The big unknown

Worldwide
Published:  24 March, 2020
Credit: Philipp Lublasser

As the world is battling a pandemic of unparalleled scale, global leaders are increasingly resorting to wartime analogies to describe the current situation. We are indeed at war. And the fact that the enemy is an invisible virus, makes it all the more difficult and harder to “fight”, to stay within the terminology. 

With the epicentre of the outbreak having shifted from China to Europe and its spread continuing at pace, it is clear that things are going to get worse before they are going to get better, and currently nobody can predict when an improvement – let alone an end - may come.
As Covid-19 spreads, the status quo looks rather bleak, with disrupted supply chains, manufacturing that has pretty much come to a standstill across most industry sectors, empty retail stores and consumer spend focused on all but essential items (and questionable stock piling), leaving empty shelves on the one hand and surplus stock and excess inventory on the other.

Economic ripple effect
When the virus first started and within a matter of weeks brought most of China to a halt, quarantining millions of people, it exposed our reliance on China as both supplier of key components, but also as important customer of global goods, and with that the vulnerability of countless businesses around the world when this network is compromised. Some commentators have compared the current pandemic with the 2002-03 SARS outbreak, but this seems inadequate, as the human, social and financial implications were far less severe, for one, but also China’s status on the world stage in terms of trade and political influence – and our dependence on it – has grown significantly over the past 18 years.
Latest reports coming out of China are suggesting that 70 to 80% of all tanneries on the mainland, as well as footwear, leather goods makers and leather chemical companies have now resumed production operations, except in the Wuhan area. However, as the ripple effect of the virus has now shut down most of manufacturing and trade across large parts of the rest of the world, where are the finished goods going to go if orders are cancelled and export demand remains non-existent? Even though China’s production is currently said to be only running at 30 to 40% of capacities, that is still a lot of stock that will remain unsold.

What happens to unused hides?
Looking at the latest developments outside of China, there is of course, an even more pressing question of what will happen to raw hides if tanneries have to remain closed for prolonged periods of time due to the wave of country-specific lockdowns, but meat consumption and generally food production continues at current – solid – levels? As governments restrict manufacturing activity to all but essential sectors, does tanning fall into this category as it is so intrinsically linked with the meat industry? A prolonged suspension of tanning activity will no doubt have huge environmental repercussions due to the non-disposal of organic waste and the putrefaction of unused hides, much worse than the already disturbing images that have been circulating before the outbreak of surplus hides being dumped in landfill. Add to this the issue of keeping tannery workers safe, as tanning remains a vastly manual process, despite the rise of automation, that requires workers’ physical presence onsite to operate machinery and without the luxury of home working, and this all creates a big additional headache. Can a tanner safely operate tannery machinery and keep their workers two metres apart at all times, for example?

Survival of the fittest
And then there is the question of what long-term effects all of this will have. While all businesses are affected, big players are clearly more resilient and able to absorb the losses better, whereas small businesses are likely to suffer more dramatic consequences as they tend to operate on much lower profit margins and have fewer assets and a generally weaker infrastructure. A lot of leather and leather goods manufacturers fall into this category, with the most vulnerable being those at the bottom of the supply chain, particularly in developing countries, with neither the personal nor social safety net to deal with the consequences of this pandemic. It’s an almost Darwinian fight for survival.

Where does this leave us?
That is the big question, which nobody can answer at this stage. We are in the midst of the big unknown. However, I do get a sense that when this is all over, there will have been a dramatic shift and re-evaluation of the status quo, how not only we as people conduct our daily lives, but on industry-level, too, of our partnerships with our suppliers, the complex supply chains we are operating in and our reliance on a globalised world which connects us, but also accelerates a crisis such as Covid-19. I would like to think that businesses are increasingly recognising their collective responsibility for those who are at the grassroots of their operations, and that not only sustainability, but also CSR will be key drivers in the trade set-ups of the future.
But there is no doubt – these are unprecedented times, and it will be interesting to see
whether we will come out of this stronger and what lessons have been learned.

Isabella Griffiths

Isabella Griffiths, Editor

isabella@edifydigitalmedia.com