The Carbon Key - A G&A Resource Paper
Thoughts on More Expansive Corporate Supply Chain Disclosure & Reporting by a Veteran Investor Relations Professional
While public company managements have continued to measure and manage their Greenhouse Gas Emissions (GhGs), the initial efforts have been focused on the company’s own operations. The internal teams and outside consulting firms have examined the manufacturing plants, offices, warehouses and terminals, data centers, and other aspects of the operations. But what about the more holistic carbon footprint of the firm? The often-far-flung supply chain operations?
For a manufacturing company, the sourcing and supply chain tier management may begin in a less-developed country with mineral extraction and processing. That resource then moves (by truck, rail, boat) to other locations and through the manufacturing value chain to the company’s doorstep. This transport of materials of all kinds destined for the company’s facilities could encompass thousands of collective miles of travel and cumulative manufacturing carbon footprint.
And so – in its public disclosure and sustainability reporting, the company “offshoring” their carbon emissions…and concentrating measuring, managing, and reporting “onshore” at its owned or leased facilities alone? Are key ESG metrics from beyond the company’s doors ignored or under-reported? A number of influential organizations (such as the World Economic Forum) and major financial & business media are now focusing corporate and investor attention on global supply chain management and reporting on the same (The Wall Street Journal). This is about expansion of “Scope 3” reporting for all companies (these are a consequence of corporate operations but occur from sources not owned or controlled by the organization).
Author Pam Styles posts, “let’s go out on a limb here and call Scope 3 indirect emissions 'the Great Equalizer' to be considered by corporate management." "Think," she suggests to executives, "about the possibilities of making real and lasting impacts to mitigate climate change by focusing on supply chain CO2 contributions to the firm’s total carbon footprint, and emissions reductions that are material to the firm."
And so – imagine if as companies continue to return to “pre-Covid pandemic” operations, their carbon emissions disclosures and performance tracking were considered as important prerequisites to their resumption of sourcing from pre-Covid suppliers – how might corporate managers re-evaluated their supply chain optimization decisions? How different would corporate management decisions be if all layers or CO2 emissions were factored into the total cost of ownership (“TCO”) in supply chain management decisions and in overall risk management?
This Resource Paper explores these timely topics as a widening range of asset managers and their ESG ratings & rankings providers look more deeply into the risk factors of public companies with respect to global supply chain operations.
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