To meet the goals of the Paris Agreement – perhaps the greatest challenge faced by our planet – and reduce carbon emissions to net zero by 2050, collaboration is crucial.
We cannot combat the worst effects of climate change without policymakers, financial institutions and companies working together. Nowhere is this more true than for multinational companies (MNCs) and their suppliers. Our latest research report, Carbon Dated, reveals that almost three-quarters of MNC carbon emissions are generated in their supply chains. As MNCs start to transition to net zero, it’s therefore no surprise that they are looking to their suppliers to do much of the heavy lifting. Our research shows that two-thirds of MNCs are targeting supply chain emissions as the first step on their transition journey. For suppliers, especially those in emerging markets, the stakes couldn’t be higher: 57 per cent of MNCs are 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. There is clearly an expiry date for carbon-reliant businesses, and it’s fast-approaching. However, if suppliers can show their MNC partners that they are making progress in their transition and can become a positive link in the chain, a share of a huge market could be theirs. In 12 key emerging and fast-growing economies we reviewed exports to the tune of USD1.6tn, or around one-third, are set to be subject to MNC zero tolerance on carbon. Suppliers cannot go it alone, but will rely on support from both banks and trading partners to reach net zero. Many of the MNCs with whom we spoke as part of our study are keen to help, with almost one in five now offering grants or loans to their suppliers to invest in reducing emissions from operations. Carbon markets and transparent carbon pricing will provide even stronger signals to reduce carbon emissions and the tools to manage the related risks. Governments, meanwhile, need to accelerate their own net-zero plans – particularly for energy generation, switching away from electricity grids that are powered solely by fossil fuels to more renewable solutions – in order to help companies transition by 2050. The need to balance the shift with existing capacity and continued economic development makes this no easy task, although it helps that the cost of renewables such as solar and wind has fallen below the cost of installing new fossil-fuel power generation in many cases. The role of banks such as Standard Chartered cannot be underestimated. We must provide the financing needed for companies in both emerging markets and carbon-intensive sectors to transition to
net zero. Both currently struggle to raise the capital they need, is met, as shown by our recent Zeronomics report.
We recently launched a new Sustainable Trade Finance Proposition to help companies implement sustainable practices across their ecosystems and build more resilient supply chains. Further, our Finance Transition Imperative is part of our commitment to help facilitate the net-zero transition in eight of the most carbon-intensive sectors in our portfolio. Decarbonisation is vital for the survival of the planet, but a vibrant trade ecosystem is essential for maintaining an interconnected global economy that leaves no-one behind. Co-existence is the only option. We must work together across the supply chain to ensure it is decarbonised in a way that delivers shared prosperity across the world.
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Bill Winters Group Chief Executive, Standard Chartered
