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Weekly Short
5 May, 2023
The carbon conversation is evolving and developing. While we are still spending much of our time helping companies calculate their carbon footprints and set reduction targets, we are now increasingly having conversations with our clients about how, exactly, they are going to achieve these targets. One area where there is scope to make significant progress is scope 3 emissions, specifically those emissions outside a company’s direct control that come from the products and services it buys or from the way in which the products and services it sells are used by its customers.
Until now, much of the emphasis has been on “sticks” – requiring disclosure of carbon emissions, prioritising those suppliers that have already made good progress on emissions reductions. This approach filters out those businesses that are not playing an active role in the transition to a low carbon economy. However, this risks missing the opportunity that comes from raising the bar, through well thought out incentives (the “carrots”). Happily, we are seeing more of these examples come to light.
Vodafone, partnering with CDP and Citi, has introduced a programme that offers preferential financing terms to suppliers that report on their carbon emissions; for companies squeezed by rising input costs, being paid early is a huge incentive. Nike, meanwhile, has established the Supplier Sustainability Council with ten of its strategic suppliers which provides hands on support to them to develop carbon reduction programmes as well as giving them tools and technical assistance to deliver them.
At the other end of the value chain, business customers are also being targeted with incentives for lower carbon behaviour. Grosvenor, one of London’s largest commercial landlords, offers green leases to kickstart conversations with tenants and help them measure and reduce their emissions, either by providing them with the tools they need like smart meters, or providing access to better and greener energy tariffs. And of course, Net Zero Now’s work with Coca-Cola and Pernod Ricard, which helps their bar and restaurant customers work on measuring and reducing carbon.
These value chain engagement processes are crucial if we want to be net zero by 2050. Compliance measures can only get us so far, and these incentives are likely to play an increasingly important part. From a commercial perspective, it makes sense to broaden your pool of suppliers and offer them a helping hand, too, rather than just shutting the door on those who have not yet made it to the carbon reduction threshold.
As always, if you need some help with this, give us a shout!
By Marie Guérinet