Supply Chains Decarbonization Offers Game-Changing Opportunity for Companies to Fight Climate Change

Published

21 Jan 2021

2021

Amanda Russo, Public Engagement, arus@weforum.org, +41 79 392 6898

Decarbonizing supply chains is an opportunity for corporate climate action - emissions created along the supply chains of most consumer-facing industries can far outweigh emissions created in their own operations
Eight supply chains account for more than 50% of global emissions and fully decarbonizing these would add just 1%-4% to end-consumer costs for many everyday items
It is possible to reduce a large proportion of supply chain emissions with technologies that are readily available and can be deployed at low costs
There are nine major actions that every CEO can take to engage suppliers and decarbonize their end-to-end supply chain – many leading companies are already taking these steps
Read the new report Net-Zero Challenge: The Supply Chain Opportunity

GENEVA, January 21, 2021—The commitment to tackling climate change is accelerating in all sectors of society, with net-zero pledges from companies, cities, states, and regions doubling in the past year. Decarbonizing supply chains is a major opportunity for companies to put these commitments into practice.

New research published today by the World Economic Forum and Boston Consulting Group (BCG) shows how tackling supply chain emissions can be a game changer in the global fight against climate change. Net-Zero Challenge: The Supply Chain Opportunity analyzes the top eight global supply chains that account for more than 50% of global greenhouse gas emissions and finds that end-to-end decarbonization of these supply chains would add as little as 1% to 4% to end-consumer costs in the medium term.

The report breaks down the major sources of emissions along each of the eight major supply chains—food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight. It assesses the key levers to reduce emissions in each supply chain and shows that many can be easily deployed today and cost very little to implement. The report also points to the global nature of many supply chains, enabling companies to support decarbonization across borders and in countries where governments do not yet prioritize climate action.

The opportunity for impact is especially high for consumer-facing companies, whose supply chain emissions far outweigh their direct emissions from manufacturing. These companies can use their buying power to push for rapid decarbonization and help fund the transition by co-investing with upstream raw-material producers, which struggle to finance the transition alone.

For example, while it costs a steel producer significantly more to make zero-carbon steel, raw input materials like steel account for such a low proportion of end-consumer prices that a zero-carbon car is only about 2% more expensive for the buyer in the medium term.

The report points to nine major actions that CEOs should take today to address supply chain emissions, including:

Building a robust view of emissions with supplier-specific data and setting ambitious targets for emissions reductions
Redesigning products and reconsidering geographical sourcing strategies to optimize for CO2
Cofunding abatement measures and educating suppliers on how to implement low-carbon solutions
Engaging in industry ecosystems to share best practices and create a demand signal for green products
Aligning incentives internally to ensure that decision makers focus on lowering emissions

Quotes

Nigel Topping, the UNFCCC’s high-level climate action champion, said: “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.”

Dominic Waughray, managing director, World Economic Forum, said: “This important report shows how companies have the opportunity to make a huge impact in the fight against climate change by also decarbonizing their supply chains. The interaction between governments and companies to seize this opportunity is an important one. We welcome more leaders to join and help build momentum on this important agenda.”

Patrick Herhold, a report coauthor and managing director and partner at BCG’s Centre for Climate Action, said: “The argument that costs are a major barrier to reducing emissions is increasingly flawed—around 40% of the emissions across the eight major supply chains we analyzed can be eliminated with measures that bring cost savings or are at costs of less than €10 per ton of CO2 equivalent. Increasing process efficiency and the use of recycled materials, as well as buying more renewable power, provides companies with major climate gains at very low costs.”

About The Davos Agenda
The Davos Agenda is a pioneering mobilization of global leaders aimed at rebuilding trust to shape the principles, policies and partnerships needed in 2021. It features a full week of global programming dedicated to helping leaders choose innovative and bold solutions to stem the pandemic and drive a robust recovery over the next year. Heads of state, CEOs, civil society leaders, and global media will actively participate in almost 100 sessions across five themes. Media can register here.

About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation – inspiring complex change, enabling organizations to grow, building competitive advantage and driving bottom-line impact.

To succeed, organizations must blend digital and human capabilities. Our diverse global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures – and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

To arrange an interview with one of the authors, please contact Eric Gregoire

at +1 617 850 3783 or gregoire.eric@bcg.com or Amanda Russo +41 79 392 6898 arus@weforum.org

The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation.

The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. (www.weforum.org).

All opinions expressed are those of the author. The World Economic Forum Blog is an independent and neutral platform dedicated to generating debate around the key topics that shape global, regional and industry agendas.