How Supply Chains Can Address Key Goals From COP26

The UN Climate Change Conference of the Parties (COP26) ended in Glasgow in November with an agreement that includes a host of new promises from countries and companies to take steps toward a carbon-neutral economy:

• Leaders from 120 countries representing 90% of the world’s forests, pledged to reverse deforestation trends by 2030.
• 500 global financial companies agreed to align $130 trillion with Paris Agreement goals.
• 40 countries, including Poland, Vietnam and Chile agreed to move away from coal use.
• More than 100 nations, cities, states and car companies vowed to end the sale of internal combustion engines by 2040 worldwide to facilitate green transportation.
• The U.S. and China agreed to cooperate on climate, including areas like methane, clean energy, and building a carbon-neutral economy.

The commitments made on a wide range of issues are encouraging.

At the same time, the Glasgow Climate Pact at COP26 has brought the need for more sustainable, resilient supply chains into focus

Digital supply chain transformation can play a key role in helping countries meet their COP26 promises. To maximize effectiveness, supply chain leaders must set pragmatic targets, maximize collaboration with suppliers and make new investments in supply chain platforms to centralize data and track progress.

Global companies are starting to pay more attention to emissions from within their supply chains

Scope 3 emissions, which occur as a result of a company’s activities but not directly from the company, i.e., from its supply chain, are on average 11.4 times higher than operational emissions, according to climate-change organization CDP’s Global Supply Chain Report 2020.

By addressing supply chain-related emissions in coordination with their suppliers, enterprises can help drive progress toward COP26 goals.

For instance, Walmart is partnering with HSBC to link early invoice payment to sustainability targets for small and medium-size suppliers, who alone may not have the resources to transform their operations. By partnering with Walmart and HSBC, smaller suppliers can share information and gain needed liquidity.

Technology platforms enable multi-enterprise collaboration to create holistic views of supply chain emissions

Global energy company Royal Dutch Shell is leveraging technology to work with its suppliers to calculate and reduce its carbon footprint. Since its launch in April 2021, the Shell Supplier Energy Transition Hub creates an end-to-end view of emissions along the supply chain, enabling Shell suppliers to identify opportunities to cut their emissions.

One of the first suppliers to participate in the Hub, energy technology provider Baker Hughes, recently agreed to collaborate more closely with Shell to reach net-zero emissions. Under the agreement, Shell will supply Baker Hughes with power and renewable energy credits, as well as low-carbon transportation and fuel solutions.

For its part, Baker Hughes will explore ways to help Shell accelerate decarbonization projects through technology improvements and digital solutions.

Having visibility is key in driving sustainability success

Sharing the right data between companies and suppliers enables the visibility to mitigate business risks. It also can have an impact on objectives like eliminating deforestation in supply chain.

Candy company Mars, for example, is one of the largest consumers of cocoa and palm oil, two crops that contribute to deforestation. By mapping its supply chain, Mars was able to reduce its palm oil suppliers from 1,500 to 87. In addition, the company is currently working to gain visibility into its cocoa suppliers at the individual farm level to help ensure sustainability.

Meeting COP26 commitments requires greater collaboration in complex supply networks

Supply chains are more interconnected and complex, especially after the COVID-19 pandemic caused many firms to explore strategies to regionalize supply chains and create more optionality.

Interconnected supply chains require true multi-enterprise collaboration to meet the challenges of decarbonizing and reducing emissions. The right supply chain software can help companies develop that capability, but it’s also important that corporations set clear targets and establish specific KPIs to track progress.

To make the progress on sustainability necessary to meet COP26 commitments, companies need to focus on supply chain collaboration by aligning finance and establishing end-to-end supply chain visibility. Doing so will yield benefits not only on sustainability, but also in competitive advantage, brand image and their bottom lines.

Managing these complexities efficiently calls for tighter collaboration between companies and their trading partners.

Like a multinational agreement that then faces the challenges of execution, multi-enterprise collaboration is frequently brought up but much less frequently acted on.

Doing it requires organizations to put the work in to get stakeholders on board, align processes and systems, set goals and measure progress.

Supply chain software that can integrate systems can be instrumental in helping companies achieve true collaboration with their suppliers and trading partners. The benefits are reduced costs, increased resilience and a more sustainable supply chain.