COP27: Imagine the Net Zero Supply Chain

A failure of imagination. In the 9/11 report, this phrase was cited as one of the key failures that left the United States vulnerable to the terrorist attack. It resurfaced during the COVID-19 pandemic, when many countries found they were insufficiently prepared for a global pandemic, even though we should have foreseen it. This year’s COP27 climate change conference also suffered from a collective failure of imagination, with limited progress on climate mitigation. Ultimately, few countries ratcheted up their climate ambition as promised. Humans have evolved to focus on fighting the bear in front of us, rather than address longer-term issues, because we fail to imagine and internalize what the future will hold. This tension between short-term and long-term priorities was a particular challenge at COP27. The United Nations conference was stuffed tightly between two short-term priorities: the U.S. mid-term elections and a critical G20 Summit.  There was acknowledgement that climate change is increasingly the bear right in front of us causing immense damage, particularly in poor countries that did little to cause the problem. Catastrophic flooding in Pakistan earlier this year is a prime example. Parties agreed to a “loss and damage” fund that would support poor countries to recover from the impacts of climate change. Yet, imagination to prevent further catastrophes was in short supply. There was even less focus on the opportunity that a Net Zero economy might present. Despite warnings that the world is far off track to limit global temperature increase and avoid the worst impacts of climate change, little progress was made to get back on track. The Lack of Tangible Progress Towards Net Zero from Governments Puts the Onus on Business to Lead. The number of net zero commitments made by businesses over the last two years suggest many businesses are taking that leadership. Still, meeting these commitments requires action and hard decisions. It requires transformation to decouple greenhouse gas emissions from growth. A new set of ISO standards on Net Zero (1) was launched during the conference and reinforces this point — business must lead and do so with authentic achievement. Such leadership is not a charitable exercise. In our research, 80% of business leaders reported that sustainability enables their organization to optimize and reduce costs as a response to disruption (see figure below). Enterprises with mature sustainability programs plan to invest more heavily in sustainability in the coming years than their less mature peers, despite uncertainty. This signals that action in sustainability is delivering value. Supply chains provide the means for this action. Supply chains represent a key driver of greenhouse gas emissions: eight industry supply chains are responsible for 50% of global emissions (3).  Supply chains are also at particular risk from the impacts of climate change. How can Supply Chain Executives Lead with Imagination to Achieve Net Zero? Align decision-making throughout the supply chain with the achievement of net zero goals. This means assigning accountability for greenhouse gas emissions reduction to senior leaders who have the authority and scope to impact these outcomes. Focus on what matters. Prioritize actions to reduce emissions in your sphere of influence and key drivers of impact. Forge partnerships to address the biggest drivers of impact beyond your influence. Engage suppliers and supply chain partners with empathy, curiosity and partnership. Assess the possibilities. What are the financial risks and opportunities if you take bold action? What are the risks and opportunities if you do not? Business as usual will not be an option. Use your imagination. Think big and pilot new business models, products and innovations that are fit for the world as it will be. How might your sustainability strategy create a sustainable competitive advantage? How should supply chains respond to the impacts of climate change? Headwinds remain, and the UN Emissions Gap Report finds that current national commitments put us far off the path to avoid the worst impacts of climate change. Indeed, climate change is affecting most of our daily lives. Yet, climate change adaptation is not on the radar for many supply chain and business leaders. Here again, imagination is key. Create a sense of urgency by educating and engaging colleagues on how climate change might impact your supply chain. Assess the supply chain’s climate change risks and conduct scenario analysis to better understand how the supply chain will be impacted in various climate scenarios. Take strategic action to address risks and identify opportunities to be part of the solution.   ISO Net Zero Guidelines, International Organization for Standardization 2022 Sustainability Survey: Use Sustainability to Drive Value and Mitigate Disruption, Gartner Net-Zero Challenge: The Supply Chain Opportunity, World Economic Forum Supply Chain Executive Report: Supply Chain Adaptation Responses to a Changing Climate, Gartner For further reading, please see Gartner’s 3 Steps to Accelerate Scope 3 Carbon Emissions Reduction Goals in the Value Chain   Laura Rainier Sr Director Analyst Gartner Supply Chain Laura.Rainier@gartner.com     Listen and subscribe to the Gartner Supply Chain Podcast on Gartner.com, Apple Podcasts, Spotify and Google Podcasts