THE SUPERMARKET is moving to reinforce its supply chain after its research revealed the £370m cost of extreme weather.
Asda says it's going to take climate change seriously. Why? Because extreme weather patterns are already affecting major chunks of its supply chain – and it has the numbers to prove it.
Announcing its Climate Adaptation Framework at an event in London last month, the company’s corporate affairs director, Paul Kelly, explained that 95% of the fresh produce it buys is already at risk. Sourcing, processing and logistics are all being affected, to the tune of almost £370m (see box).
Kelly said the chance to put hard figures on the impact of climate change has given weight to a subject that is often shrouded in opinion rather than based on fact. The data has also encouraged a serious rethink of how the supermarket does business and will result in “rebalancing the relationship” with its suppliers, he said.
Asda is more aware of the challenges and risks that producers face now and in the future. It’s also aware that this could leave its shelves bare or filled with limited, very expensive fare.
As such, it will be encouraging suppliers to invest savings in climate adaptation rather than passing them on to the supermarket in the form of lower prices. How will this sit with a consumer base that has got used to being “better off at Asda”,though? When pressed, Kelly suggested that supply chains were bulging with middlemen that add no value and these would be “taken out” to save costs too.
There was little specifically on what Asda will change as a result of this risk exercise, carried out with a little help from the accountants PwC and the Environment Agency – the “framework” so far comprises a short A5 booklet. The lack of detail is because of the “competitive advantage” provided by this new, shorter supply chain model based on long-term relationships with suppliers that can cope with the perils of climate change.
Asda now understands all too well that as the availability of food goes one way, price will continue going the other. According to an Oxfam report last month, the cost of Kellogg’s cornflakes will rise 44% within the next 15 years. Asda wants to be sure its cereals, tomatoes and coffee won’t go the same way.