This article was originally published in Issue #12 of The Beam, a publication dedicated to amplifying the voices of changemakers and innovators in the Global Climate Action Movement to create and promote a sustainable future.
Outsourcing value chain activity has increased the complexity of global supply chain operations. Incentivised by the desire to reduce costs and boost bottom line performance, the manufacturing of goods has accumulated quite the carbon footprint as they are transported from continent to continent throughout production.
Decarbonising supply chains, tackling environmental inefficiencies and setting science-based targets is at the heart of sustainable business operations. Reducing the pollutive elements of supply chains is essential to meet climate targets set out in the 2015 Paris Agreement and achieve the UN 2030 Sustainable Development Goals – in particular Goal #12 which pays homage to responsible production and consumption.
What role do corporations have to play in this? It is no longer sufficient to measure emissions accrued through an organisation’s direct operations and facilities. Sustainable supply chains must account for their scope 3 emissions – an indirect cause of activities upstream and downstream that occur within the company’s value chain. This is critical if we are to move away from the trajectory of a 3°C temperature rise and crossing of planetary boundaries.
The coronavirus pandemic has amplified the necessary attention dedicated to supply chain practices. The latest insights from McKinsey noted that 93% of supply chain executives are planning to increase their operational resilience and re-evaluate their infrastructure. This will prove fruitful as resilience encompasses environmental management factors like the protection of ecosystem services to secure required raw materials.
Decarbonising supply chains for environmental preservation
For businesses to contribute to achieving the optimum 1.5°C pathway, they must re-examine their entire value chain. It is these scope 3 emissions created through extraction, production, processing and distribution, that often tower over those from an organisation’s direct operations.
Aligning science-based targets to meaningful actions will help businesses transition to a zero-carbon economy and we are beginning to see evidence of corporate accountability.
The CDP, who recognise and promote environmental disclosure, reported in 2018 ,that 115 organisations that represent a procurement spend of $3.3 trillion, had requested environmental data from over 11,500 suppliers.
Similarly, in their 2019 Global Supply Chain Report, the CDP disclosed that for 125 organisations representing a $3.6 trillion procurement spend, suppliers cut 563 MtC02e worth of emissions. Corporations reported these measures have had subsequent savings of over US$20 billion, which provides a clear business case for decarbonisation.
The development of standard metrics has made achieving these science-based targets more straightforward. For instance, the Corporate Value Chain (Scope 3) Accounting and Reporting Standard, designed by the GHG Protocol and World Resources Institute. Similarly, the invention of Environmental Profit and Loss by Kering Group helps businesses identify where they are accruing the most carbon. This form of natural capital accounting helped Puma in 2011 to identify that a stark 94% of their environmental footprint originated within their supply chain. By establishing this, they were able to create a new system that eliminated negative externalities and waste, which subsequently saw Puma decrease their carbon footprint by 15% from 2013 to 2017.
Decarbonising supply chains for for social stability
Mitigating the environmental footprint of global production is not only critical for environmental preservation but for social stability. Effective decarbonisation of supply chains must start from the extraction of raw material phase in the product life cycle. Tackling this can bring meaningful change to all stakeholders involved in the value chain.
As the most profitable non-agricultural crop, the global production and supply of cotton underlines this. To make progress in removing carbon from raw materials, businesses must make sustainable choices. Simone Cipriani, CEO of the Ethical Fashion Initiative recently noted that “Decarbonisation of supply chains starts by using organic materials. For example, organic cotton can reduce greenhouse gas (GHG) emissions due to less use of harmful pesticides and fertilisers which release nitrogen.” Cipriani is right, organic cotton not only reduces GHG emissions by up to 94% according to Global Organic Textile Standard (GOTS) but also decreases the chances of acid rain by 70%.
Yet, as it stands only 1-2% of the cotton produced worldwide is organic, therefore carbon intensive conventional cotton crops represent a substantial risk to growers in the supply chain. Not only do conventional crops require excessive water and chemical treatment, their production neglects fair market prices for farmers. This phenomenon often means labourers are paying higher prices for genetically modified seed which can entrap them in debt – a pattern that has caused over 270,000 recorded suicides of Indian farmers since 1995.
The situation in India exposes the correlation between decarbonising supply chains and socio-economic stability. Currently, the country provides over 50% of the global organic cotton production. Yet, based on current climate trajectories, the Indian Ministry of Earth Sciences Assessment of Climate Change estimate the surface air temperatures in India could rise by up to 4.4 °C by 2100. Alongside this, the incidence of heat waves and monsoon seasons, which currently bring 70% of the rainfall received by India, could disrupt the cotton agrarian economy that employs millions.
Limited freshwater and unpredictable weather patterns will alter cotton farmers’ ability to produce satisfactory yields, on which their livelihoods depend. Increased frequency of extreme weather events will force many to migrate to new rural areas. These too, may be facing problems of subsistence. As a consequence, this is likely to exacerbate local conflicts and strip regions of social cohesion. We already know there is a link between forced migration and amplified social tension, the Indian cotton industry merely provides a lens to see this.
Recommendations
Solving the environmental inefficiencies of supply chains requires radical collaboration. There is no single panacea but through the partnerships of Government, buyers, distributors and workers, progressive reform can be made to decarbonise global operations.
At a policy level this looks at widespread carbon reporting, correct energy pricing and carbon labelling. For buyers, a new approach to procurement that uptakes low carbon sourcing, nearshoring as well as supplier incentives provides hope.
Whilst environmental audits hold businesses to account on the carbon intensity of their supply chains, cross-industry efforts to collect more data through agreed reporting standards will sustain momentum. Further to this, the development of network intelligence systems like &Wider, stamp out human rights violations in the supply chain, which strengthens trust between boots on the ground and company headquarters.
Final thoughts
Decarbonising supply chains is at the crux of creating climate resilient business operations.
It is clear that a supply chain and its extended network cannot be truly ethical or sustainable unless it has worked to mitigate its GHG emissions at each and every stage of extraction, production and distribution. Failure to do so puts firms at risk of losing favour with investors, as asset managers lean into ESG analysis and prefer climate resilient organisations.
Ultimately, reducing the environmental impact of supply chains will work to conserve natural capital and biodiversity – this is fundamentally linked to socio-economic stability. Achieving a 1.5 °C pathway will reduce vulnerabilities at each stage of the value chain and provide a higher level of security for those most susceptible to the impact of the climate emergency.
If you enjoyed this article, take a look at how businesses can account for their impact on biodiversity and ecosystems in an explanation of Environmental, Profit & Loss.
Join hundreds of other readers and subscribe to the monthly S & S newsletter:
