Almost half (43%) of UK CEOs say they will invest in decarbonising their business model this year. When over 90% of Scope 3 emissions come from the value chain, this means you’ve got to get to grips with the complex inner workings of your supply chain — and fast. In doing so, you’ll gain a platform to reassess cost alongside carbon, creating opportunities to overhaul your entire value chain to improve resilience, efficiency and revenue.
Driving change
The trick with such a complex and interconnected supply chain is knowing where to start. You’ve now got to dig deep into your operations to gain a full understanding of the bigger picture: how things are made, how much they cost and where the carbon is.
“The complexity, scale and pace of change required across the value chain means there’s a need to tackle the challenge simultaneously from both ends. Decarbonisation of the supply chain requires a fundamental rethink in the products you design and materials used, then how they’re made and delivered.”
Barry Middleton, PwC Partner
Driving change means transitioning to a circular economy, where carbon is designed out of the value chain and energy efficient resources are kept in use for as long as possible. For example, a large multinational energy company established an emissions baseline for complex Scope 3 categories, both supply chain and product use, and engaged leaders across the world to develop over 600 carbon reduction projects. Bringing data, technology and human productivity together to reduce the environmental impact of production and make organisations more resilient.
Underpinning any purpose-driven changes to the supply chain is the performance data that gives businesses clarity on baselines, targets and progress. Successful firms are already using advanced technology like cloud, AI, and machine learning to help them capture the right information and drive processes. This data can be used not only to measure their environmental impact, but also to quantify that impact into meaningful business parameters.
Human-led technology transformation
Because decarbonisation is a relatively new frontier, industrial and services businessesmay lack employees with the skills and understanding to progress their net zero agenda. So it’s no surprise that 72% of CEOs are upskilling their people to support ESG efforts, and a further 69% of CEOs are investing in technology.
“The only way you can achieve progress to your net-zero agenda is by digitising your supply chain. It’s crucial to become data-driven, seeing where the costs, carbon, inefficiencies and risks lie – and taking steps to manage and remove them.”
Fred Akuffo, PwC Partner, Supply Chain Operations Transformation
The Cloud and AI in particular are giving organisations a better understanding of their supply chain impact by modelling different ‘what if’ scenarios. By running simulations, businesses are able to see the potential impact of their decisions ahead of time. For example, with the 2030 deadline for all new cars to be electrified fast approaching, the topic of electric vehicles (EVs) is a big concern for manufacturers. Modelling a fully electric fleet on your exact business model will show you precisely where you’ll save on carbon, pick up operational efficiencies and gain access to cheaper capital.
Tech adoption is also enabling industrial and services businessesto track and reduce carbon emissions throughout the value chain — from design right through to shipping. While supply chain automation is freeing up time and effort away from repetitive, manual or low value tasks, allowing employees to focus on the areas like the development of new products.
Secure a first mover advantage
While net zero reporting and regulatory guidelines are still evolving, some of your competitors will be delaying action until their obligations become clearer. But by embedding net zero into your value chain now, you can get ahead of the curve and set the pace in your market.
Just under half (43%) of manufacturers feel that the pressure to prioritise ESG is coming primarily from customers. We’re already seeing businesses capitalising on growing customer preference for zero or carbon neutral products, and tapping into potentially lucrative market demands. This means reducing packaging waste and reducing the amount of new materials used in products by reusing and recycling. Or diversifying your product portfolio and developing low-carbon services.
According to PwC’s Global Investor Survey, sustainability is now seen as a priority for investors and companies alike. Financial institutions are looking to work with businesses that are both managing their climate impact, and reporting on it. So as lenders shift their attention to ESG-focused firms,industrial and services businesses can attract lower cost capital to drive further transformation and innovation.
“This calls for a diverse combination of skills and experience within the industry of decarbonisation, of supply chains, of change management — and how best to harness tech, data and finance to make it happen.”
Barry Middleton, PwC Partner
Making it happen
While it can be overwhelming knowing where to start, it pays to take a phased approach.
- Conduct an initial assessment to understand where the carbon hotspots are in your supply chain. From there, you can begin to devise a plan with the steps needed to quantify your emissions, so you can direct your attention to deliver the most impact.
- Success requires bringing the right stakeholders together, internally, but also with your suppliers and partners. Reflecting that across everything you do, by demonstrating the business value of decarbonisation is crucial for ensuring your entire organisation is on board. While incentivising your suppliers towards decarbonisation sets a solid foundation for driving strategic changes to your supply chain.
- As you digitise more of what you do and gain greater visibility, you’ll find it’s win-win – in driving more business and supply chain resilience, and in taking out cost and carbon to make tangible progress to delivery of your net zero goals.
How PwC can help
There are a number of ways in which we can help you on this journey:
- Create sustainable business propositions and help you bring them to market
- Identify your areas for improvement across not only your supply chain, but also your entire value chain
- Position and communicate your ESG credentials as a value proposition for prospective and current customers
- Rethinking your portfolio of products and services to be more sustainable and ethically responsible
- A managed service, underpinned by one of our Cloud technology partners — we can take control of collection and reporting of carbon emissions
Decarbonisation can unlock resilience, efficiency and revenue throughout your supply chain — the time to drive this change is now.
