PEST control for a turbulent world

Redwood Comment
Published:  03 May, 2022
Credit: tomertu/Shutterstock.com

On a global scale, things have only gotten more concerning since the Covid-19 pandemic, and the leather industry must keep an eye on the issues, explains Mike Redwood.

They say a TED talk should focus on a single point for clarity; this article makes two. First, if you are a new entrant to the leather industry, you should start to pay attention to the big picture, whatever your discipline. Secondly, if you are in a senior position in the industry today, you are already being sorely tested interpreting the contextual situation.

We thought that the pandemic was exceptional, and the leather industry generally dealt well with the massive disruption involved. This is so much worse. Adding in war, inflation and material shortages, among other issues, a myriad of uncertainties has upturned any short, medium or long term plans.

The business tool for putting things in context is called PEST – looking at the situation through the lens of Politics, Economics, Social and Technical. Recently this has been taught as PESTEL, adding Environmental and Legal to cover climate change, biodiversity loss and new laws on inclusion among other matters.

Pandemic and war

Until the pandemic, these latter two issues plus social and retail trends largely dominated, with only President Trump’s aggressive transactional approach to international affairs upsetting some aspects of supply chains in what many thought would be a temporary blip.

Before that was tested, we had the pandemic and now a war, both events with no end in sight and whose implications are quite unclear. We now have new challenges to overlay on the old, and a list of issues too long to cover here. Some are quite unpredictable both in severity and in timing as it becomes clear that matters to do with nationhood, national politics and individual power are winning over the economic welfare of citizens, the progress of the planet and any thoughts of climate change and biodiversity.

What is clear is that reality and attitudes soon change irrevocably. Many of Trump’s tariffs remain and China’s attitude has promptly hardened. Similarly, with the pandemic there has been no return to normal, it is a different world now. War is even worse as although it is being fought between two countries, its impact is reverberating everywhere.

Inflationary concerns

Consider some obvious areas. Consumers everywhere are worried about fast-rising inflation. The degrees differ with Brazil, Ethiopia, Eastern Europe and India among the worst, although the speed and continuation of the rise means figures are largely inaccurate. For some countries, this means poverty or starvation while for those with fossil fuels or other needed commodities to sell things are more positive.

Since money saved by consumers during the pandemic is being used to cover energy and food costs and, with interest rates set to rise in many countries multiple times this year, borrowing will be less easy. Consumer spending will fall, possibly quite dramatically, and this will inevitably hit the leather industry, requiring even stronger promotion of the message of longevity with leather products. Programmes such as Metcha become more important to divert consumers from the throwaway society to considered purchasing of products made of leather.

Relations between China and the West look likely to deteriorate rather than mend and this could mean anything from further decoupling up to war over Taiwan. There are many potential flashpoints. To date, this has not reverberated through the leather industry except at the agricultural end, with Covid lockdowns in China and shipping issues causing most problems. If it gets more serious will sides have to be taken by those in the industry? Medium-term, China and Russia will together continue to use soft power to the maximum to build a global base of allies.

This could be of huge, longer-term significance as The Economist Intelligence Unit says that countries holding two-thirds of the world’s population – China, India and much of Africa – are leaning towards supporting Russia whereas those countries against Russia represent about two-thirds of the world’s GDP, not a simple situation.

Where do you expect to make and sell your products in future years? What should your supply chain look like? How do you define resilience in these circumstances and what will it cost?

Even the strongest fans of reshoring know that can only be a partial solution and the search will be on to find workable locations which are safer from geopolitical disruption, making new choices now being termed “friend-shoring”.

For companies with a strategic view approach, the scenario planners will be busy, but the mind maps will extend far beyond the Flipchart or simple A1 paper size. This is not like the Dotcom bust, the China Price or the Financial Crisis, or a matter of an aging urbanising world. It is everything together being churned in ways never seen before.

I began reading the magazine The Economist back in my late teens and have, I believe, been an uninterrupted subscriber ever since. It gave a readable background to the world and there was always something to learn even when there was only time to scan through it, sometimes with a focus on technology, or maybe business or world affairs. Right now, it’s cover to cover.

If I were young, I would start with a journal like that and escape for a moment each week to try and grasp how that bigger picture, however unwelcome, is likely to encroach on my place of work and my specific area. 

Mike Redwood

mike@internationalleathermaker.com

Follow Dr Mike Redwood on Twitter: @michaelredwood

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