Tetra Pak Talks 3-Prong Approach for Pushing Climate Change Agendas Across Supply Chains.
Climate Change Leads to Rising Costs & Investment Risks
Economists predict that the Canadian economy will lose billions to climate change by 2050 if infrastructure is not upgraded to withstand harsh natural disasters; which have doubled over the past 30 years. This could cost Canadians $5 billion per year in 2020, and $21-$43 billion by 2050, says the TD Special Report on Climate Change. In the United States, the Risky Business Report predicts climate change will cost the U.S. economy $35 billion annually and trillions of dollars by the end of the century if left unabated.
Business leaders are confirming these new and costly realities in their disclosure reports for the Carbon Disclosure Project (CDP). According to the CDP 2011 Agriculture Report
The Natural Resources Canada Report confirms that climate change is already impacting the nation’s natural environment and economic sectors. Warmer winter temperatures contributed to the mountain pine beetle outbreak in Western Canada and by 2012, it affected over 18 million hectares of forest. For companies who manufacture fibre-based products and packaging, in due time this will have a cascading effect across the entire supply chain.
Rising to the Challenge
Traditionally, companies have always looked for the competitive advantage that will help them win but with respect to climate change, this is not a game of who can outwit, outlast and outplay. Rather, this is a universal reality that requires joint action and the right tools to adapt to conditions which threaten our wellbeing, ecosystems and economy. It is now understood that the impacts of climate change are real and a combined strategy of adaptation (modifying our activities, policies and practices), mitigation (actively reducing greenhouse gas emissions) and value chain approach is essential.
3-Prong Approach to Tackle Climate Change Risks
1) Analyze Risks & Evaluate Risks of Doing Nothing
- Climate change risks vary greatly depending on your region and sector and, you will want to know your vulnerabilities and plan accordingly.
- Is your industry susceptible to water shortages?
- Are the base materials you are sourcing being affected by climate change? Could it affect the availability of supply?
- Are your transportation networks at risk of disruption due to extreme weather?
- Is your supply chain vulnerable and at what point(s)?
- Are your customers buying alternatives to your products that are more energy-efficient?
- Do your customers ask you to disclose your CO2 emissions through specific reporting requirements?
2) Develop Your Strategy
- Approach this at two levels by thinking about: a) what you can do within your own organization to lower your carbon emissions and b) how you can progressively implement a collaborative eco strategy across your entire value chain to strengthen your business continuity.
- Mitigation: This should include a benchmarking exercise to address sourcing and material use, product innovation and efficiency production, processing technologies, energy use, and distribution networks as well as how you will support your customers and suppliers to reduce upstream and downstream emissions.
- Adaptation: A flexible and collaborative supply chain will improve resiliency in times of extreme weather and other climate-related disruptions. An adaptive climate change strategy could entail contingency planning, supplier diversification, decentralizing production facilities and efficiency and infrastructure decisions.
3) Measure Progress and Take Action
- Lifecycle Analysis (LCA) or product carbon footprint (PCF) are extremely useful for identifying high emissions output. What is measured can be managed for example, Pepsi discovered the production and application of fertilizer applied to orange trees was the biggest contributor of GHG emissions (35%). By investigating lower carbon fertilizers, PepsiCo expects to reduce the total emissions of Tropicana orange juice by as much as 15%.
- Greater transparency and efficiences among supply chains can be achieved through various sustainability initiatives (e.g. Carbon Disclosure Project, Global Reporting Initiative, SEDEX, GS1, etc), which can result in benefits for both business and the planet.
- Natural Capital Coalition is currently developing Natural Capital Protocol, a harmonized framework for valuing natural capital in business decision making to enable better measurement, management, reporting and disclosure.
The Fruits that Grow – Benefits of Action
Meaningful mitigation will require a paradigm shift that decouples revenue growth from natural capital impact. To minimize climate change disruption and hedge the effects of increasingly volatile resource prices due to a serious resource crunch, a transition to a circular model is necessary. The greatly reduced materials intensity and lower energy demands of the circular economy offer a viable contribution to climate change mitigation and fossil fuel independence, making it easier to cross the threshold to a production base that largely runs on renewable sources of energy and renewable materials.
The World Economic Forum estimates $1 trillion could be generated annually by 2025 if companies transitioned to “circular” supply chains. The circular economy refers to an industrial economy that is restorative. It relies on renewable energy and resources; optimizes product design for extended lifecycle and waste diversion, tracks and eliminates the use of toxic chemicals.
Here at Tetra Pak, we believe we should be able to grow our business and not our climate impact. Our goal is to reduce our carbon emissions to sustainable levels by 2020 and thus far, our CO2e emissions remain flat with 12.6% growth in packaging material production since 2010. In addition, we worked in collaboration with NGOs, suppliers and customers to strengthen our relationships and improve our supply chain resiliency. Although we are seeing firsthand the benefits of a robust climate strategy, we recognize the need to push the envelope further as a joint force. In so doing, together I believe that we can reap the benefits of a renewable and climate-friendly future as long as we are willing to move beyond business “as usual” and rise to the challenge of climate change through strong thought leadership, innovation and investments.