PremiumMUMBAI: India-based suppliers stand to lose almost $274 billion in export revenues if they fail to cut carbon emissions in-line with net-zero plans of their biggest clients, according to a Standard Chartered study released on Tuesday.
As per the study, multinational companies will cut suppliers for failing to curb carbon emissions, with 78% of them planning to remove suppliers that endanger their carbon transition plan by 2025.
“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," said the study.
The study also reveals that the approach taken by MNCs could create a $1.6 trillion opportunity for the net-zero club: those businesses reducing emissions in line with MNCs' net-zero plans. “This represents a major opportunity for net-zero-focused suppliers across the 12 markets in this study, but also quantifies the potential losses to companies not embracing net-zero transition," it said.
The study added that 93% of MNCs with a supply chain in India have set emission reduction targets for their suppliers, asking for an average 30% cut by 2025.
According to the study, 64% of MNCs believe that emerging market suppliers are struggling more than developed market suppliers with their net-zero transition and 57% are prepared to replace emerging market suppliers with developed market suppliers to aid their transition.
“It’s no surprise that as multinational companies transition to net zero, they will have to ask to their suppliers to evidence their own transitions. However, suppliers – especially those in emerging and fast-growing markets - cannot go it alone. MNCs need to incentivise their suppliers to help them kick start their transition journey, but governments and the financial sector have a role to play too by creating the right infrastructure and offering the necessary funding," Bill Winters, Group Chief Executive of Standard Chartered said.
MNCs are also willing to spend more on net-zero products and services. Some 45% said they would pay a premium, of 7% on average, for a product or service from a net-zero supplier. They are also exploring ways to help their suppliers’ transition to net zero. Some 47% are offering preferred supplier status – a sales advantage – to sustainable suppliers, and 30% are offering preferential pricing. Some MNCs are going further, offering grants or loans to their suppliers to invest in reducing emissions (18%) or data collection (13%).
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