Exporters may lose $18.7b a year if carbon goals not met

Local suppliers are at risk of losing $18.7 billion worth of exports a year if they can't reduce carbon emissions in line with the plans of their major clients, according to a study by Standard Chartered.

The study -- Carbon Dated -- looks at the risks and opportunities for suppliers in emerging and fast-growing markets as large corporates transition to net-zero emission.

It says MNCs expect to exclude 35 per cent of their current suppliers as they transition away from carbon.

Supply chain emissions account for an average of 73 per cent of MNCs' total emissions. So, 67 per cent of MNCs say tackling supply chains emissions is the first step in their net-zero transition, rather than focusing on their own carbon output, the study said.

Suppliers in 12 key emerging and fast-growing markets can share in $1.6 trillion worth of business if they can remain part of the MNC supply chains, said a press release of Standard Chartered Bangladesh, citing the study.

Racing against the clock to hit the net-zero carbon goals, MNCs are piling pressure on their suppliers to become more sustainable, with companies based in emerging and fast-growing markets facing the biggest challenge.

Sixty-four per cent of MNCs believe emerging market suppliers would struggle more than their peers in the developed markets to meet the emission reduction targets. A further 57 per cent is prepared to replace emerging market suppliers with developed market suppliers to aid the transition.

MNCs are concerned that emerging-market suppliers are failing to keep pace with for two key reasons: insufficient knowledge and inadequate data.

Fifty-six per cent of MNCs say the lack of knowledge among the emerging market suppliers is a barrier to decarbonisation.

With MNCs struggling with the quality of data, two-thirds are using secondary sources for data to plug the gap left by supplier emissions surveys. A further 46 per cent say unreliable data from suppliers is a barrier to reducing emissions.

In the press release, Bill Winters, group chief executive of Standard Chartered, said: "It's no surprise that as multinational companies transition to net-zero, they will have to ask their suppliers to evidence their own transitions."

However, suppliers, especially those in emerging and fast-growing markets, cannot do it alone. MNCs need to incentivise the suppliers to help them kick-start the transition journey, he said.

Governments and the financial sector have a role to play by creating the right infrastructure and offering the necessary funding, he said.

"We must work together to ensure the supply chain is decarbonised in a way that delivers shared prosperity across the world."

The study surveyed 400 sustainability and supply chain experts at MNCs across the globe.