In a drive to meet its legally-binding net zero by 2050 target, the UK Government has recently stepped up its response to climate change with the introduction of several new policies and strategies, including the Ten Point Plan for a Green Industrial Revolution and the Industrial Decarbonisation Strategy. Tighter environmental regulations will inevitably follow and manufacturers will be required to take action to decarbonise their own activities and those of their supply chains.
The introduction of new legislative requirements will bring challenges for many businesses, not least those in carbon intensive industries such as steel, oil and gas, automotive, aerospace and chemicals. Many businesses will need support in making the transition to net zero. Some may find that the demands being made of them are too great and their business models are at risk, whereas others could find that green transformation represents a significant commercial opportunity.
For the UK’s aviation sector, for example, decarbonisation will bring major challenges. There has been an 88% rise in greenhouse gas emissions in this sector since 1990. While 2018 data shows that the US and China are responsible for a much bigger proportion of the world’s aviation emissions, the UK is still the third highest emitter. In other sectors, the transition to net zero has accelerated during the pandemic and fast-growth industries in areas such as renewable energy and electric vehicles are already generating value.
To assist businesses in making the transition to net zero, the UN’s Race to Zero initiative has published a four-step plan, which emphasises the importance of metrics. Only when armed with consistent and reliable emissions data can stakeholders across the supply chain understand the knock-on effect of their decisions.
For industrial businesses, as much as 80% of carbon emissions can come from the supply chain. To address this, board-level commitment is needed to put in place a strategic action plan, based on a whole supply chain view of their carbon footprint. This won’t be easy to achieve, as many industrial supply chains are complex and cut across jurisdictional boundaries, making end-to-end visibility more difficult to achieve. A strong focus on supply chain management and a willingness to share emissions data will be vital.
Achieving a net zero transformation will require a change of mindset for many organisations. For industries where low-cost sourcing is the norm, alternative procurement strategies will need to take account of carbon emissions to an even greater extent. Placing environmental considerations higher up the corporate agenda will ensure such strategies are implemented quickly and effectively.
Learning from successes in other sectors will also be important as businesses put in place their net zero action plans. For example, the changes currently taking place in the automotive sector, as established manufacturers race to introduce new, all-electric ranges in response to rising global demand for greener cars, could be replicated in other sectors.
Those businesses that demonstrate their ability to manage their cost base and plan for a green transformation will be on course for a more profitable and secure future.
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