The Paris Agreement, which aims to curb the worst effects of global warming by cutting carbon emissions to net zero, has laid down a gauntlet. Governments are striving to deliver net zero by 2050 to avoid an environmental catastrophe, but without the direct engagement of business they will fail. Multinational companies (MNCs) in turn are feeling the pressure, but with 73 per cent of their total emissions sitting in their supply chain, their challenge is far from simple. The interplay between these businesses and their MNC partners will be a defining factor in the global race to net zero.
For 67 per cent of MNCs, reducing supplier emissions is the first step in their net zero strategy, underlining the importance of supply chains in carbon transition.
78 per cent of MNCs say they will start removing slow-to-transition suppliers by 2025 (including 15 per cent who have already started this process).
MNCs expect to cut around 35 per cent of their current suppliers as they respond to net-zero pressure.
Our study finds that almost a third of MNCs are already taking a zero-tolerance approach to their supply chain, swiftly removing suppliers that endanger their transition. Our economic model reveals what this means for the businesses in 12 key fast-growing markets at the centre of OECD supply chains: a ringfenced USD1.6 trillion export opportunity for early movers that align with MNCs’ net-zero plans.
The MNCs setting the pace and cascading their net-zero targets will need to collaborate with their smaller partners to make net zero a reality. Many MNCs are developing shared goals with their suppliers, and some are offering additional benefits and better prices to decarbonising suppliers. This is a trend that must grow if businesses are to embrace the challenge of global net-zero transition.
64 per cent of MNCs are developing shared sustainability goals with their suppliers.
47 per cent are offering preferred supplier status to sustainable suppliers, giving them an advantage over their less sustainable peers.
18 per cent are offering grants or loans to suppliers to invest in reducing emissions.
