Now is the time for leaders to embed climate considerations into their supply chain strategies
By Blythe Chorn, Advisory Managing Director, C&O Commercial
With ongoing supply chain disruptions and companies increasingly focusing on reducing their carbon footprints, leaders of businesses of all sizes have an opportunity to embed climate considerations into their supply chain strategies, and for suppliers, into their overall value propositions. By doing so, businesses can reduce their own vulnerabilities and potentially outperform their competitors.
The first step to driving decarbonization into the supply chain is to identify where the most carbon emissions are occurring and where climate change will most materially impact the business—for what products and services sourced could shifting and extreme weather patterns cause vulnerabilities, slower delivery, lower quality, or higher prices? For many companies, with ongoing material and input shortages, distribution delays, and inflationary pressures, the ability to spot and manage climate-related risks and opportunities across the supply chain is critical to meet customer expectations.
For example, as extreme weather caused by climate change—including fires, floods, and extreme heat—increasingly threatens the movement of goods globally, those companies that have identified climate and weather risks and designed supply relationships and networks for resiliency will be more agile and profitable. Similarly, energy efficiency efforts and changing energy supplies to more renewable sources can bring price stability to suppliers and their buyers.
In KPMG’s 2022 U.S. CEO Outlook, which features insights from 400 U.S. CEOs of large companies on the key challenges and opportunities in driving business growth, CEOs cited the complexity of decarbonizing their supply chains as the greatest barrier to achieving Net Zero or similar climate ambitions.
In some cases, companies are beginning to require suppliers to commit to setting carbon reduction targets to help buyers meet their own decarbonization goals. The suppliers that can effectively and accurately demonstrate their ability to reduce emissions faster than their competitors may be more appealing to buyers as well as to investors, gaining market share and reducing capital costs.
At KPMG, we help companies not only develop a strategy for accessing and collecting their supply chain emissions data but also help them adequately analyze it so they can determine which sources are emitting the most and deploy effective strategies to drive decarbonization. Our work across the supply chain helps us to ensure that we are partnering with clients to deploy sustainable strategies that create financial as well as environmental benefits for all parties involved.
In the coming years, ESG, and particularly climate, will become a primary consideration in supply chain management. These examples are just the tip of the iceberg as major companies increasingly evaluate their supplier relationships and networks and adjust in reaction to a variety of emerging disruptions. Those who want to truly outcompete will use climate change as a lever to manage risks and uncover new opportunities for value creation.
The views expressed in this piece are those of the author alone and do not necessarily represent those of KPMG LLP. Learn more about developing and operationalizing ESG strategy by visiting KPMG ESG.