Nearly 78 percent of multinational corporations across the world are looking to remove suppliers that are likely to endanger their carbon transition plan by 2025, a report by Standard Chartered said.
According to the report titled ‘Carbon Dated’, for which 400 sustainability and supply chain experts were surveyed, MNCs plan to exclude around 35 percent of suppliers in order to move away from activities that emit carbon.
The supply chain emissions are around 73 percent of the company’s total emissions, according to the report, and MNCs are of the view that tackling the supply chain will be the first step in their transition towards net-zero carbon emissions.
The move puts Indian suppliers at the risk of losing $274 billion in export if they fail to curb carbon emissions in line with their multinational company partners.
Around 93 percent of MNCs that have supply chains in India have in fact set emission reduction targets for the suppliers. The report quantifies the potential risk to revenues for suppliers if they do not transit to net-zero.
“Racing against the clock to hit their net-zero carbon goals, MNCs are increasing the pressure on their suppliers to become more sustainable, with companies based in emerging and fast-moving markets facing the biggest challenge,” the report said.
Nearly 64 percent of MNCs believe emerging market suppliers are struggling more than developed market suppliers with their net-zero transition, and 57 percent are prepared to replace emerging market suppliers with developed market suppliers to aid their transition, it added.
With the move to cut suppliers, China is expected to bear the highest loss of $512 billion followed by India. Next in line are other Asian countries like Hong Kong and Singapore.
South Korea is also likely to see a possible revenue loss of around $140 billion. For the other countries, losses could range from $4 billion to as much as $65 billion.
According to the report, MNCs are also willing to spend more on net-zero emission products and are looking at ways to help suppliers transition to net zero. They may offer special status, or opt for preferential pricing. Some companies are also planning to offer grants or loans to their suppliers to invest in reducing emissions.
The MNCs’ plans reflect on the awareness and action being taken towards sustainability, which is the next big thing as more companies, even in India, are now focusing on net-zero emissions.
With text input from PTI