An ‘Opportunity to Make a Huge Impact’
Let’s begin by stating the obvious: “Decarbonizing” the supply chain — working with your suppliers to reduce CO2 emissions — is hard.
“Even leading companies struggle to get the data they need and to set clear targets and standards to which their suppliers must adhere,” Boston Consulting Group (BCG) and World Economic Forum (WEF) admit in the summary of a new report they coauthored. “Engaging an often-fragmented supplier landscape is challenging — especially when emissions are buried deep in the supply chain, or when addressing them might require collective action at the industry level.”
And yet, reducing supply chain emissions is key to reducing a company’s climate impact because those sources up and down the chain generally release more CO2 than any single organization does on its own. “Net Zero Challenge: The Supply Chain Opportunity” observes that eight industries’ supply chains account for 50% of carbon emissions around the world. They include food, fashion, “fast-moving consumer goods” and freight.
The report released today also seeks to debunk a common concern about environmental efforts: That they are too expensive.
“The argument that costs are a major barrier to reducing emissions is increasingly flawed — around 40% of the emissions across the eight major supply chains we analyzed can be eliminated with measures that bring cost savings or are at costs of less than $12 per ton of CO2 equivalent,” said Patrick Herhold, managing director and partner at BCG’s Centre for Climate Action. “Increasing process efficiency and the use of recycled materials, as well as buying more renewable power, provides companies with major climate gains at very low costs.”
BCG and WEF argue that end-to-end decarbonization of supply chains would “hardly increase” costs, adding “as little as 1% to 4% to end-consumer costs in the medium term.”
Of course, depending on what sort of margins you face in your business, even “hardly” hiking your customers’ costs might not seem like such a small thing to them or to you. How BCG and WEF’s ideas will play out in the real world is another question. However, organizations will likely face more pressure to decarbonize, and the report lists nine actions they can take to begin to get a handle on supply chain emissions. They are listed on the accompanying graphic.
“Companies have the opportunity to make a huge impact in the fight against climate change by also decarbonizing their supply chains,” said Dominic Waughray, WEF managing director. “The interaction between governments and companies to seize this opportunity is an important one. We welcome more leaders to join and help build momentum on this important agenda.”
The full report can be downloaded here.