Spend Matters welcomes this guest post from Pierre-Francois Thaler, Co-CEO of EcoVadis.
After years of discussions, negotiations and anticipation, we’ve finally reached an international agreement on climate change. The pact establishes a commitment from 195 countries to take concrete measures to reel in carbon emissions and ultimately make the world a better, more sustainable place to live.
But now that we have a framework to work with, there are a lot of questions to consider. How will this agreement impact organizations? What role will procurement need to play in reaching these new reduction goals? What specific supply chain operations will organizations need to examine to ensure they’re compliant with the new guidelines?
Framework for Fight Against Climate Change: 7 Steps to Success
In order to answer these questions, we must first understand the seven commitments agreed to at COP21 and what they entail.
- Temperature increase: keep increase in global average temperature to well below 2°C above pre-industrial levels; pursue a limitation of 1.5°C above pre-industrial levels to limit negative impacts of climate change even further.
- Preservation of forests: reduce emissions from deforestation and forest degradation, and actively promote conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries.
- Bearing the cost: go beyond previous efforts to mobilize climate finance and note the significant role of public funds.
- Promote transparency: build mutual trust and confidence in one another, create an enhanced transparency framework for action and support.
- Greenhouse gas emissions neutrality: achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.
- Loss and damage: avert, minimize and address loss and damage associated with the adverse effects of climate change.
- Five-year contributions: each party will communicate a nationally determined contribution every five years to ensure continued progress with reduction goals.
Supply Chain Key for Reaching Reduction Goals
The first two commitments will certainly have the biggest impact on private sector companies, since according to a study conducted by SustainAbility and GlobeScan, the supply chain is expected to be one of the most effective channels for reducing global temperatures and greenhouse gas emissions. Today, the supply chain makes up the vast majority (an average of 86 percent) of carbon emissions.
Supply chains are where emissions hot spots are, where the success or failure of the fight against climate change will be determined and where the world can make real progress toward sustainability.
For example, a large company spends about 55% of its revenue on purchased materials, and 80% in supply chain activities. This type of leverage in a supply base can drive significant supplier engagement. If these multinational companies made sustainable procurement practices their priority and encouraged tier 1-3 suppliers to do the same, the positive effects would cascade down throughout the global supply chain. With everyone working together to limit their carbon footprint and proactively mitigate the consequences of climate change that have already taken hold, we could easily reach our reduction goals. This is where procurement teams come into play.
Implications of COP21 Agreement for Procurement
With the supply chain predicted to be one of the most effective mechanisms for achieving the climate change agreement, procurement teams will have a big role to play in its execution. By analyzing the carbon footprint of their supply chains, understanding where emissions hotspots are located in their operations, identifying which commodities are affected by the shift to a low carbon economy and knowing which suppliers are heavily impacted by climate change and rising global temperatures, procurement can proactively limit their contribution to greenhouse gas emissions and ensure their suppliers are equipped to do the same.
Procurement departments should use the resources and tools they have at their disposal to help suppliers become more resilient against the effects of climate change events and provide guidance around how to attenuate its long-term consequences. By engaging suppliers on climate change issues, communicating clear targets and reduction goals, and regularly and consistently measuring both their own and their suppliers’ progress toward these goals, procurement can affect change within their own function and influence sustainable practices throughout the supply chains of the world.
With trusted and solid networks of global suppliers, procurement teams are in a unique position to make real progress toward sustainability and facilitate a low carbon world — it’s not just good for business, it’s procurement’s moral obligation to play its part in saving the planet and do what’s right.
This is not the finish but the starting line. Despite the progress we’ve made at COP21, we have a lot of ground to cover before we’ll see the effects of climate change start to dwindle, but by focusing on the small steps procurement can make toward sustainability each day, we can together fight climate change and make the world a better place.