The ‘Net Zero’ Club - When Sustainability Meets Margins & Supply Chains
With an increasing number of corporate, city, sovereign, and supranational targets based on being ‘net zero’ by a certain date, the drive to follow up these targets with tangible strategies and business plans is growing. Even more impressive, the drive for Scope 3 net zero targets — referring not only to direct emissions, but indirect emissions not just used by the organization but also resulting from activities of the organization — is increasing.
To achieve a Scope 3 net zero target, all of the elements of a supply chain and distribution network need to also be net zero on a Scope 3 basis. In practice, a company with a Scope 3 net zero target is (all things being equal) more likely to use suppliers or counterparts with similar targets, who will effectively help them reach their targets, rather than creating a ‘gap’ which might have to be filled by carbon offsets. A net zero club of suppliers and counterparties with similar targets is starting to coalesce and members in the club could see increased market share and expanded margins.
We’ve attempted to put some order and structure to the vast number of net zero targets out there in the market using work compiled by the Science Based Target Initiative (SBTi). In doing so, we get a picture of which industries are showing the greatest level of ambition in aggregate, as well as the extent of leadership being shown by the largest companies in that industry.
As companies transition towards net zero targets, financial innovation will be enormously important to help customers finance these transitions.
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