Insights for Procure-to-Pay and Finance Leaders

What Paris Agreement? Sustainable commerce can fight climate change with or without global pacts

Whether or not the U.S.’ withdrawal from the Paris Agreement on climate change mitigation is overall a good or bad move for the U.S. economy is now a raging debate that will last for years. From an environmental standpoint, there is no debate. In my view, Trump’s withdrawal is bad news but not bad enough to slow down progress.

Companies with real commitments to corporate social responsibility (CSR) generally accept full responsibility for the products they sell—both in terms of production, sourcing, distribution, maintenance and return flows, and in how they affect people and the planet. This reality is increasingly penetrating boardroom agendas.

With businesses spending an estimated $6.7 trillion on global trade annually, imagine the implications for the earth’s atmosphere if the goods and services delivered by that dollar amount moved across sustainable infrastructure?

The proactive response from business and civil leaders across the U.S. to move forward on the agreement (with or without the White House) is no surprise, given they share in the globalist view that our future depends on sustainability and a low-carbon economy. Our long-term fate can only be secured by enabling a circular economy, where renewable energy, smart products, and reverse supply chain management are the norm.

In May, while at Sustain 2017 hosted by our partner EcoVadis, I learned about the latest ways businesses are working to build a just and sustainable economy. (If the event took place a few weeks later, it would have had to absorb the fallout of Trump’s decision!)

Like-minded buyers and their suppliers are catching up with first movers to integrate CSR factors into their trade relationships and procurement processes.These strategies are embraced by the majority of Fortune 500s, which means most are pursuing some form of carbon emission reductions. Collectively, that can make an impact when you consider the length and complexity of their supply chains.

For the remainder on the sidelines, many say sustainability is important and are finally getting started with carbon reductions.

In a conversation with Pierre-François Thaler, co-CEO of EcoVadis, he told me that the Fortune 500 buy an enormous amount of goods and inputs from other companies which can be used as a big lever to bring about positive change. According to research his company helped carry out, almost all of these supply chain leaders surveyed place a high level of importance on sustainable procurement. With these leaders taking action, suppliers can soon expect requests for compliance and reporting to trend upwards as their buyers pursue carbon emission targets.

Of course, not all global enterprises are incentivized to reduce greenhouse gases, even while pursuing sustainability in their supply chains. Even if it’s just the top, the trickle down effect across supplier tiers can make a dent and, in turn, catalyze entire industries and regions to switch to sources of renewable, clean energy.

And clean energy sources are only but one dimension that can impact climate change. There are countless influential decisions across the supply chain that can negate global warming. For example, using recycled packaging, more efficient transportation and distribution, avoiding materials that cause deforestation, and purging production practices that emit greenhouse gases.

The bottom line costs of pursuing these options can be equal to or even lower compared to the status quo. Solar and wind power, for instance, is now on par or cheaper than fossil fuels in more than 30 countries, according to the World Economic Forum. That means that the upside for companies to step up and make these commitments is only getting larger. Many innovators, like Tesla, have built up their brand leadership and set a new bar for the rest of their industry to follow.

In addition to putting in a place a program to enable a sustainable supply chain, companies that are ready to commit also need greater transparency. Open, digital networks that promote collaboration between companies, people and services will go a long way to allowing metrics, analytics and visibility for CSR, supply chain, and procurement leaders to track and report progress toward environmental goals. That transparency can, in turn, help leaders set standards that cascade throughout their supply chains.

In light of Trump’s separation with the Paris Accord, we can breathe a collective sigh of cautious relief that governments across the globe, Fortune 500s, and private sector research will continue to build a cleaner future. Gatherings like the UN Climate Change Conference (COP23) in Bonn later this year? will help build out the supporting political framework.

As these efforts trickle down global supply chains, the full picture of our sustainable low-carbon future will come further into view.

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