Supply Chain

WEF:
Decarbonizing Supply Chains Would Be Game-Changer for Fighting Climate Change

The opportunity for impact is especially high for consumer-facing companies, whose supply chain emissions far outweigh their direct emissions from manufacturing.

Published 5 years ago | About a 4 minute read

Image: Pexels/Pixabay

On the heels of the World Economic Forum’s release of its annual Global Risks Report — of which the biggest long-term risk remains a failure to act on climate change — comes another report that shows how eliminating supply chain emissions would be a game changer in the global fight against climate change.

Net-Zero Challenge: The Supply Chain Opportunity, published this week by the World Economic Forum and Boston Consulting Group (BCG), analyzes the top eight global supply chains — which account for more than 50 percent of global greenhouse gas emissions — and finds that end-to-end decarbonization of these supply chains would add as little as 1-4 percent to end-consumer costs in the medium term. It also points to the global nature of many supply chains, enabling companies to support decarbonization across borders and in countries where governments do not yet prioritize climate action.

We’ve seen a growing wave of commitments to address the climate crisis across sectors; but, particularly, the private sector — with companies including Burberry, Google, Kering, Levi Strauss, Microsoft, Natura, PepsiCo, Procter & Gamble, Target, Unilever and Walmart, to name a few — launching bold climate action plans in the past two years, with all focusing much-needed attention on their Scope 3 emissions.

“We see the progression at CDP," says Dexter Galvin, Global Director Corporations and Supply Chains at CDP. “At the beginning, we mainly worked with sustainability functions. But over time, this increasingly shifted out to procurement teams as well — thinking about the full supply chain.”

The new report breaks down the major sources of emissions along each of the eight major supply chains — food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services and freight — assesses the key levers to reducing emissions in each supply chain; and shows that many can be easily deployed today, with very little cost to implement.

Patrick Herhold, a report coauthor and managing director and partner at BCG’s Centre for Climate Action, said: “The argument that costs are a major barrier to reducing emissions is increasingly flawed — around 40 percent 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 €10 per ton of CO2 equivalent. 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.”

The opportunity for impact is especially high for consumer-facing companies, whose supply chain emissions far outweigh their direct emissions from manufacturing — P&G, for example, estimates that 85 percent of its emissions comes from consumer use of its products. These companies can use their buying power to push for rapid decarbonization and help fund the transition by co-investing with upstream raw-material producers, which struggle to finance the transition alone.

Why isn’t supply chain decarbonization already being done on a wider scale? As the report explains, a variety of factors have prevented companies from trying to reduce emissions in their supply chains. One common problem is that many companies are still working to gain transparency about these emissions in the first place — and the mechanisms for establishing greater transparency at the supplier level are still immature. This lack of transparency means the economics of decarbonization are obscured, leading to the perception that optimizing for sustainability may interfere with the goals of increasing performance or lowering costs. More and more companies are forming partnerships and adopting new technologies to gain visibility into the farthest reaches of their supply chains.

Read more findings from the report — including nine major actions that CEOs should take today to address supply chain emissions — here.