We’ve hinted at this in our damnation posts on natural disasters, water, and food shortages but this source environmental damnation is one that has repercussions across the damnation categories. While we won’t discuss all of the ripple effects of the shockwaves it is producing, we’ll discuss some of the biggest ones from the primary effects.

Hotter Summers

Everyone associates climate change with global warming, and the summers are definitely warming up, as this is one aspect of climate change. As a result of hotter average summertime temperatures, we are experiencing a global change in weather patterns that is bringing more droughts and wildfires, which is resulting in an increase in lost crops at a time when food reserves are hovering near the all time lows that arrived in 2011 (and at a time when the US no longer has any strategic grain reserves). This means that spiking commodity prices are going to keep spiking, assuming that you can even get enough of the commodity. If your organization is not your supplier’s preferred customer, and 30% of the global crop gets wiped out, is your order getting filled?

Colder Winters

Global warming is not just global warming, it’s global climate change year round. While the summers get hotter, the winters get colder and more severe and bring more severe storms with record setting snowfalls that can bury your average personal automobile, massive ice storms (that can bring down entire power grids), and fast moving ice, even in the US. (Source: Raw Video) As a result transportation routes are shutting down, which doesn’t matter because your factories cannot run without power, and your people can not get to work in temperatures that can inflict frostbite in less than sixty seconds.

More Regulations

Climate change is a result of global warming and global warming is at least partially a result of our industrialization and all of the carbon and particulates that we pump into the atmosphere that would not get there naturally. The smarter countries realize this, and are creating regulations to prevent (over) pollution that is damaging our planet and threatening our very existence. And while this is a good thing in theory, the fact that these regulations are not only popping up faster than Fibonacci’s rabbits but that every clean air, water, etc. regulation around the globe has not only different restrictions on pollutant output, but on quality control and reporting, it’s a paperwork nightmare. When one considers all the trees that are being cut down to support the creation of these regulations, one has to wonder if more harm is being done than good sometimes.

In short, climate change is another eternal damnation that plays havoc in the direct manners specified above, and in more indirect manners when one considers the impact it has on transportation infrastructure (as extreme cold and rapid freezing and thawing is very hard on our man made structures), our providers (who are forced to claim force majeure on a more regular basis), and us (when we just cannot handle extreme weather conditions we never evolved for).

Closely related to Economic Damnation #9: Oil & Natural Gas Reserves and Oil Price Shocks, Oil & Natural Gas is also an environmental damnation that hits us hard on the front end and hard on the back end.

In our economic damnation post, we talked about how the almost randomly fluctuating prices that can often double or halve within a year is a damnation that can wreak havoc with your supply chain. When prices double, your costs are going up, way up, and there’s nothing you can do about it. When prices halve, if you’re in a contract, you’re losing money hand over fist, possibly both hands over both fists if there was a fuel surcharge and the supplier refuses to remove it, claiming they are still in a fuel contract with their supplier and won’t see the price drop for a year. (And that’s why you always have to tie surcharges to market rates and monitor closely.) But that’s just the beginning.

Dirty Power

Oil and Gas is dirty power. Burning oil releases dangerous pollutants into the air that pose a risk to our health, a risk to our environment, and even a risk to machinery that requires clean air to ventilate. As a result, these are pollutants that, in many countries, must be captured upon their creation during the burning process by law. This requires expensive machinery that adds to production costs, maintenance costs, and overhead costs.

Disaster Risk

Oil and gas is explosive. Very explosive. It only takes a single miscalculation and your fuel, your factory, and, possibly even your workforce goes up in a hot fiery ball of liquifying flame and all that is left at the end of the day is charred remains of melted metal and smoke.

Shortage Risk

Reserves are limited. And so is our ability to tap them. There are only so many pumping stations, so many pipelines, so many tankers, and so many people to operate them. A single delay in transportation. A single accident that shuts down a pipeline or a pumping station and your supply can be cut off for days or weeks and your production shut down for that length of time.

