Most companies are still struggling to accurately validate carbon emissions data across their extended supply chains, writes Dr Swati Murthy from TCS.
The European Green Deal to reduce carbon emissions by 2030 – in line with the Paris Agreement – is making progress, with the ‘Fit for 55’ climate legislation recently passed by the EU Council. These latest proposals will help ensure a socially fair transition to net zero that strengthens industrial innovation and competitiveness, while supporting vulnerable citizens and small businesses.
The Irish Government, in the 2023 Climate Action plan, has committed that it will meet its greenhouse gas (GHG) commitments against a global energy crisis and rising inflation, implement the carbon budgets, and sectoral emission ceilings, as well as set a roadmap for taking decisive action to halve our emissions by 2030 and reach net zero by 2050.
“Today there are too many different scorecards, compliance indices and metrics to measure the success of sustainability initiatives”
It is clear that investment and innovation by private sector enterprises is ‘critical’ to the net zero transition, as they bring low carbon and renewable energy solutions to the mass market and drive economic growth.
Enterprises are now taking more responsibility for reducing their carbon emissions by implementing strategies that leverage technology to decarbonise as efficiently as possible. In trying to understand their unique sustainability journeys, TCS conducted research in partnership with Microsoft by analysing a randomly selected set of 400 public companies (with a combined revenue of $10 trillion). The findings reveal a majority of companies are still struggling to measure the true value of decarbonisation efforts from their supply chains, highlighting a common business challenge of using supply-chain data to accurately measure the impact of these initiatives.
Decarbonisation: The missing link to net zero
For our study, we assigned each company a cumulative score to gauge their level of success in managing sustainability objectives. This is based on a grade point average assigned for four aspects of sustainability: shareholder value as reflected by the Dow Jones Sustainability Index, combined with climate resilience in operations and supply chain, and water resilience.
The research shows 51% of companies are actively participating in the Dow Jones Sustainability Index and 52% have publicised their climate initiatives. However, most companies are still struggling to accurately validate Scope 3 carbon emissions (all indirect emissions upstream and downstream of the supply and business value chain) data across their extended supply chains.
Although many enterprises report proactively reducing their carbon emissions, energy consumption and waste, there is still a clear majority (84%) who have yet to set any public science-based targets to reduce direct operational emissions from their supply chains. Moreover, only 16% have publicly set science-based targets, with just 11% committing to science-based targets for reducing carbon emissions from their supply chains.
Today there are too many different scorecards, compliance indices and metrics to measure the success of sustainability initiatives, which is overwhelming and unmanageable for many organisations. Further, supply chain carbon emissions data is often hidden in siloes or spreadsheets, which makes auditability, accuracy, lineage, and governance a complex and time-consuming process. The challenge for any business trying to decarbonise its full value chain efficiently is understanding where this data is located, how to obtain it, and what it means in relation to the latest regulatory frameworks.
Innovation and collaboration drive transparency
Technology companies have a strategic role to play in the transition to net zero and organisations must prioritise forging partnerships with hyperscalers to reduce life-cycle carbon emissions from on-premises data centers and legacy hardware. The cloud can be a crucial foundation for integrating Environmental Social Governance (ESG) data and build auditable solutions that leverage state-of-the-art analytics enabled through artificial intelligence, digital twins, and edge-to-cloud data automation processes. These powerful innovations can quickly convert insights into valuable intelligence by aggregating, analyzing and curating data into a single source of truth that can be accessible for all stakeholders in the net-zero ecosystem.
A secure digital core in the cloud supports a multinational exchange of supply chain data across different geographies and time zones for better transparency and understanding progress made through sustainability initiatives worldwide. There are also additional benefits that can address end-to-end supply chain data challenges for disclosure to investors and shareholders, enhancing brand image by nurturing business innovations.
As shopping behavior evolves, consumers are making more ethical, environmentally friendly purchases and actively seeking packaging labels that show the sustainability of the manufacturing and distribution process throughout the lifecycle of the goods that they buy. To meet this demand, companies need better visibility of their connected supply chains so they can gain confidence in their ESG data and report the true environmental impact.
We are now working with hyperscaler and decarbonisation partners across the world who are deploying digital accounting systems in the cloud to navigate the net-zero landscape of global markets and helping them analyze their Scope 1, 2 and most importantly Scope 3 emissions.An actively evolving innovation and ecosystem collaboration means organisations can accurately analyse, visualise, record and report true environmental impact, helping to set more realistic targets for reducing their carbon footprints and substantiate their green claims effectively.
It is essential for organisations to work more closely with their suppliers and collaborate with a global ecosystem of stakeholders from private enterprises, governments and academia. This is the key to unlocking the true value of decarbonisation initiatives, as it will improve the quality of supply chain data and ultimately help find the missing link to a net-zero future. By improving the quality, accessibility and transparency of supply chain data, enterprises will be better able to measure their true carbon footprints and develop strategies to decarbonise as quickly and effectively as possible.
Working together for a sustainable and transparent future
We saw in our research that increasing a business’ sustainability index rating will positively impact its share price for the same period. However, decarbonisation efforts are not just about ticking a compliance box or increasing a company’s valuation. All enterprises have a responsibility to share learnings, so we can collectively reimagine our supply chains and mitigate environmental impact.
By joining forces with industry peers, both at home or abroad, and leveraging the latest digital ESG innovations, businesses will have a clearer understanding of where they are on their sustainability journeys so they can reach their true potential. This powerful combination of collaboration and innovation will help to build a more sustainable and transparent future for people and the planet.
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