Standard Chartered: Suppliers risk US$35 billion if they don’t cut carbon emissions

A new study by Standard Chartered has revealed that multinational companies will cut suppliers for failing to curb carbon emissions, with 78% of multinationals (MNCs) planning to remove suppliers that endanger their carbon transition plan by 2025.

For South African suppliers who fail to transition alongside their MNC partners, this could mean a loss in export revenue of US$33.7 billion. However, the study also reveals a US$1.6 trillion market opportunity for suppliers who decarbonise in line with MNC net zero plans.

According to Carbon Dated, which looks at the risks and opportunities for suppliers in emerging and fast-growing markets as large corporates transition to net zero, 15% of MNCs have already begun removing suppliers that might scupper their transition plans. In total, MNCs expect to exclude 35% of their current suppliers as they move away from carbon.

The study also found that:

• Supply chain emissions account for an average of 73% of MNCs’ total emissions
• More than two thirds (67%) of MNCs said tackling supply chain emissions is the first step in their net-zero transition, rather than focusing on their own carbon output
• Suppliers in 12 key emerging and fast-growing markets can share in US$1.6 trillion worth of business if they can remain part of MNC supply chains
• 90% of MNCs with a supply chain in South Africa have set emission reduction targets for their suppliers, asking for an average reduction of 31 percent by 2025

Racing against the clock to hit their net-zero carbon goals, MNCs are increasing the pressure on their suppliers to become more sustainable, with companies based in emerging and fast-moving markets facing the biggest challenge. Some 64% of MNCs believe emerging market suppliers are struggling more than developed market suppliers with their net-zero transition and 57% are prepared to replace emerging market suppliers with developed market suppliers to aid their transition.

Bill Winters, Group Chief Executive, Standard Chartered, said: “It’s no surprise that as multinational companies transition to net zero, they are starting to look to their suppliers to help. However, suppliers – especially those in emerging and fast-growing markets – cannot go it alone. MNCs need to incentivise their suppliers to help them kick start their transition journey, but governments and the financial sector have a role to play too by creating the right infrastructure and offering the necessary funding.”

Kweku Bedu-Addo, CEO, Standard Chartered South Africa and Southern Africa, said: “There is growing acceptance that decarbonisation is vital for the future of the planet Earth to remain hospitable as we have known it for millennia. What is required is the collective will to act with urgency to manage the transition towards Net Zero in a co-ordinated approach such that it minimises severe short-term economic dislocation across markets from stranded assets, unviable industries and activities.”

Carbon Dated surveyed 400 sustainability and supply chain experts at MNCs across the globe.