“Supply chain decarbonization will be a ‘game changer’ for the impact of corporate climate action. Addressing Scope 3 emissions is fundamental for companies to realize credible climate change commitments.” — Nigel Topping, UNFCCC’s High-Level Climate Action Champion, The World Economic Forum, January 2021
Forty percent of global GHG emissions are driven or influenced by companies through their purchases, cites Accenture’s Chad Gottesman, Managing Director of Procurement Business Process Services. The World Economic Forum’s new report suggests that eight supply chains account for more than 50% of global emissions: Food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services and freight.
The Net Zero journey can be daunting if it isn’t segmented into manageable pieces. During the early stages of setting a plan for Net Zero emissions, it is critical to pause and consider the most material environmental impacts of your industry. Gottesman suggests that “CPOs should leverage their buying power to help influence their supplier’s decisions about reaching Net Zero to set off an inevitable virtuous cycle.” It may be wise for your CPO, head of supply chain or similar, to prioritize their purchases from the specific industries that we know tend to be the largest carbon emissions offenders.
Gottesman recognizes that companies are pressured to commit to Net Zero from all sides and while “transforming fossil fuel-based procurement and supply chain systems into clean, sustainable processes is one of the greatest challenges[,] … it also represents one of the greatest opportunities.” He identifies stakeholders, including Investors, Customers, Regulators, and Employees that are currently pressuring supply chain professionals to pursue these challenging steps forward.
Interestingly, Gottesman highlights a recent Accenture survey that found 62% of customers want companies to take a strong stand on issues like sustainability and, a report by The World Economic Forum suggested that a Net Zero Supply Chain would only increase end consumer’s costs by 1-4%. While customers may drive business, investors and regulators can incentivize more progressive organizational commitments. In fact, the Accenture report shows that 75% of investors now integrate Environmental, Social and Governance (ESG) principles into their decision-making and that governments—even at the highest level—are creating binding targets to achieve carbon neutrality.
Take for example, the Sustainable Procurement Pledge (SPP), co-founded in 2019 by Thomas Udesen—Chief Procurement Officer of Bayer and Bertrand Conqueret, Chief Procurement Officer at chemicals and consumer goods company Henkel. SPP is dedicated to supporting procurement leaders who wish to champion decarbonization in their organizations by guiding them through the complexities of the ESG landscape.
At IBM, we believe the pathway to net zero requires support and collaboration of all corporate stakeholders. This includes customers—or in the built environment, building tenants—but also includes investors, regulators, and most critically, corporate leadership. As a company accelerates its net zero journey, it will become increasingly clear that solutions to reduce emissions within the supply chain will be the most challenging, yet most impactful. The procurement team, supply chain experts and Chief Procurement Officers, can lead this charge to become the unexpected heroes of your organization’s decarbonization efforts.