Faced with mounting regulations and disclosure requirements – and the increasing risks of non-compliance – organizations are beginning to incorporate decarbonization concerns into day-to-day business decisions. Unfortunately for those late to adapt, this includes putting existing supplier relationships on the chopping block.
More than two in five organizations (42%) have already discontinued a supplier relationship due to carbon emissions performance, according to the Verdantix 2024 global corporate survey of supply chain carbon management priorities and preferences. A further 38% would be highly likely or somewhat likely to do so in future, indicating just how willing decision-makers are to interrupt business-as-usual in order to make gains on decarbonization. Firms in the extractives and agriculture industries are most likely to take action: around half of decision-makers in each (52% and 48% respectively) have cut ties with suppliers that have poor emissions performance.
Supply chain decision-makers are not only considering emissions when weighing up existing relationships. Although only 4% of organizations have already cut ties with a supplier due to its overall sustainability performance, the vast majority – a huge 79% – say that they would be highly or somewhat likely to do so.
While large, complex supply chains may previously have made these strategic moves more difficult, increasing supply chain maturity means that some organizations are able to make discrete supplier-to-supplier decisions across their value chain based on emissions profiles. Firms’ willingness to compromise business operations in favour of sustainability initiatives highlights a shift in sentiment towards decarbonization, as sustainability teams look to satisfy internal and external stakeholder pressure.
It’s not all risk and no reward for suppliers. Almost all organizations – 93% – already have or are likely to some degree to provide preferential rates to suppliers who can reduce their emissions. As larger firms recognize the business benefits of improving their sustainability performance – and the vital role their supply chain plays in this – they are willing to pass these benefits onto the smaller firms they work with.
