Given that I will jump on any platform possible to tell clients and members of the Environmental Business Network that change is coming regarding their relationships with their corporate customers, I was interested to pick up on two recent stories that seemed to both affirm and contradict my argument.
The first, about a month ago, was in the (extremely good) online media publication EDIE and it stated that the food services and facilities management giant Sodexo has announced that it will stop working with suppliers that have not made “tangible progress” in measuring and reducing their greenhouse gas emissions by 2030.
As part of its supply chain engagement strategy, which will see it transition to a Net Zero supply chain by 2040, it appears it is moving the pressure onto the shoulders of others in an effort to eliminate the estimated 43% of its emissions outside of Scope 1 and 2.
The second report was in the equally impressive ESG Today, a US based media channel, and it rang alarm bells at first glance. A recent study, by EY, of over 500 Chief Sustainability Officers (CSOs) from companies across the globe with a turnover north of $1bn had found that companies were losing focus on climate action.
So, big players are losing interest and others, like Sodexo, are kicking the climate and decarbonisation ball into the long grass by talking about 2040, when, let’s face it few C Suite reps will still be at the helm!
But dig a bit deeper and read between the lines and a different picture emerges. If your business is in the supply chain of a large corporate, or your customer is a direct supplier to a large corporate, you will find that it simply confirms the burden of decarbonisation is going to fall on your shoulders.
Sodexo may talk about the end game being some 16 years from now but, and it is a huge but, it has stated that suppliers representing 75% of supply chain emissions (remember this accounts for 43% of Sodexo’s total emissions) will HAVE to set targets that are validated by the Science Based Target initiative by 2025! By 2027 this will increase to 90% of their supply chain emissions, so even the smallest supplier will be under scrutiny. If you don’t know what the SBTi’s are check them out – they are very good but very stringent.
Returning to the seemingly more negative (from a climate point of view) EY study, things here are not as they first appear. Whilst the headline numbers look bleak (a sharp slow down in those reporting a reduction in Greenhouse Gas (GHG) emissions from 30% to 20% and an extension of deadlines for achieving corporate climate goals to way off to 2050) they paint a more subtle picture.
One of the major reasons for this is that a large number of corporates have already committed to, and are on the way to achieving, significant reductions in GHG emissions. As EY’s Global Climate Change and Sustainability Services Leader, Matt Bell says in the ESG Today article corporates “are facing an inflection point. Most have made climate commitments and are now under pressure to meet them…(and the) focus has moved from public declarations to implementation and delivery.”
He goes on to say that the “early phases of low hanging fruit are coming to an end”.
So, let’s just think about this for a minute.
In many cases the GHG emissions that a corporate organisation is responsible for can be as much as 80% in their supply chain. In what is known as Scope 3. That might be your business! You don’t have to be a lighting specialist to work out where the light is going to be shone next.
So, two seemingly contradictory stories end up arguably saying the same thing. The next stage of the battle to decarbonise business is heading to the supply chain.
Now, I speak to literally hundreds of board members of medium-sized businesses and I get very mixed views. Some tell me that their clients have never spoken to them about GHG or other sustainability related issues, some say it is creeping up the agenda under the wider banner of ESG but many see it and get it and are doing something about it.
Regardless of the challenging inflationary and geopolitical issues business faces right now, anyone who is in any doubt that change is coming should pause and use the festive holiday period to lift their heads up and read around the subject.
I used to tell clients that they had between 3 and 5 years to embrace sustainability, or ESG in general, and that by doing so they would gain all sorts of competitive advantages, but the evidence is telling me that this window is probably more like 2 to 3 years. Bear in mind, too, that we are operating (on the whole) in a pre-regulatory world where decarbonisation and becoming nature positive is voluntary. No external body is forcing Sodexo to change its supply chain strategy but imagine what things will look like when they do.
The good news, and there is a fair amount of it, is that smart corporate organisations like Sodexo are actively supporting their supply chain and helping them to address the challenge of a decarbonisation programme so that they can create a “significant ripple effect”. I know of very few large companies that are taking the stick, as opposed to the carrot, approach to their suppliers. So there is no need to panic….yet.
At Xeed ESG we are working with a number of businesses that turnover anywhere from £5m to £300m as they transition to what we call low carbon and nature positive. 100% of them report that it is an exciting and motivational experience which is also adding huge value to their businesses. It can’t be done for free, but you would be surprised what a relatively small investment can achieve, certainly when compared to other forms of CAPEX or marketing spend.
Times are changing and there is no doubt that as we head towards 2030, a crucial point in our battle to save the planet, more pressure will be brought to bear on all businesses. But the commercial benefits in getting started now are huge.
If you would like a no-commitment conversation about how this might affect your business I would be delighted to hear from you. You can reach me on roger@xeedesg.co.uk or on 07703 344139
