Today, nine out of ten Fortune 500 companies publish sustainability reports. Doing so has revealed that climate targets require change across the business value chain, and bigger businesses understand this. Siemens, for example, recently observed that 90% of the CO2 emissions generated by its business were indirectly generated by its suppliers.
For most large enterprises, sustainability demands transparency and a holistic understanding of the consequences of their business. Supply chains account for over 80% of greenhouse gas emissions and over 90% of the impact on resources, so accurate data is essential.
Measuring impacts has coalesced around the Scopes of the Greenhouse Gas Protocol. Scopes are the basis for mandatory Green House Gases reporting in the UK. It’s a way of categorizing the different kinds of carbon emissions a company creates in its own operations and in its wider value chain. Scope 1 and Scope 2 mostly relate to factors within an organization’s control, while Scope 3 refers to extrinsic factors, including raw materials, suppliers and usage of what they manufacture. The realization is that achieving net-zero will involve tackling all of these, particularly Scope 3.
Accurate data is essential to guide investment and support data-driven transparency. To achieve this, supplier agreements require data transparency across existing operations, says non-profit think tank New Climate Institute, which monitors corporate efforts to meet climate targets. This will also involve embedding metrics across upstream and downstream processes to measure diverse sustainability impacts.
In practice, sustainability requires recognition that the consequences of doing business encompass everything from raw material extraction to end-of-life (EOL) recycling. Some 80% of 320 large enterprises interviewed for a Longitude report that Orange commissioned are investing in sustainable technologies.
To achieve such insight, 70% of chief supply chain officers will increase spending on digital technologies into 2025, says Accenture, to help extract data from complex supply chains. For example, Unilever is working with a SAP-based blockchain system to increase transparency across its palm oil supply chain. And IBM is developing its own blockchain-based solutions to build supply-chain transparency.
EcoVadis, a leader in the use of data to support sustainability efforts, is investing in machine learning to optimize its work. “We continue to experience record demand, as more companies are empowered to integrate the planet and society into their business operations,” said Frédéric Trinel, co-CEO of EcoVadis. Corporations using its sustainability solutions include Amazon, L’Oréal, Unilever and JP Morgan.
As the quality of insight improves, understanding of the urgent need to help suppliers mitigate their own impact to reach carbon neutrality is also growing. This is generating major moves across some of the world’s biggest companies to support partners across their supply chains.
For example, Apple plans to become completely carbon neutral by 2030 and already works closely with its 213 manufacturing suppliers to reduce Scope 3 emissions, including investment in renewable energy support of its chain. Others include Siemens, which has repositioned its business to help smaller partners meet carbon targets. Walmart has a program to help suppliers reduce emissions, which 23% of its suppliers have joined; DHL’s Green Carrier Certification program encourages downstream logistics companies to “green” their fleets, while the parent company replaces its own diesel vehicles with bio-LNG trucks.
Sustainability efforts are emerging across every industry. An increasing number of farmers has committed to organic cotton production generating on average 21% more profit per hectare, as clothing brands such as H&M seek sustainable supply. Lloyds Bank Business Barometer shows around a third of manufacturers hope to reach Net Zero in the next 20 years. But a Bain & Company report suggests 31% of businesses failed to meet their own 2020 targets. They report that the scale of the problem is overwhelming business leaders and recommend collaboration across customers, suppliers, industry peers and government to make the journey to Net Zero.
Of course, moves to work with the entire value chain are becoming mandatory, rather than voluntary. Incoming EU sustainability law will require large companies to adopt a whole-value-chain approach. Maha Al Qattan, Group Chief People & Sustainability Officer, DP World told the World Economic Forum at Davos: “Through open dialog with our partners on everything from emissions data, human rights, modern-day slavery criteria and operations reform, we can mitigate and, where possible, eradicate adverse outcomes.”
Building sustainable business shouldn’t be seen as a cost, but as an opportunity. Professor Tensie Whelan, director of Stern’s Center for Sustainable Business argues such investments already generate positive returns for those who do invest. Dell’s Head of Supply Chain Kevin Brown notes McKinsey estimates suggesting, “Savings in materials alone could exceed $1 trillion a year by 2025, while potentially creating more jobs and innovation.”
“Climate action can be the foundation for a new era of innovative potential, job creation and durable economic growth,” Apple CEO Tim Cook has said. “This is no time for changes at the margins. Together we can transition to a carbon neutral economy and usher in a new era of inclusive opportunity.”
The evidence bears this out. The World Resources Institute found that index funds that include firms with high sustainability scores outperformed those in more traditional funds. Saving the world will be good for business, it seems.
Orange Group is a founding member of the Joint Audit Cooperation, a consortium of 16 global telecom operators who collaborate to ensure our suppliers respect human rights and environmental standards. A group-wide initiative to encourage customers to recycle mobile phones and reuse equipment, like routers, are key pillars in Orange Group’s circular economy strategy and commitment to be Net Zero by 2040.
Jon Evans is a highly experienced technology journalist and editor. He has been writing for a living since 1994. These days you might read his daily regular Computerworld AppleHolic and opinion columns. Jon is also technology editor for men's interest magazine, Calibre Quarterly, and news editor for MacFormat magazine, which is the biggest UK Mac title. He's really interested in the impact of technology on the creative spark at the heart of the human experience. In 2010 he won an American Society of Business Publication Editors (Azbee) Award for his work at Computerworld.