New research by the World Economic Forum and BCG shows that it is possible to decarbonize major global supply chains with readily available technologies at low end-to-end costs
GENEVA—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 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
- Co-funding 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
“Supply-chain decarbonization will be a ‘game-changer’ for the impact of corporate climate action,” said Nigel Topping, the UNFCCC’s high-level climate action champion. “Addressing Scope 3 emissions is fundamental for companies to realize credible climate change commitments.”
“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,” added Dominic Waughray, managing director, World Economic Forum. “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.”
“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,” offered Patrick Herhold, a report coauthor and managing director and partner at BCG’s Centre for Climate Action. “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.”
The decarbonization impact of circular plastic is less than 2% of emissions
Overall, the conversation around reusable packaging was largely absent from the report. While the circularity of plastics is critical in the fight against ocean plastics, only incremental emission reductions can be achieved through circularity of plastics packaging, according to the study:
Within the food supply chain, less than 2% of emissions can be reduced via circularity in plastics packaging. Approximately 25% of emissions can be abated through material and process efficiency levers. These include the reduction of food waste, nitrogen-optimized feeding and increasing the productivity of low emission intensity fertilizers. Renewable energy for power and heating can provide another ~15% emissions savings, mainly at the food-processing and packaging stage. The biggest bucket (~55% of total emissions) needs to be tackled via naturebased solutions. About 20% of emissions are caused by deforestation and should be addressed by moving to deforestation-free agriculture, e.g. via projects in relevant countries that provide the financial means to protect large forests from being converted into cropland and that provide alternatives to logging for the local population. The remaining ~35% are inherent to agriculture and cannot be reduced any further – they need to be addressed through reforestation, restoration of mangroves and peatland, soil sequestration, biochar production and other levers. About 5% of emissions need to be addressed via fuel switch for more carbon-efficient transport means.
A copy of the report can be downloaded here.