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Climate Change, INDC Targets, and Sustainable Supply Chain
Author: Pure Research
Negative impacts of climate change have already started to play out worldwide – seasons are shifting, temperatures are climbing, sea levels are rising and so is the frequency of extreme weather events. The Intergovernmental Panel on Climate Change (IPCC) findings corroborate that increasing carbon emissions are responsible for global warming, and will lead to widespread and severe impacts like the ones mentioned above. Some experts would go to the extent of saying that the damage that has been done to our climate is irreversible. Therefore, it is important for governments and enterprises worldwide to take steps to curb carbon emissions, thereby minimize their negative impact.
INDC Targets agreed at the 2015 Climate Summit in Paris are a good starting point…
Late last year in Paris, nearly 200 nations agreed to work towards time bound goals of reducing their respective carbon emissions. The agreement is a big step towards fighting climate change, even though some feel that the move may not be effective enough to counter the challenge we face today. While the ambitious INDC (Intended Nationally Determined Contributions) targets set by governments are a step in the right direction, the devil will lie in execution as the ability of governments to achieve these targets. The success will depend on their policy measures to incentivise individuals and businesses to work towards a more sustainable future.
Intended Nationally Determined Contributions (INDC) Targets Set at the 2015 Climate Summit in Paris
Source: Center for Climate and Energy Solutions
…and Corporations have a key role to play
While government policies and initiatives can go some distance, we believe that corporations worldwide – both big and small – have a pivotal role in ensuring that this initiative succeeds. Some companies have already begun their journey towards a sustainable future by setting aggressive targets for emission reduction and other important sustainability indicators, and by taking effective initiatives for achieving these targets. These companies (usually the large ones) have demonstrated that significant progress can be made in the areas of reducing emissions, reducing energy and water usage, recycling, waste management, and preserving biodiversity among others, while maintaining superior operational and financial performance.
However, the need of the hour is for governments to ensure that sustainable practices are embraced by smaller companies as well. There are several ways through which corporations can promote sustainable conduct and choices, such as:
- Optimise their operations to reduce direct environmental impact.
- Invest in innovative products/services to minimise the negative environmental impact caused by their clients or end-user of their products.
- Engage with suppliers to educate them about sustainable supply chain practices, and work collaboratively towards reducing the overall environmental impact of the supply chain.
Engaging smaller corporations is critical to building a Sustainable Supply Chain and meeting INDC targets
Driven by consumer and investor expectations, large organisations have adopted sustainable practices. However, smaller companies at times tend to sacrifice sustainable practices in interest of operational and financial goals. Therefore, it is important for larger buying organisations to take ownership of their entire supply chain, and drive adoption of sustainable practices by their extended supply chain. Here are some steps that buying organisations can take in order to drive sustainable practices in their respective supply chains:
- Align corporate sustainability and strategic sourcing goals: As more and more organisations adopt strategic sourcing to drive value in their supply chains, they should keep their corporate sustainability objectives in mind while creating sourcing strategies. This will help them leverage their supply chain and choose suppliers that can help reduce environmental footprint. For example, going for a mix of renewable energy along with conventional energy while planning power sourcing strategy, and setting targets to gradually increase the renewable component as it becomes more affordable.
- Assess sustainability performance of suppliers periodically: A comprehensive sustainability assessment of suppliers, especially the critical ones, is necessary for any organisation. This not only pushes the suppliers to measure and report their sustainability performance, but also helps the buying organisation to identify gaps in its supply chain which can lead to sustainability risks. For example, sustainability assessments might reveal that indicate some suppliers use cheap but inefficient manufacturing processes in order to control costs, or that a supplier dumps hazardous waste inappropriately thereby putting employees and communities at risk.
- Drive supplier engagement to build a sustainable supply chain: Buying organisations should also try to improve the sustainability performance of its suppliers, and hence its supply chain. It can be done in several ways such as setting targets or benchmarks for performance on specific indicators; sharing category specific best practices with smaller suppliers; and even by rewarding suppliers with good practices, so as to motivate other suppliers.
As buying organisations pass on sustainability best practices down their supply chains, more and more corporations will be mandated or motivated to adopt sustainable business practices. We believe this will provide the much-needed multiplier effect for countries and businesses worldwide to achieve emission control targets agreed upon at the Paris summit.
Pure Research Private Limited, a procurement intelligence firm, helps buying organizations build sustainable supply chains by understanding the sustainability performance of their suppliers, and recommending corrective action based on category specific best practices.