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Photo illustration by John Lyman

Our over-dependence on raw mateirals is proving especially problematic as global supply chains show their wear and tear.

Because of disruptions, or in some cases a lack of resources, the world is rediscovering the importance of raw materials. Oil, gas, grain, water, phosphates for fertilisers, and lithium for batteries have all experienced disruptions over the past few years. In some cases, a shortage of lithium is more of an inconvenience if it delays the newest iPhone or Apple Watch, but the shortage of other resources can have real-world consequences.

This is being made all the more evident as we witness a rise in autocratic governments, the fragility of global supply chains in the face of economic and geopolitical crises, and a worsening environmental situation. This situation has opened up new possibilities to entrepreneurs and investors eager to kickstart a new era of sustainable investing.

The extent of raw material shortages around the globe has been evident since 2020. The fragility of global supply chains has been exacerbated by the war in Ukraine, with Europe weening itself off of Russian gas, and increased suspicion and distrust of China as Xi Jinping exerts an ever-tighter grip on the CCP and the Chinese people.

Steady rates of inflation and stability in the pricing of goods seem to be a thing of the past and the unpredictability of the commodities market means that global supply chain resilience is marginally above the ‘high-risk’ threshold.

The truth is, the world is much smaller than it was even 20 years ago, which means supply chain disruption in any given region can quickly escalate into a global crisis, with ripple effects continuing to affect markets for months, even years. Supply chains are at the heart of the very idea of globalisation, so reinforcing them and overcoming geopolitical challenges is crucial if the industry is to avoid any lasting harm.

“Price rises have emerged as a dominant theme in the quarterly earnings season,” write Aziza Kasumov and Andrew Edgecliffe-Johnson in the Financial Times. “Executives at Coca-Cola, Chipotle, and appliance maker Whirlpool, as well as household brand behemoths Procter & Gamble (P&G) and Kimberly-Clark, all told analysts in an earnings call last week that they were preparing to raise prices to offset rising input costs, particularly of commodities.”

Current geopolitical crises have led to skyrocketing commodity prices as raw material supply chains are hit hard. “We are going to be in for a rough ride,” said Alexandre Garese, founder of Kouros Investment. “Investing not only in the energy transition but also in global, collective infrastructures is going to be key to building supply chain resilience when it comes to raw materials.”

The unfortunate reality is that millions of people are already suffering due to the lack of raw materials. The Food and Agriculture Organization’s price index is at its highest point in six years and this will have far-reaching consequences on global health and nutrition, especially in the developing world. According to World Bank President David Malpass, “this reduced access to nutritious food will have negative impacts on the health and cognitive development of COVID-era children for years to come.”

The World Bank goes on to highlight the importance of robust food supply chains to help avert the worst possible outcomes: “To avoid artificial shortages and price spikes, food and other essential goods must flow as freely as possible across borders.” Finding solutions, and quickly, to the distribution of global raw materials is therefore of paramount importance.

For business leaders and governments, the potential benefits of increased globalisation of the markets are clear; how to reap those benefits is the real challenge of today. The ability to exchange materials, technologies, know-how, and commodities at breakneck speed provides a world of opportunity for keen investors but also has unique challenges. The most fundamental of these involves infrastructure and supply chain resilience. A global marketplace is by nature inextricably linked to the geopolitical crises of the day. Finding a way around these means building a flexible, malleable structure that can rapidly respond and adapt to evolving conditions.

Taylor Mitchell specializes in the field of materials and methods for energy storage and conversion.