The Road to Supply Chain Decarbonisation
The ever-pressing effects of climate change have led many individuals to make increasingly carbon-conscious decisions in daily life, yet a meaningful reduction of emissions requires action at the organisational level. While individuals may have a role to play, greenhouse gas (GHG) emissions from industry and transportation account for over one-third of global output [1], demanding efforts from industries to operate within sustainable emission limits and adhere to environmental protection standards.
The pact agreed at the COP26 summit provides a baseline metric as to what limits are required, determining that a 45% reduction in carbon dioxide emissions by 2030 is necessary to limit the global average temperature increase to 1.5°C [2]. Failure to meet this target will cause an increase in weather extremes around the world, such as droughts and storms [3]. In other words, the roads, seas and airspace that supply chain logistics rely upon will be increasingly disrupted. This disruption will likely impact the eight supply chains that are currently responsible for more than 50% of greenhouse gas emissions worldwide, with construction having the second biggest footprint at 10% [4]. Organisations can benefit from adopting a more GHG-conscious mindset that will reduce long-term operational costs, improve efficiency and increase competitiveness for decarbonised businesses. [5]
Source: World Economic Forum, 2021 ‘Net-Zero Challenge’ Report
Two Key Challenges
Of the many barriers to overcome for businesses to sufficiently reduce their emissions, perhaps the most important is the still limited visibility throughout many supply chains. This is especially problematic in multi-tiered networks where a significant proportion of emissions are produced far out of the sight of end-users. Calculating the total carbon footprint of components imported from aboard can be near impossible, with information increasingly hard to trace the further upstream you go.
A lack of transparency is compounded when procurement targets are not aligned with environmentally-conscious supply chain strategies, due to misconceptions around the scale of the cost burden. Decarbonisation is estimated to result in only a 1-4% increase in end-consumer prices, with the first 40% of decarbonisation possible for less than £8.50 (€10) a tonne [4]. Despite this, many organisations cite cost as a primary reason not to transition towards environmentally-friendly strategies.
Source: World Economic Forum, 2021 ‘Net-Zero Challenge’ Report
A key requirement to improving transparency and meeting environmental targets is collaborative engagement with supply chain partners. In cases where effective dialogue has been established in working relationships over time, suppliers are more likely to be open to sharing data to monitor emissions more accurately. This enables companies to establish comprehensive and accurate baselines that are monitored on a granular level to allow targeted changes to be made to the most significant emission contributors. It is only with this data that ambitious carbon reduction targets can be set, communicated and tracked accurately throughout the supply chain. Decathlon is a good example of a large company that is effectively encouraging cooperation from their supply chain, as they aim for 90% of their suppliers to set science-based targets by 2024. [4][6][7]
The implementation of emissions management software can promote accurate reporting and tracking performance against these targets.
Key Levers
The World Economic Forum has identified eight levers that can support supply chains in their move to decarbonisation which are listed below in order of most to least affordable/accessible [4]:
The benefits of adopting even some of these approaches are tangible. Specifically, for the Construction supply chain, through increasing circularity/recycling, material and process efficiency and the use of renewable power, it is estimated that the carbon footprint can be decreased by 60% with a cost of less than £8.50 (€10) per tonne of carbon dioxide. [3] This represents a great positive impact at a relatively low cost compared to many other sectors, indicating a promising opportunity for change within the Construction sector.
Conclusion
Achieving the dramatic reduction in emissions required to curb global warming is a formidable challenge for many companies, especially those in energy- and resource-intensive heavy industry. Carbon-accounting and tracking practices necessitate working collaboratively with customers, supply networks, and industry groups over long-term change efforts. However, mitigating carbon emissions in supply chains has become a strategic necessity for most organizations and those that wait too long will cede ground in competitive markets. Companies that reframe their mindset to view decarbonisation as added value as opposed to an unwanted cost will reap the benefits in the years to come. Those that lead partnerships and sustain engagements can capture new value in a resource-constrained world.
Words by Amelia Bradbury
References
[1] https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
[2] https://news.un.org/en/story/2021/10/1103972
[3] https://climate.nasa.gov/news/2865/a-degree-of-concern-why-global-temperatures-matter/
[4] Net-Zero Challenge: The supply chain opportunity, World Economic Forum
[5] GHG Emissions Management, Sarah Keyes, CPA, CA
[7] https://textilefocus.com/decathlon-aims-achieve-science-based-emissions-targets/