Rattling Supply Chains

Rattling Supply Chains: The Effect of Environmental Trends on Input Costs for the Fast-Moving Consumer Goods Industry
By Kelly McCarthy on regulation

In recent years, the world has experienced a remarkable rise in the prices of vital commodities, including energy and agricultural products. For example, between 2006 and 2008, the average world price for oil rose by 110 percent, rice by 217 percent, wheat by 136 percent, maize by 125 percent, and soybeans by 107 percent. The resulting economic impact on firms, households, and entire economies has renewed attention to the scarcity of natural resources and the best way of managing them in the twenty-first century.

The world’s natural resources are under pressure, as approximately 60 percent of the benefits provided by natural ecosystems are being degraded or used unsustainably. As much as 20 percent of freshwater use exceeds the long-term sustainable supply, and between 15 and 35 percent of the withdrawal of water for irrigation is unsustainable, raising concerns about agricultural yields and costs. The current patterns of resource consumption are exemplified by the case of oil. North America and Europe consume more than 50 percent of this resource yet account for only 20 percent of the global population. At the same time, the growing populations of developing countries are realizing their desire for a better quality of life, which has led to increased consumption and thus greater demands on finite resources.