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The state's role in managing environmental risks in supply chains a survey and external analysis

This study maps existing and planned public initiatives to facilitate sustainable supply chain management, in Sweden, the EU and ten other countries.

Many Swedish companies are part of cross-border production networks with complex supply chains in several tiers. Factors such as just-in-time deliveries and small stocks increase the susceptibility to disruptions, which is why both extreme weather events as well as long-term changes such as desertification can pose risks to Swedish business. One of several examples is the flooding in Thailand in 2011. Since 25 per cent of world hard disk production was located in the country, the disaster led to significant disruptions in the
global supply chain. The UN Climate Panel IPCC has pointed out that the number of extreme weather events will increase in the future.

This study maps existing and planned public initiatives to facilitate sustainable supply chain management, in Sweden, the EU and ten other countries.

There are many different types of environmental risks. Exogenous risks are something that companies' supply chains are exposed to from external sources (for example, natural disasters). Endogenous risks are caused by the companies and their suppliers themselves
through their activities (emissions, waste, poor compliance, accidents). Our main focus in this report is the role of the state in managing companies' exogenous environmental risks.
In practice, however, we see that many government initiatives have a broader focus and can include both endogenous risks and social sustainability.

A wide range of measures

The survey shows that there are a number of political initiatives to manage environmental risks in supply chains. However, no country or international organization has designed a comprehensive policy that covers all types of risks. However, it is clear that the work on
endogenous risks has gone much further than the corresponding work on exogenous risks.

At the same time, it can be noted that many of the efforts currently focused on endogenous risks possibly could be extended to include exogenous risks. Government interventions appear in various forms: comprehensive policies for sustainable business and climate adaptation, policies that inform about risks, policies that inform about
business opportunities of sustainable entrepreneurship, support for education about environmental risks, policies for increasing competence about environmental risks at companies, efforts for resilient infrastructure, policy for effective certification,
standardization and traceability of resources in the supply chain, financial support for reducing environmental risks, guidelines for how companies can act to reduce environmental risks, international cooperation for, among other things, more knowledge about environmental risks in the supply chain, public procurement to reduce the environmental impact of suppliers, corporate governance of state-owned companies and financial institutions against reduced environmental risks, and regulations such as the requirement to report environmental risks in the supply chain.

Developments in comparable countries

The Netherlands is one of the countries that has come the longest in its policy development. Germany also prioritizes this area. The United Kingdom has made ambitious analyses of the effects of climate change on companies' supply chains. The European
Commission is working on several new initiatives.

Neither the EU nor any individual member state has so far chosen to formulate a common policy for sustainable entrepreneurship or to reduce companies' environmental risks. Rather, these areas are regarded as two different policy areas where the efforts have several
purposes. On the one hand, there are motives that aim to achieve environmental goals and, on the other, to strengthen the companies' competitiveness. Often, there is an implied or stated assumption that these goals are mutually reinforcing.

Developments in Sweden

Sweden is already today driving internationally in both the general and specific work for sustainable entrepreneurship. In some areas however, other countries carry out efforts that are lacking in Sweden. One example is the British Climate Committee's regular reviews of
business climate-related risks, which also include supply chains. In Sweden, the Swedish Growth Agency has ambitions to cooperate with SMHI to produce data that can lead to a step in this direction. However, we see that the data will not take into account endogenous
risks. The National Climate Adaptation Council has also begun work in the area.

Another example is the Netherlands and Germany, where sector analyzes have been carried out as a basis for more systematic work. The documentation describes the sensitivity to interference in various industries such as textiles, food and vehicles. To date, such work has not been carried out in Sweden.

Further examples of political initiatives that have been taken in several countries are about binding rules of caution. Among other things, France has enacted a law and today legislation is being discussed at EU level. Growth Analysis has in previous studies
highlighted the value for Sweden of introducing a similar regulatory framework as that in France.

The work on this sub-study has shown that Sweden will soon have to take a position in several international policy processes. This applies, among other things, to the discussion within the EU and the OECD on developed guidelines and rules for companies' due diligence.

The state's role in managing environmental risks in supply chains – a survey and external analysis

Serial number: PM 2020:04

Reference number: 2020/70

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