the most affected by climate change. 4  Poor rural women, who often have fewer livelihood alternatives and fewer rights over productive resources such as land and water, are the most vulnerable to crises and are likely to be hardest hit when a climate-related disaster occurs. Small-scale producers are a key link in companies’ supply chains, often producing labour  -intensive commodities. In some cases, companies are also investing to increase the range of small-scale producers they source goods from. This is driven in part by a need to diversify their portfolio of suppliers in the face of diminishing resources and the impacts of climate change, and in part by the desire to protect or enhance their brand and reputation. Sourcing from small-scale producers  –  when it adheres to ethical standards  –  can generate goodwill and help companies to reach and retain customers. 5  As recent campaigns targeted at major clothing, food and retail companies whose suppliers use harsh working conditions have shown, there is a public expectation that companies accept greater responsibility for what happens throughout the supply chain. Despite progress made by leading companies in this respect, there has been relatively little discussion about the threat that climate change poses to the livelihoods of small-scale producers in developing countries and the role companies can play in helping them to adapt. This discussion paper is about understanding that future and responding in a way that meets the needs of producers in developing countries as well as global value chains. It should be noted that the efforts described in this paper are but a tiny part of the solution. Most small-scale farmers are not involved in global value chains; they provide produce and grains for local markets or to meet their own consumption needs. Here, the role of governments and public policy in supporting adaptation is vital: to help small-scale farmers increase and secure their access to productive resources through policies such as land reform; and by enhancing access for all small-scale farmers, including women, 6  to the finance, inputs, and extension services that can support adaptation.  4 Climate Change Risks and Supply Chain Responsibility WHAT WE DID We worked with three companies that rely on agricultural commodities from developing regions and are interested in climate change and what it means for their business: ã  Starbucks, a coffee company; ã  Marks & Spencer, a food and clothing retailer; ã  The Body Shop, which sells cosmetics and beauty products. Based primarily on interviews with company executives from buying departments, as well as those whose remit covers climate change and related issues, we posed some key questions:  Are companies aware of climate events affecting their agricultural supply chains? Are they taking actions to help producers build their capacity to respond in the face of such events? What more could companies be doing? To ground the discussions in reality, we focused on examples of crops which these companies source from small-scale producers and which have, in some way, been disrupted by extreme weather with significant impacts on producer livelihoods. Our three case studies examine coffee production in Colombia, sesame in Nicaragua, and cotton in Pakistan. Our understanding of these examples was built on additional interviews with producer organizations and NGOs. A full list of interviewees can be found in Appendix 1. Throughout the paper, we refer to the effects of extreme weather events on communities, and make the link to climate change. Our intention is not to claim that each of these events was caused specifically by climate change. However, empirical data suggest that extreme weather events have become more common in recent years, 7  and the majority of scientists relate the increased frequency and intensity of such events to climate change (see Box 1). 8   Box 1: Climate change and extreme weather Our case studies are centred on extreme weather events, including excessive rainfall and flooding. While we cannot conclusively attribute any specific event to climate change, the science linking extreme events to human-caused climate change has advanced rapidly in recent years. Until fairly recently, the natural variability in climate systems generally limited scientists to saying that any indivi dual extreme weather event was ‘consistent’  with climate predictions. Increasingly, more definitive statements about attribution are becoming possible.  According to Kevin Trenberth, Head of Climate Analysis at the US-based National Center for Atmospheric Research (NCAR), scientists can now say that particular events would not have occurred in the same way in the absence of climate change. 9  One of the first published studies linking a single extreme weather event to climate change related to the 2003 heat wave in Europe, which killed 40,000 people. Led by Peter Stott, the study concluded that human influence more than doubled the likelihood of the heat wave occurring. 10  More recently, the Intergovernmental Panel on Climate Change (IPCC) report on extreme weather events judged it ‘ very likely   that the length, frequency, and/or intensity of warm spells or heat waves will increase over most land areas ’ and ‘ likely   that the frequency of heavy precipitation or the proportion of total rainfall from heavy falls will increase in the 21st century over many areas of the globe ’. 11  
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