Biggest Companies Plan to Reduce Emissons By Culling Suppliers

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For the world’s biggest companies, reducing emissions means cutting suppliers that aren’t moving quickly enough to prepare for a low-carbon economy.

Just short of 80% of multinational companies will start culling “slow-to-transition suppliers” by 2025, and 15% have already begun to do so, according to a report from Standard Chartered Plc based on a survey of corporate executives at 400 of the world’s largest companies. Since more than 70% of emissions for such businesses come from their supply chains, lowering those emissions is the first step in their climate-change strategies.

With companies such as Apple Inc., Royal Dutch Shell Plc and Unilever Plc all committing to reach net-zero emissions, the carbon contribution of global supply chains is under scrutiny 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,” said Amit Puri, global head of environmental and social risk management at Standard Chartered. “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.”

Standard Chartered found 57% of multinationals were willing to replace emerging-market suppliers with ones in developed markets that are less reliant on fossil fuels if it would help them reach net zero. 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 United Arab Emirates.

In those 12 counties, about a third of exports, or $1.6 trillion, are “set to be subject to multinational corporation zero tolerance on carbon,” according to the report.

“For the net-zero trailblazers, outsized opportunities await,” said Simon Connell, global head of sustainability strategy at London-based Standard Chartered. “Those that fail to take up the challenge, meanwhile, can expect to lose access to a significant slice of business in the near future.”

©2021 Bloomberg L.P.

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