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Inching the World’s Supply Chains Closer to Net Zero

Feb. 7, 2022
With supply chains being a key area of ESG focus, more corporations are making commitments to net zero in 2022.

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The balance between the amount of greenhouse gases (GhG) produced and the amount removed from the atmosphere, net zero is attained when the amount an organization “adds” is no more than the amount “taken away.” The gases that absorb and emit radiant energy within the thermal infrared range—thus causing the “greenhouse effect”—GhGs pose severe environmental and health issues.

For example, they cause climate change by trapping heat, which in turn affects various species in already arid climates. The climate change caused by GhG emissions also contributes to extreme weather, wildfires, droughts and food supply disruptions, according to Inspire Energy Capital.

With global supply chains accounting for 60% of global emissions, a growing number of corporations have been making net zero commitments over the last few years. These commitments are being made in answer to consumer demand for more corporate responsibility on the ESG (environmental, social and governance) front and to gain competitive advantage in a sustainability-focused world.

“Supply chains are a key area of ESG focus, as they are both a large source of emissions for companies as well as a large percentage of operating costs, and they are also susceptible to the risks inherent in climate change, such as natural disasters and rising temperatures,” EY points out in a recent report. “Today, businesses across sectors are rethinking everything from what materials they use in their packaging to what markets they compete in and where their factories are located.”

Winning the Battle

Now more than ever, Accenture says that the supply chain is the key to winning the battle against climate change. “If companies build sustainable supply chains—embedding ESG concerns at every step of the way—they can make their supply chain operations not just future ready,” the global consultancy states, “but also a powerful force for good.”

Supply chain sustainability can be tackled on three different fronts, according to Accenture, and require organizations to take more action on their net zero and other commitments. Here are the three areas that it says will help make the biggest strides right now:

  1. Net zero commitments that incorporate carbon-neutral products, production and supply chain. “We have to start by getting to carbon net zero,” Accenture states, adding that a big part of that is addressing scope 3 emissions. These are the indirect emissions from upstream and downstream of a company’s operations, and they’re 11.4 times greater than scope 1 and 2 combined. Accenture says supply chain operations often make up a significant majority of scope 3 emissions. “For example,” it adds, “electronics companies can expect scope 3 emissions to account for 77% of [their] overall emissions.”
  2. A circular economy that drives resource-efficient business models and ecosystems. Circular principles and business models lead to better sustainability. This means thinking beyond making products in traditional ways for a single use. It’s better for the planet and also leads to greater profitability and growth. Elvis & Kresse, for example, turns recycled firehoses into ethically handmade luxury bags. “Or consider a life sciences company we worked with that began collecting injectable medicine devices after use,” Accenture states, “thus saving 15 billion of them from landfills.”
  3. Trust that comes from mitigating negative environmental and societal impact. Accenture sees stakeholder trust as more than just simple risk management for social incidents. “The societal aspects of trust are important, especially because you can lose trust in a split second,” it says. “Digital can help by allowing companies to see and prevent negative incidents before they happen.” 

Time is Running Out

So far this year, the new net zero announcements include (but aren’t limited to) Carlyle, a global investment firm that’s committed to achieving net zero GhG by 2050 or sooner across its investment portfolio; Exxon’s 2050 goal for net zero GhGs; and PPE maker Globus Group’s announcement that it will reach net zero carbon emissions by 2027.

In “Net Zero Supply Chains Will Decarbonize Industry,” Siemens’ Matthias Rebellius admits that while reaching net zero will be a monumental task that takes time—and that it won’t work without more trust and closer collaboration—it’s something that has to be done.

Climate change leaves us no choice. Every improvement, every reduction of emissions counts,” Rebellius writes. “We don’t have much time – experts say this is the decade that counts. Digitalizing the supply chain will accelerate decarbonization – and the transition to a sustainable future.”

About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.

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