Perhaps 2019 will best be remembered by statements such as, “Our house is on fire” or “How dare you.”
Greta Thunberg, the straight-speaking 17-year-old, has increased our awareness of climate change and its potential impacts. She was named Time magazine’s Person of the Year in December. But what does her message have to do with supply chain?
Everything, and perhaps nothing, if we choose to ignore the greenhouses gases within our value chains. Each supply chain has a carbon impact (CO2e) from raw material extraction, processing and production to product end of life. We don’t “see” these emissions because they are intangible, not monetized and therefore often forgotten.
There are many reasons that businesses may choose to not take action to reduce greenhouse gas (GHG) emissions from their supply chain, including the perceived expense, worries about being competitive or more pressing strategic goals. Of the many reasons to act, there is one that resonates with all parts of the organization — the idea of consumer perception.
In our 2019 “Consumer Behaviors and Attitudes Survey,” we found that 63% of consumers stated that climate change is an “urgent and pressing issue.” The same research identified that 59% of respondents blamed big businesses and corporations the most for climate change, followed by 17% who cited government and 16% who cited individuals.
This research also found that consumers have pinned their hopes on government and corporations to positively act on climate change. Our research shows that 58% of consumers think governments are most effective at acting on climate change while 50% think corporations are most effective. It is notable that individual and citizen action effectiveness is perceived to be low, at 23% and 12%, respectively.
Getting Started: Engaging the Value Chain in GHG Emissions Reduction
It was Lewis Cass (October 9, 1792 – June 17, 1866), an American military officer, politician and statesman, who said: “People may doubt what you say, but they will believe what you do.”
The same principle applies to sustainability. Consumers are wary of greenwashing — conveying a false impression or providing misleading information regarding a company’s environmental practices. Instead, they want to see tangible action and results. What can supply chain organizations do to demonstrate that they are starting to take tangible action to reduce GHG emissions in their supply chain?
- Strategy: The starting point for any sustainability program is to undertake a materiality assessment to understand what is important, and to set the strategy based on these issues. This allows for prioritization.
- Own Operations: Many organizations have focused on efficiency to reduce their Scope 1 and 2 emissions. But there are opportunities to do more, by looking at equipment purchasing and capital investment criteria to ensure inclusion of sustainability factors. An option open to many organizations in developed countries is to shift their electricity procurement to renewable contracts with zero associated GHG emissions.
- Engaging with Logistics: Not only are GHG emissions a concern, but for consumers living in cities, air quality may be a worry too. Supply chain organizations can start by measuring the impact from logistics, specifically freight. The GLEC standard provides a helpful starting point for measurement.[i] Baseline performance and look at opportunities for improvement. This could include the siting of warehouses, mode shift, last-mile delivery and offsetting. For example, the retailer Waitrose is using compressed natural gas to reduce its emissions.[ii]
- Engaging with Suppliers: The next step is to set goals to reduce GHG emissions in the supply chain. For example, Walmart is working with suppliers under its Project Gigaton program to eliminate one gigaton of GHG emissions from its supply chain by 2030 (baseline of 2017).[iii] A slightly different approach has been taken by British American Tobacco, which has stated that 70% of its direct materials suppliers, by spend will set science-based, Scope 1 and 2 emissions targets by 2023. Essentially, this organization is asking suppliers to set targets which will limit climate change to a 1.5C and 2C warming scenario, in alignment with the Paris Agreement. Think about how you will engage with, measure and uplift suppliers to enable improvement and reduce GHG emissions.
These are just four starting points. There are other opportunities to reduce GHG emissions in product design, overproduction, waste disposal and employee travel. It’s clear that the movement and concern about climate change is becoming an unstoppable force. This presents both risk and opportunity. It’s a risk if organizations don’t take action and are left behind. But, it is also an opportunity to engage with consumers and show that they are taking systemic, meaningful action.
As Thunberg reminds us: “Change is coming, whether you like it or not.”[iv]
Gartner Supply Chain