With less than 30 years to reach the goals laid out in the Paris Agreement, the pressure is on the world’s largest multinational companies (MNCs) to start making headway on carbon net zero and play their part in helping stave of the worst effects of global warming.
And, as well as focusing on their own emissions, MNCs are targeting the emissions of supply partners. In fact, according to our latest net-zero report, Carbon Dated, more than two thirds of MNCs are tackling supply chains’ emissions as the first step in their net-zero transition.
Risks and opportunities
The research, which looks at the risks and opportunities for suppliers in emerging markets as large corporates transition to net zero, reveals that 78 per cent of MNCs will remove suppliers that endanger their carbon transition by 2025. MNCs also expect to exclude 35 per cent of their current suppliers as they transition away from carbon.
Despite the threat of losing business, there is a silver lining for suppliers who are able to embrace net-zero transition and retain their place on supply chains – a USD 1.6tn opportunity across the 12 markets in our study (China, India, Hong Kong, Singapore, South Korea, The UAE, Malaysia, Nigeria, South Africa, Indonesia, Bangladesh and Kenya).
To help suppliers on their transition, MNCs are willing to incentivise them. Some 47 per cent are offering preferred status to sustainable suppliers, and 30 per cent are offering preferential pricing. Other MNCs are going further, offering grants or loans to their suppliers to invest in reducing emissions (18 per cent) or data collection (13 per cent).
An emerging issue
While MNCs are hoping all their suppliers will transition alongside them, they seem more concerned about their emerging markets’ partners.
Sixty four per cent of MNCs we spoke to as part of Carbon Dated said emerging market suppliers will struggle more than developed market suppliers to meet their emission reduction targets.
The reason? Insufficient knowledge and inadequate data. More than half of MNCs believe that the lack of knowledge among emerging market suppliers (41 per cent for developed market suppliers) is a barrier to decarbonisation.
In addition, 46 per cent say that unreliable data from suppliers is a barrier with MNCs struggling with the quality of data with two-thirds of MNCs using secondary data sources to plug the gap left by supplier emissions surveys.
The role of banks and governments
Suppliers cannot do it alone - MNCs, banks and governments also have a role to play in aiding transition. Banks must provide the financing needed for companies in both emerging markets and carbon-intensive sectors to transition.
Governments, meanwhile, need to accelerate their net-zero plans – particularly switching away from electricity grids that are powered solely by fossil fuels to more renewable solutions – to help aid the transition.
We cannot combat the worst effects of climate change without policymakers, financial institutions and companies working together. Decarbonisation is vital for the survival of the planet and we must collaborate to ensure we reach our goals without leaving anyone behind.