Transition roadmap to emissions-free supply chains

Vietnam's textile industry has been moving towards emissions-free supply chains.

Rethink product design

Go back to the drawing board and revisit product design, rather than opti- mizing existing processes. Net zero supply chains will not be delivered by tinkering at the edges of a prod- uct’s carbon footprint, but may require a wholesale re-evaluation of how people use it and how it is made. Does fashion need to be washed daily, with reduced life cycles and leaking microplastics? Do we need to make, sell, and dispose a vehicle for each person who drives, or is the sharing economy the future of mobil- ity? And equally topical, can we pivot back to ‘building to last’ rather than ‘building to replace’? Indeed, this dynamic of defining leaner product designs has yet to pick up in some sectors. While changing end product certifications was put in place in nearly half of auto- motive clients surveyed, only around a tenth of the textile players surveyed had considered it in as part of their sustainability strategy in the last 3 years.

Embrace collaboration

Supply chains are asym- metric. They have a few large corporations with top quality talent, education and resources at one end, and many smaller, less sophisticated SMEs along the chain. These suppliers will need substantial help to enable the transition to occur. They all need to col- laborate to succeed: to share knowledge, technology, investment, and resources. For example, both the ath- letic wear company Puma and retail giant Walmart collaborated with HSBC to launch a financing pro- gram that rewards environmental and social standards throughout the supply chain. Collaboration should not be limit ed to within a corporate’s own supply chain either, but needs to be across the whole sector in order to accelerate change. For example, the industry needs to agree on common data standards, share technologies, etc.

Build the capabilities needed for change

As sup- pliers begin the net zero transition, they may find gaps in their skills and knowledge. As mentioned, this is an even bigger issue when considering SMEs. Capability development and training can help accelerate the shift. BMW has provided emissions-reduction workshops for first and second tier suppliers, covering the use of recycled materials, smarter use of tools, and education of the car purchaser. One explicit goal is competing with electric vehicles for net-zero credibility.

Invest in technological solutions

These include alternative fuels, less energy intensive manufacturing processes, and methods of carbon cap- ture to compensate for or neutralize emissions that the organisation has not yet reduced. Speed up the time it takes to bring an innovation to market. Some of the most effective advances either exist in pilot form, simply have not yet reached the right hands or do not yet exist at scale. Others do not yet exist at

all, and the window for R&D investment – given the length of time needed for scaling-up across supply chains, sectors, and countries – is closing. Industry, governments and financial institutions will need to col- laborate to not only fund and drive this R&D, but also help accelerate it.

Develop better data structures

Net zero supply chains will need transparent, visible and consistent analytics. This in turn requires a robust system for gathering operational data across the supply chain, down to the last mile, and making it sufficiently fit for purpose to be adopted by most participants. It is particularly important to have standards to assess and report the carbon footprint of an organisation across scope 1, 2 and 3. Some data providers already exist. For example, the apparel industry’s Higg Index assesses environmental and social sustainability for value chains, including data on water use, carbon emissions, and labor conditions. Specialised data play- ers such as Coriolis are also growing in this space, using advanced analytics and reporting to help provide end-to-end transparency on environmental, social, and governance metrics across supply chains. Ultimately, access to this data needs to go all the way downstream, and right into the hands of consumers. For example, there’s a clear need to have consis- tent labelling for end consumers that would help with their purchasing decisions, echoing the caloric and ingredient data we have seen in food packaging for many years – except now focusing on the health of the planet, not just of consumers.

Think about policy and standards holistically

This applies to both government and business policy. While we are seeing momentum now, there has been a lack of consistency in policies, standards and market practices. This has resulted in an ever-changing set of requirements that businesses need to comply with simply to meet the requirements of their partners, driving up complexity and cost. Supply chains cross national borders and need policies that hold everyone to a high but workable common standard.

Enable financing

Most small businesses don’t have the capacity or money to focus on a net zero strat- egy. Of the SMEs in our survey that have not launched initiatives to reduce emissions, about half report the lack of access to finance as a key preventing factor.

The path to net zero is much easier for large corpo- rate entities with access to capital markets than for smaller, unrated suppliers. Targeted, ring-fenced and affordable capital is a key enabler of the net zero supply chain, but banks will not be able to do this alone. Banks need to team together (for example, through syndication), to co-invest with corporates, and form public-private partnerships to help deliver financing to where it is most needed. For this to work in practice, data structures must provide transparency across the supply chain to trace where such funding is being directed, used, and by whom.