Oil and natural gas negatively impacts your balance sheet on acquisition, and, if something goes wrong, on transport and utilization. But, in many places, it’s sometimes the only viable energy source at the organization’s disposal. (And why an organization with the dollars should invest in its own sustainable energy production methodology, and, if located in an appropriate area, solar, wind or hydro power to minimize its dependence on oil.) So, unfortunately, for the time being, it’s a double damnation that Procurement needs to live with.

Yes, you read that right — procurement damnation #17 is Greenpeace. While it’s important that someone provide the voice of sustainability when your average organization can’t see beyond the Wall Street proclamation that the almighty dollar must come first, and must come as soon as possible unless you want your rating downgraded and your corporate brand value wiped out, this is a case where that someone has inadvertently done as much harm as good.

While Greenpeace is not an eco-terrorist organization, there’s a reason that the (US) FBI (Federal Bureau of Investigation) coined the term eco-terrorism and a reason that the FBI once called radical environmental activists the number one domestic terror threat, and, at SI we’re very sad to say that the reason is Greenpeace. Unfortunately, a large number of radical environmentalists take Greenpeace’s message too far and use, or threaten the use of, violence and sabotage of a criminal nature in an effort to get their responsibility and sustainability messages across. (This, of course, weakens their cause, but they still do it.)

Moreover, its fight to end the use of nuclear power, coal, and oil can be so crippling to a developing economy that still depends on those technologies (and that needs time to convert over to more environmentally friendly alternatives such as solar, wind, and water power) that Greenpeace actually poses a threat to economic security and India even barred international funding for the local branch of Greenpeace (while freezing its seven bank accounts) in April of this year (and, to date, Greenpeace India has only regained access to its two main domestic bank accounts and 25% of the funds in its foreign contribution accounts).

And when it gets a company in its sight, that company loses money. For example, Greenpeace demonstrators regularly put up blockades that prevent companies from clearing land, drilling for oil or mining for minerals, or ships from leaving ports (with a recent example being the blockage of a Shell drilling vessel from leaving port). Renting, maintaining, and staffing heavy construction equipment and ships costs a lot of money and everyday the equipment sits idle can cost a company tens or hundreds of thousands of dollars. This drives up the cost of the raw materials mined or harvested, and hits all our pocket books to the point that the tax credits we get in countries where Greenpeace is seen as a charitable organization is often less than what they cost us.

And if your organization ever gets in Greenpeace’s sights, the reason why it is one of only two organizations to be included on our Procurement Damnation list will become crystal clear.

An EMP, or an electromagnetic pulse, is a short, typically intense, burst of electromagnetic energy that is generally disruptive, if not damaging to, electrical and electronic equipment, and high energy EMPS can even damage buildings and aircraft.

While EMP weapons are a concern, as they could be set off in a terrorist attack, naturally occurring EMPs are of a greater concern as they are often even less predictable and not preventable (whereas an EMP weapon can be prevented if the person holding it can be prevented from setting it off).

Whether one realizes it or not, a number of natural events cause EMPs:

• lightning
  which is the most common, and well known, cause as it is known that it can fry the electrical and electronic systems of anything it hits
• solar flares
  intense solar storms, like the one that occurred on July 23, 2012, could knock us back to the stone age; the geomagnetic storm (which occurs when a solar flare hits the earth’s atmosphere) of March 1989 collapsed the entire Hydro-Quebec electricity transmission system
• earthquakes and volcanoes
  while not likely, an intense earthquake or massive volcanic eruption could (theoretically) cause an EMP similar to that produced by a massive (nuclear) explosion (as electrical discharges have been recorded as a result of earthquakes)

Just when you thought you understood the natural disaster risks in your supply chain, a whole new level of risk, that can decimate the information supply chain that the physical (and financial) supply chains depend on, is exposed.

When we said Procurement is Damned, we meant it!