→ Climate Change Risks and Opportunities

Written by james newsome

31/08/2018

Buyers and suppliers alike can embrace benefits whilst tackling climate change within supply chains (SC). Climate change is a well-recognised risk among many worldwide institutions. If addressed properly by the private sector, multinationals (who have a big role to play) and their supply chains may generate multiple medium and long term benefits. This article addresses the risks to SC stakeholders caused by climate change but the main focus is the rising opportunities that decrease long term risks, reduce costs and enhance economic, social and environmental performance by re-invigorating their relationships between supply chain stakeholders.

Severe climatic events such as droughts, floods and storms caused by global warming are increasingly impacting supply chains. Climate change not only degrades the social and environmental state of the world but also its economic performance. Over the past few decades, multinationals have begun to change their strategies and procurement policies in order to do their part in an attempt to reverse the situation. However, many reports, such as The 3% Solution are pointing out the hidden environmental impacts embedded in their supply chains. Depending on the studies, up to 85% of the corporate CO₂ emissions occur upstream. Although already an immense task, reaping the full benefits of tackling climate change will require suppliers and buyers working together through diverse program solutions.

As its title indicates The 3% Solution report explains that for the U.S to meet its IPCC target of reducing emissions by 25% from 1990 levels, its supply chains need to reduce 1.2 gigatons of CO₂ emissions which equates to a 3% reduction annually until 2020. A target not only reachable but also cost saving too. If this target is met $190 billion of savings could be made throughout corporate supply chains. This will be achieved through three main activities:

  • Changing management and behavioural business approaches to improve energy efficiency
  • Energy efficiency through technology improvements
  • The deployment of low-carbon energy, particularly rooftop solar photovoltaics.

Decreasing the emissions by 1.2 Gt with the three main activities can be conducted through multiple actions. Management and behaviour changes that represent 135-270 Mt CO₂ of the total can be achieved by monitoring energy use, improving transport routes and identifying and stopping energy leakages. Technology improvements represent the biggest opportunity of reduction which is 580 Mt CO₂ and can split into 3 sub-categories: industrial, commercial and transport. This includes activities such as energy and steam waste recovery, efficient lighting systems and efficiency in diesel heavy duty vehicles, respectively. An ever evolving sector makes it difficult to pinpoint the most suitable  way to implement low carbon technologies. However installing natural gas turbines for on-site electricity generation and/or rooftop solar photovoltaics are increasingly becoming a viable source of energy.

In 2016 the Global Risk Report published by the World Economic Forum declared that the biggest threat to the world economy was ‘Failure of Climate Change Mitigation and Adaptation’. This was also classed as the third most likely event to happen after ‘Large Scale Migration’ and ‘Extreme Weather Events’. In order to respond to this challenge and harness its opportunities, Stewardship programs comprised of sustainability evaluations that cover multiple social and environmental aspects are emerging as a solid solution to reach out to supply chain partners, launch collective initiatives, monitor and implement new strategies across your supply chains.

Sustain-In’s Stewardship Program offers a concise methodology and framework to assess the sustainability efforts in place and the carbon footprint of your suppliers’ activities. Through a methodical evaluation process Sustain-In conducts a CSR assessment in order to audit and analyse pertinent policies and measures that have been implemented. The assessment is done through an online platform which allows the suppliers, the buyer and Sustain-In to interact and work towards a sustainable future. The ability for the suppliers to register, upload and save information for themselves and the buyer allows Sustain-In to monitor progress over a specific timeframe. In order to provide a clear understanding of sustainability progress a report is split into four main themes;

  • Social
  • Environmental
  • Business Ethics
  • Sector Specific Issues.

The first 2 cover all typical social and environmental issues that a company may address. The latter 2 are orientated towards the specific contextual issues that occur in different sectors.

The second part of Sustain-In’s framework consists of a carbon footprint of companies’ activities. Whether from the industrial or the service sector the carbon footprint includes all activity impacts from office and building facilities to transport and manufacture.

Being able to monitor environmental policies and measures put in place and footprint all carbon emissions produced by a company’s activities permits suppliers themselves and buyers to draw up initiatives and construct common objectives over the long term so that they can bring climate change opportunities to fruition and meet international sustainable development goals.

Sources:

Carbon Disclosure Project (CDP). 2013. The 3% Solution.

-The World Economic Forum. 2016. The Global Risks Report 2016 11th Edition.

-Prnewswire. 2016. Companies Blind to Climate Risks in Half Their Supply Chains Finds Largest Global Study. Available at: https://www.prnewswire.com/news-releases/companies-blind-to-climate-risks-in-half-their-supply-chains-finds-largest-global-study-300209209.html.

 

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