Making our economy more sustainable and safeguarding the planet from global warming are two connected and indispensable challenges, especially now that Covid has slowed down production chains, putting businesses in crisis but at the same time offering an unmissable opportunity for renewal. Decarbonisation, both for companies and above all for the supply chain, has a cost: in part this is absorbed by the companies themselves with investments, in part it is covered by public funding (the Recovery Fund is also there for this ), but in part it will fall on consumers, that is, on all of us. To quantify this very often underestimated aspect of the ecological transition is the report "Net-Zero Challenge: The Supply Chain Opportunity" created by the Boston Consulting Group for the World Economic Forum: the ambitious decarbonization goals lead to an increase in consumer prices which is estimated at between 1 and 4%.
A sort of additional inflation, which the Boston Consulting Group however deems from its point of view "relatively contained, such as not to jeopardize the company's competitiveness". Also because, the BCG always maintains, the tools to eliminate emissions from the production chains they are already largely available to businesses “which, with an adequate strategy, can overcome obstacles (increased costs, government inertia, unfair competition from polluting rivals, lack of reliable data) to even transform them into a competitive advantage”. “The opportunity offered to us to 'recreate' the post-pandemic world is absolutely not to be missed”, comments Laura Alice Villani, Managing Director and Partner of BCG and responsible for the Energy practice in Italy. “Large companies can become protagonists, supporting their suppliers in this phase”. In fact, it is known that the plants of large companies and the energy to power them have a significant weight on the quantity of CO2 emitted into the environment, but all the rest of the emissions are result of the activity of their suppliers.
In short, for the BCG, solutions in favor of the environment are also economically sustainable, at least to a large extent. In fact, total decarbonisation could fall much more on consumers, but the study explains that "40% of emissions could be reduced with measures that even allow savings or that involve a expenditure of less than 10 euros per ton of CO2 eliminated. Instead, the burden would rise between 10 and 100 euros per ton for a further reduction of 40%, due to the cost of the technologies which, however, could rapidly decrease in the event of large-scale adoption”. According to the work of the BCG, raw materials and components ultimately represent a modest share of the final price of an asset: to give a couple of examples, around 10% of a car, between 10 and 20% of a couple of tennis shoes. This is why the final impact on consumer prices of sufficient decarbonisation would be between 1 and 4%.
Is this increase really that small and digestible by most global consumers? The Boston Consulting Group seems optimistic about this and in presenting its work claims that "indeed, more and more consumers are willing to pay more to have a sustainable product, from cradle to grave”. That extra price to pay is therefore attributable to the decarbonisation also and above all of the supply chains: the study identifies those which are currently less sustainable and are the so-called big eights, i.e. the 8 supply chains that alone are responsible for 50% of global emissions. These are the chains of food, construction, fashion, consumer goods, electronics, cars, offices and freight transport.
“The barriers to the decarbonisation of the production chains – explains Villani – are not only of an economic nature, but also of an informational nature. Considering that, at the moment, multinationals struggle to know the identity of all the thousands of suppliers and sub-suppliers scattered around the globe, it becomes even more difficult for them to have full knowledge of everyone's emissions”. Boston Consulting has thus come up with a list of suggestions for a winning strategy on this precise front:
1. Establish a line of emission containment and ensure transparency on the data shared with suppliers;
2. Design overall reduction goals;
3. Revisit the products according to sustainability criteria;
4. Design the value chain by reconsidering the sources of supply also from a geographical point of view;
5. Integrate emissions metrics into procurement standards and monitor performance;
6. Work with suppliers to work towards decreasing their emissions;
7. Engage in industry initiatives to stay current on best practices and certifications;
8. Increase “buying groups” to broaden demand-side commitments;
9. Insert low-emissions governance, coordinate internal incentives and make the organization accountable.
