Visit Our Sponsors |
Global supply chains will need an estimated $100 trillion in investment to achieve the planet’s goal of net-zero carbon emissions over the next three decades, according to new research that pins as much as half of that price tag on small- to medium-size businesses.
“Many organizations have started to rapidly address their direct emissions, but not enough has been done to reduce their indirect emissions, including the emissions arising from their suppliers, as well as the usage and disposal of their products,” according to the report from HSBC Holdings Plc and Boston Consulting Group.
Supply chains account for nearly 80% of the world’s carbon emissions, according to the paper, which focuses on two industries — the highly fragmented textile sector and the more concentrated group of global automobile makers. Combined, they account for about 5% of global GDP, but the challenges of shifting to a smaller carbon footprint are different given how their supplier networks are structured.
“In the textile industry, there is great leverage in addressing small- and medium-sized companies” along the value chain, the report states. “In automobiles, by contrast, there is less opportunity for change in manufacturing, even with suppliers.”
Regardless of the industry, the size of the company matters too — with large companies having deep pockets and other resources to deploy while smaller firms can face more resistance to change and “an inertia towards changing habitual embedded practices,” the report says.
On top of that, smaller players are under pressure from COVID-19 just to survive, reduce costs and boost the resilience of their supply lines.
“Many small businesses are making ends meet month by month, and may be hamstrung by more general supply chain difficulties — particularly when over half of those surveyed feel that transitioning to net zero will either have no positive or a negative financial impact.”
HSBC sees the current pandemic-related disruptions subsiding in the next 12 to 18 months, leaving the climate challenges to address longer term.
Natalie Blyth, head of the bank’s global trade and receivables finance business, said the goal of the paper is to lay out the steps necessary to meet climate targets and to delegate roles and responsibilities. At the center of the effort will be getting little firms on board.
The smaller players “can’t do it on their own and they can’t have the large corporates just pushing it down and just making increasing demands for them because it will fail,” she said.
Sukand Ramachandran, a managing director and senior partner in Boston Consulting’s London office, said the majority of investment is going to come from large businesses as they shift to more renewable power and more efficient technology.
“But when you look at it as the number of people that you need to touch to make it work effectively, the value sits in the small to midsize businesses,” he said. “Large corporates can handle the complexity and their complexities are idiosyncratic, but we can’t copy and paste into the smaller businesses.”
RELATED CONTENT
RELATED VIDEOS
Timely, incisive articles delivered directly to your inbox.