For the world’s largest companies, reducing emissions means cutting back on suppliers who are not moving fast enough to prepare for a low-carbon economy.
According to the British multinational banking and financial services company Standard Chartered, just short of 80 percent of multinational firms will start removing “slow-to-transition suppliers” by 2025, and 15 percent have already started to do so.
Since more than 70 percent of emissions for such businesses come from their supply chains, reducing those emissions is the first step in their climate-change initiatives. The British firm made this remark based on a survey of corporate executives at 400 of the world’s largest companies.
With firms like Apple, Royal Dutch Shell, and Unilever pledging to achieve net-zero emissions, global supply chains are being scrutinized like never before. While dropping suppliers may provide a quick win for a company’s road to net-zero, it also will disproportionately affect emerging economies that are likely to face the greatest social and economic toll from climate change.
“This should be a wake-up call to suppliers. The net-zero debate has intensified the focus on carbon emissions, and companies are working to understand the sources of emissions and their impacts in a more meaningful way,” said Mr. Amit Puri, Global head of environmental and social risk management at Standard Chartered.
According to Standard Chartered, 57 percent of multinationals would be willing to replace emerging-market suppliers with developed-market suppliers who are less reliant on fossil fuels if it would help them achieve net-zero emissions.
The 400 companies surveyed by the bank had at least one supplier based in either Bangladesh, China, Hong Kong, India, Indonesia, Kenya, Malaysia, Nigeria, South Africa, South Korea, Singapore, or the UAE. As per the reports, about a third of exports in those 12 countries are “set to be subject to multinational company zero tolerance on carbon.”
“For the net-zero trailblazers, outsized opportunities await. Those that fail to take up the challenge, meanwhile, can expect to lose access to a significant slice of business shortly,” commented Simon Connell, global head of sustainability strategy at London-based Standard Chartered.
