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Considerations for the impacts on SMEs as major corporates ‘race to zero’

Written by Marita Doak on 24 May 2021

Numerous corporations have joined the “race to net zero” emissions, announcing targets and policies to reduce their carbon outputs. The impacts these declarations will have on small to medium sized enterprises (SME) within major corporates’ supply chains should be considered.

For example, Unilever is a leader in producing fast moving consumer goods (FMCG) and their announced climate policy and targets in their Climate Transition Action Plan. The plan was put to shareholder vote earlier this month with the majority of shareholders voting in support of the climate action strategy. The company’s voluntary targets, signify a movement that responsible businesses cannot and should not wait for regulation. Corporates opting for voluntary annual emission reports and in this case, an advisory shareholder vote, signify an increased level of transparency and accountability between investors, consumers and businesses. 

However, the impacts of these policies on the supply chain and wider network need to be considered.  

>Where does the cost lie? The plan discusses the intent to cost neutrally reduce the emissions from raw material suppliers. The cost of reducing these emissions will be placed onto the suppliers, potentially placing the burden on the supply chains of SME’s to shoulder.
>What support for SMEs will be provided? The introduction of carbon data invoices is an example of an area where smaller companies will need assistance. Although it may sound like a simple tweak to the system, it may be complex to set up and deliver and potentially not cost neutral.
>How will the new supplier reporting frameworks chosen by major multinationals start to shape and influence the uptake of different reporting methodologies? As there are an overwhelming variety of these methodologies in use (TFCD, Science based targets, GRI, CDP, as well as national government systems), there is much debate around how to select one global standard to use. Unilever in this case have chosen Science Based Targets, which may have an influence on the uptake of that particular framework at a global scale. 

Corporates are setting expectations on acceptable reporting methodologies for their suppliers. This has the potential to be a positive environmental step, as data will be influential in setting a global consensus for mass scale climate reporting methods. When large corporations dictate that science based targets are the new reporting frameworks they want from suppliers, it may be hard to envision how this reporting framework won’t become a new norm for SMEs in Australia and elsewhere.

Written by Marita Doak and Donald Fraser

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