Sustainable Supply Chain Strategy: A perspective for climate change negotiations at COP27
COP26, held in Glasgow late last year, reaffirmed a global commitment to collaborative climate action and the path to net zero. It also culminated in the Glasgow Climate Pact which offered welcome developments to the Paris Agreement- strengthening inter-dependent efforts to improve climate resilience, further curb greenhouse gas (GHG) emissions and ultimately improve the availability of climate finance for adaptation, mitigation and the planet’s sustainability transition.
The Pact saw nations reaffirm their commitment to fulfill the pledge of providing USD100 billion annually from developed to developing countries. A strong framework through which to manage supply chain risk will go a long way in obtaining access to this financing or that available from the UNFCCC Adaptation Fund. Supply Chain Management (SCM) is quickly becoming an indicator of sustainability best practice; specifically, in traditionally resource intensive, difficult-to-abate industries such as Food & Beverage, Construction, Logistics and Manufacturing. Regulatory and legislative developments across the EU reflect this sentiment:
• Regulation (EU) 2017/821 on Supply Chain Due Diligence for precious metal imports.
• EC Regulation No.66/2010 & the ensuing Commission Decision 2016/1332 establishing EU EcoLabel criteria and the increased scope of relevance.
• 2022 Draft Proposal for EU Directive on Corporate Sustainability Due Diligence (CSDD), amending Directive 2019/1937; highlighting the need for sectoral inter-connectivity and collaboration to achieve climate neutrality and green economy ambitions.
Considering that EU legislation guides Middle East (ME) sustainability policy requirements & best practices, the above legislative commitments are a clear indication of where supply chain due diligence, across the region, is moving
Following the launch of COP27 in Sharm El-Sheikh earlier this week, it is important to revisit the integral role supply chain management (SCM) will play in fully realizing a climate sensitive future that must:
1. Collaborative effort to improving climate resilience
2. Impactful GHG emissions reduction
3. Establishing financial commitments from global capital markets.
DNV’s approach to value chain management adopts these three themes as principal tenets to a successful supply chain strategy.
They illustrate the need for companies to effectively manage relationships with their stakeholders going forward if meaningful climate action is to be achieved. COP26 further highlighted this when it brought scope 3 corporate value chain emissions into the fold and thus the actions, or lack thereof, of a company’s respective value chain partners has become an increasingly important barometer through which to evaluate sustainability performance.
Given that on average more than 90% of value chain emissions occur outside of a company’s direct control, supply chain decarbonization poses both a great responsibility and opportunity to reducing product, and ultimately sector-wide, carbon footprints and equivalent GHG emissions.
Source: Gartner
In addition to the decarbonization considerations, effective SCM must also address wider ESG objectives as outlined by Gartner in the graphic above. This includes social impact, capacity development and biodiversity loss. All of which remain extremely pertinent to sustainability action and climate sensitivity.
Ultimately, the fourth Industrial Revolution and digitization will also prove to be an integral part of the supply chain management solution. By using centralized data collection platforms that can map company performance across a set of parameters, visibility on company practices and the level of supply chain accountability across product lifecycles will improve. The need for smarter analytics to suitably transform supply chain performance in the long-term is reasserted by the 2022 edition of our Energy Transition Outlook
This idea of aligned operationalization is not a novel approach and whilst it has traditionally been adopted in the context of geopolitics, international trade and intergovernmental cooperation; it can and should also be applied to how we manage our global value chains. Individual organization's must show a commitment to improving the lines of communication between all of their stakeholders, collaborating with their respective supply chain agents and bettering their supply chain performance against both environmental and social criteria.
DNV’s suite of supply chain solutions acknowledge that climate friendly business practices require collaboration between upstream and downstream partners. This is the only effective way to meaningfully address a range of parameters relating to decarbonization, biodiversity, social impact mitigation, capacity building and overall process improvement. Our service portfolio serves a single purpose: to improve organizational resilience and offer risk management solutions which bridge the gap between complex value chain networks and climate uncertainty.
As global demand continues to reflect consumer desire for stronger climate action and improved social responsibility, value chains will become increasingly susceptible to public scrutiny and thus calls for evidence-based product claims, transparency and accountability will only become more palpable.