Value Chain Transformation Starts at the Product Level
Dec 15, 2022
Thousands of companies across different industries have committed to drastically reducing their carbon footprints and eventually eliminating them completely from their value chains. This reduction in carbon emissions cannot be achieved solely by implementing energy efficiency measures or switching to renewable energy sources under companies’ direct control.
While these steps are critical, they only address a small portion of a company's carbon footprint. To achieve a significant reduction in carbon emissions, companies must focus on reducing emissions at the core of their value creation.
Mobilizing the creativity and ingenuity of the entire organization is necessary for delivering emission reductions against net zero targets aligned with science-based reduction pathways. And for companies making physical products, the change starts at the product level.
Designing for low carbon
Most of a product’s emissions are decided in the design stage. Therefore creating low carbon products and decarbonizing value chains requires attention to reducing emissions across the entire life cycle of products.
Redesigning products for higher degree of reparability and circularity.
Sourcing new, low carbon materials.
Finding new suppliers and collaborating with existing ones to find new opportunities to reduce emissions.
Making electronic devices more energy efficient.
Deploying low carbon logistics solutions like low emission last-mile delivery, optimizing shipping routes and using biofuels wherever it’s possible.
The list goes on.
To reach net-zero emissions and decarbonize value chains, companies need to replace high-carbon products with low-carbon alternatives. Low-carbon products can be designed to minimize emissions during production or use, or they may use renewable energy sources to power their production or use. In either case, they produce fewer emissions during their life cycle than their high-carbon counterparts.
Creating low-carbon products or redesigning existing ones is a significant challenge for companies, as it requires significant investment and a fundamental shift in their approach to product design. However, companies that successfully make this shift can create a competitive advantage, as customers increasingly demand sustainable products.
Working with the supply chain
To achieve net-zero emissions, companies must also work with their suppliers to reduce emissions across their entire value chain. This requires collaboration and strong partnerships with suppliers, as well as the ability to implement new processes and measures such as environmental data collection and audits to ensure that suppliers are meeting sustainability standards.
What’s the business case?
As a result of shifting consumer needs and increasing pressure on corporate disclosures, low carbon products are actually good business. Studies indicate that low carbon products reach 5-25% higher annual compound growth than their legacy alternatives.
At the same time, in a recent report by the Carbon Disclose Project (CDP), it was found that out of the 20’000 companies publicly disclosing their climate impact data, less than 200 had a credible and robust climate action plan.
Let’s stop here for a moment and digest this. Out of the roughly 200 million companies in the world, only 20'000 of them disclosed their climate metrics publicly and less than 200 of them has a clearly stated plan on how they will manage the transition to net zero.
What this means is that 99.9999% of companies don't have a clear idea about the future: this is a huge business opportunity. Having a clear transition plan is your recipe to beat your competition in most sectors, from commodities through chemicals to furniture, buildings, mobility and energy and so on and on...
Reducing greenhouse gas emissions in the supply chain can have significant benefits for the performance of a product in the market. More and more companies are including carbon emissions in their purchasing decisions, and are actively seeking out sustainable products.
By reducing the carbon footprint of a product, companies can appeal to environmentally conscious customers, and differentiate themselves from competitors that do not prioritize sustainability.
In addition, reducing greenhouse gas emissions in the supply chain can also result in cost savings. For example, by reducing energy use or switching to renewable energy sources, companies can lower their energy bills and increase their bottom line. By prioritizing sustainability, companies can also improve their reputation and attract investors that value sustainable business practices.
To turn sustainability work into increased sales, companies can use their product carbon footprint to inform customers about the products’ climate impact. By including information on the carbon footprint of a product on its packaging or marketing materials, companies can communicate their commitment to sustainability to consumers.
The increased transparency can help to build trust with consumers and create a positive brand image. In addition, companies can also highlight the environmental benefits of their products in their marketing materials, such as their use of recycled materials or their low energy consumption.
Overall, understanding the product carbon footprint of a product is a crucial step towards transforming the value chain and creating sustainable products. By reducing greenhouse gas emissions in the supply chain, companies can appeal to environmentally conscious customers, save costs, and improve their reputation.
By communicating the environmental benefits of their products to customers, companies can turn their sustainability work into increased sales and a competitive advantage in the market, gaining advantage over and replacing less ambitious, legacy competitors.
In conclusion, value chain transformation is essential for companies looking to achieve net-zero emissions and decarbonize their entire value chains. While energy efficiency measures and renewable energy sources are important, they only address a portion of a company's carbon footprint. To achieve significant reductions in carbon emissions, companies must focus on creating new low-carbon products or redesigning existing ones.
This requires significant investment and a fundamental shift in product design, but companies that successfully make this shift can create a competitive advantage and meet the growing demand for sustainable products.
Communicating sustainability while not doing the hard work of transforming your value chain will bite you in the back sooner or later. Being labeled as a greenwasher is a massive risk.
Wiping carbon emissions out of your value chain reduces cost, eliminates risk and has a positive ROI. Low carbon products win. And making carbon core business is good business.