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Supply Chain
Small Gains, Big Wins:
Net Zero Is About More Than Just Carbon Offsetting

Offsetting initiatives are becoming increasingly popular among businesses looking to be seen as leaders in sustainability. However — while the approach can be an interim solution for operations that can’t be fully decarbonized — companies must focus first on working with their supply chain to identify where immediate changes can be made.

Brands and retailers are in a race against time to get themselves aligned with net-zero carbon approaches. Every five weeks brings us one percent closer to the 2030 target of reducing global emissions by 45 percent — set out in the Paris Agreement as a key waypoint on the journey to net zero — so, time is of the essence; and when that is the case, shortcuts are often sought.

It is clear that carbon offsetting does have a role to play on the road to net-zero emissions; but it is a misconception that it helps with decarbonisation.

With the limits of current technology, there are certain things — for example, airline travel — that simply cannot be made carbon-free (yet); and in that case, offsetting is better than doing nothing. However, if offsetting becomes a key element in a company’s primary strategy, it creates real questions as to whether it is serious about driving positive change, or whether it is looking to greenwash its way to net zero.

A big part of tackling this perception is ensuring that any offsetting undertaken is additive. Taking part in initiatives and ideas such as “carbon credits” or investing in an existing wind farm in China does tick the box of helping the planet; but in reality, it adds nothing to the decarbonisation mix beyond padding your own statistics.

Any offsetting programme needs to create some benefit that wasn’t already there — and there is a big difference between offsetting to actively drive positive change and doing it to ensure you slide under the radar of government targets.

Plus, if a company is creating 200 million metric tonnes (mt) of carbon from fossil fuels and ‘offsetting’ this with 200m mt equivalent of clean energy production, the problem is that the environment only sees the 200m mt of carbon. The planet garners one half of the equation — and with it, climate change, too. This is the real crux of the danger with offsets. Yes, the world is better positioned with 200m mt equivalent of additive clean energy capacity; but there is still 200m mt of carbon impact.

Driving real change

The true key to driving this positive change and moving from intention to action is to engage your supply chain in the decarbonisation journey and bring them along with you. Typically, brands and retailers have tended to apply the Pareto principle to sustainability in their supply chains — focusing most efforts on working with the top 20 percent of suppliers. Not only is this an ineffective way to encourage sustainable practices throughout a supply chain, it also means the smaller suppliers that typically need the most help are left behind.

Even top suppliers are looking at the road to net zero as a 30-year strategy; so, if it is taking the biggest and brightest that amount of time, how long will it take the rest? If brands and retailers are to be seen as taking net zero and carbon reduction seriously, they must work with the entire supply chain or risk leaving behind a significant section of suppliers that may well have great ideas for how to address sustainability challenges, but not the method of making them heard.

The principle of marginal gains can very neatly be applied to this, with small positive changes made throughout the supply chain quickly compounding and becoming evident. Major retailers have hundreds — if not thousands — of suppliers, so if incremental improvements are made across each of them, the results will improve exponentially over time.

Yes, apply the Pareto approach to apply maximum focus in the right areas; but to achieve and enhance your positive impact, you must use the right tools to engage all suppliers across all materials and products.

A rising tide lifts all boats

Bringing everyone along on the journey also has the benefit of shared learnings, where the smaller suppliers learn from the bigger ones and — often more critically — vice versa.

With everyone on the same journey, smaller suppliers can incorporate some of the processes that are used by larger suppliers, which they wouldn’t typically be exposed to. Meanwhile, those larger players can learn from some of the innovations that are often introduced by smaller suppliers, which aren’t as constrained by tradition and corporate structure.

By taking this collaborative approach to supply chain engagement, brands and retailers can be much better placed to hit the ambitious targets that we face over the next 20 years. Critical to this is working closely with all suppliers in a scalable way to identify what they can achieve, and how they can work together towards a common goal.

In doing this, sustainability gains can be made immediately — bringing significant benefits not only for the environment, but also for business growth and increased marketing opportunities.

The reality is that carbon offsetting is likely to have a place in the sustainability mix for a long time yet. But only by actively engaging all suppliers to identify where gains can be made can we advance towards not just a calculated ‘net-zero’ impact, but a truly positive impact on people and planet.