Boston Consulting Group (BCG) executives said at the "Supply Chain Carbon Reduction Trend" press conference held in Taipei on March 2, that Taiwanese companies should take on the sustainability challenge to effectively cut carbon emission, using it as their competitive advantage to access the US$4.5 trillion sustainability business opportunity.
Under the circumstance that the European Union will introduce a carbon tax in 2023 and many global brand OEMs are requiring their supply chain partners to cut carbon emission, it calls for imminent actions for companies to use artificial intelligence (AI) system tools to help them meet the standards. They stressed that Taiwanese manufacturers, who are mainly in the middle and upper reaches of the ICT supply chain, should actively respond to this trend, not only to improve their own operational efficiency and access business opportunities but also to avoid being overwhelmed by the "net-zero tsunami."
BCG managing director and partner Mei-jung Chen emphasized that the world must reduce carbon emissions by half by 2030 in order to achieve the Paris Convention (COP26) goal of net-zero carbon emissions by 2050. However, it is impossible for companies to track and measure the entire value chain on their own. Therefore, BCG has collaborated with Carbon Disclosure Project (CDP) launching the CO2 AI product eco-platform, to help companies share sustainability-related information about their products up and down the supply chain and develop carbon reduction actions.
"The whole global carbon reduction economy is estimated to be as large as US$4.5 trillion. Those who get carbon-emission reduced will be those to access the opportunities first," said Chen.
BCG GAMMA associate director of Data Science Barry Liu pointed out that many major global brands have already begun to reduce their carbon footprint by establishing carbon transparency, using sustainable product design and sourcing, applying supplier management practices, promoting eco-system initiatives, and establishing low-carbon governance mechanisms to guide organizational behavior.
For example, Hewlett Packard has been requiring its suppliers to improve carbon emission transparency, Dell has adopted ocean-friendly materials for its packaging, and BestBuy uses carbon emissions as a criterion for selecting suppliers. Apple has launched a Green Energy Initiative requiring suppliers to use green energy while exerting supplier management to gain more freedom in carbon reduction.
"If you can't meet their standards, you will face the problem of whether you still have a business to do with them," Liu stressed, Taiwan manufacturers should make efforts as soon as possible to avoid being phased out by this wave of "net-zero tsunami".
BCG also released the "Global Supply Chain Carbon Emissions Report," the first collaboration with CDP, which shows that carbon emissions from upstream and downstream supply chains are on average 11.4 times higher than the operational carbon emissions of individual companies, but only 38% of companies cooperate with suppliers to reduce emissions, while more than 80% of suppliers do not disclose their carbon emissions in their supply chains.
The report also shows that in 2021, more than 200 CDP corporate members worldwide with a combined procurement expenditure of $5.5 trillion required their 23,487 suppliers to disclose environmental data, a 50% increase from the previous year, indicating that the demand for transparency in the supply chain has increased. More than 11,000 suppliers have submitted environmental data, but 56% have not set carbon reduction targets. Only 28% have developed low-carbon transformation plans.
However, many companies have not yet made the transition to low carbon mainly due to the lack of an effective approach to monitor and reduce emissions. "Most companies are still living in the stone age of using manual excel reports," said Liu, adding that there is still room for significant improvement in the comprehensiveness, accuracy, and frequency of carbon emission stock-taking. This has prompted companies to seek systematic and automated solutions using artificial intelligence (AI).
Since thermal power still accounts for more than 80% of the electricity generated in Taiwan, and 99% of the green power is bought by Taiwan Semiconductor Manufacturing Company (TSMC), how should other Taiwan manufacturers respond to the problem of high carbon emissions that is already determined by the source of electricity itself? Chen said BCG has assisted South Korea in formulating its carbon reduction strategy and found that hydrogen energy is the most feasible, but they persuaded the government to invite big corporates to facilitate a hydrogen supply chain, attracting many small and medium-size petrochemical companies to join the business.
"Such an effort takes an ecosystem, no one single enterprise can do it alone," said Chen. She added that from the initial investment, production, transportation, to domestic distribution, there are opportunities for Taiwanese companies and industries to jointly invest in the hydrogen or other green energy industry chain. "Such public-private collaboration will help establish the competitive advantage of Taiwanese companies in the long run."
Barry Liu, BCG GAMMA associate director, Data Science
Photo: DIGITIMES
