Many big businesses aim to reach net zero emissions by 2050, but with complexities in each industry, achieving net zero alone is not easy – especially when trying to reduce scope three emissions – the emissions from the company’s whole value chain.
John Spear, Director at epi Consulting, discusses the importance of working together and sharing information to achieve the ultimate goal.
For many companies, the journey to net zero began a long time ago. For some, it was a case of jumping before being pushed; for others, it was about acting out their values. For others still, it was about attracting a new kind of consumer. But even those who started down the path years ago have faced challenges in decarbonising their businesses.
Now, a raft of tough legislation and regulation, designed to quicken the speed at which the world moves to net zero, is forcing those companies that have dragged their feet to catch up fast. Across Europe, in California, in Brazil and in countless other regions all around the world, new sustainability laws are being proposed, drafted or passed.
Some, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), have extra-territorial scope, meaning that some companies outside of their immediate jurisdiction are bound by them.
Many hands make light work, as the saying goes, and that certainly applies here. Businesses must make sure they understand new regulations, assess their current performance in respect of environmental, social and governance (ESG) activities, make a plan for meeting whatever criteria the new regulations set, and then execute that plan.
Given that certain companies – namely, those that work in the same industry or sector – face very similar challenges, it’s a good idea for them to join hands. Indeed, the more companies in the same position who do this, the smoother things will pan out.
And we’re beginning to see instances of corporate collaboration across many forward-thinking industries. The Joint Alliance for CSR (JAC), for example, brings together the biggest players in telecommunications under a single banner, and continues to add to its 28-strong membership.
And lately, companies in the UK food sector have come together to form the BRC Mondra Coalition, which will take a single, unified industry-wide approach to monitoring, improving and communicating the environmental performance of products. Where collaboration is most effective is bringing down Scope 3, the category of emissions which is responsible for the vast bulk of any organisation’s carbon footprint. This category deals with the entire value chain, including suppliers.
But the overall case for collaboration is compelling. One key aspect is cost. For any one company, ESG initiatives and activities can be expensive, in both money spent and money lost due to the time commitment involved.
Company A might need to develop the right CSR criteria according to which it can audit its suppliers, and then carry out that audit on a regular basis. But if Company B has to do the same thing, and its supply chain in any way overlaps with that of Company A, then working together will save both of them time and money. It’ll also spare the suppliers from having to deal with multiple similar audits from different companies. And you don’t have to think too hard to imagine the vast cost savings for all involved if 10 or 20 companies were sharing the audit burden. The audits they carry out, too, would be more rigorous and more systematic, since they can work together to set the criteria and hold each other to account.
Another enormous benefit of collaboration connects to knowledge. The knowledge contained in even one huge company pales in comparison to that contained across five or 10 of them.
This knowledge is both practical and theoretical. In the context of ESG, the former is especially useful, since many companies are embarking on something – the green transition – that hasn’t been done before, and in many cases involves a wholesale transformation of their business models.
Again, considering the time and effort involved in ESG activities, knowing that something works or doesn’t work is extremely valuable. If Company C can say, ‘We tried this and it failed miserably’, then that saves all the other companies from doing the same thing.
In contrast, and more positively, when one or two companies can say they’ve benefitted from product life-cycle assessment studies, for example, all the other companies can follow their lead, rapidly accelerating the transformation of the industry.
Communication is also a huge part of the collaboration conversation, because once a thorough plan is put in place to bring down Scope 3, businesses need to get ‘buy-in’ on sustainability from their suppliers.
This isn’t necessarily straightforward. Suppliers can be based all around the world, be of many different sizes, and face different challenges. If sustainability isn’t a priority for a supplier, then companies need to give that supplier good reasons for inconveniencing themselves and joining them on their sustainability journey.
There are various ways to do this; contract clauses are one. But a very effective and non-coercive way is for a number of companies with similar suppliers to speak with one voice.
Together they can communicate the importance of what they’re trying to achieve, and then provide both support and practical guidance to suppliers through webinars or guidance documents. Again, the greater the number of companies who come together in a sector, the easier it is to get supplier alignment on sustainability. If the suppliers find that the majority of their big customers expect them to meet certain criteria, then they’re both obliged and motivated to meet them.
All in all, companies that join hands save money, save time, accelerate their individual decarbonisation efforts, and drive industry-wide transformation, which benefits all of them. They help to drive the green transition globally and set an example for other industries.
They make sure that they don’t fall foul of new and upcoming regulations. But most importantly, they play their part in helping to address the climate challenge, which is something we all have to do.
