The Race is On: EU’s Transition to Net Zero impacts Global Supply Chains.

04/29/2024 | Reading time: 4 minutes

Following its climate target of cutting emissions in half by 2030, the EU Parliament recently approved several legislations to transfer this goal into action. On the forefront is the Corporate Sustainability Due Diligence Directive (CSDDD)

The last EU plenary session of this legislative period produced a wealth of new directives, including the Corporate Sustainability Due Diligence Directive (CSDDD), an amendment to the Corporate Sustainability Reporting Directive (CSRD), an EU version of the Inflation Reduction Act and a number of others ‘green deal agreements’. As a result, we are currently experiencing a new era of corporate responsibility, beyond the direct boundaries of a company.

The upcoming and existing legislations underline the transformative potential of this time for businesses and their supply chains, worldwide. Explore in the following how the transformation is impacting businesses and their supply chains – and how by embracing transparency, due diligence, and climate action, companies can mitigate the climate impact in their supply chains.

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Sustainability Supply Chain Due Diligence

The EU Corporate Sustainability Due Diligence Directive is a key piece of mandatory legislation that obligates companies to protect human rights and reduce environmental impacts in their operations and supply chains in the EU and beyond.

The CSDDD, complementing the Corporate Sustainability Reporting Directive (CSRD), is marking a major political breakthrough and a turning point for human rights and environmental management. It lays down a framework for companies to enhance governance and sustainability due diligence processes in supply chains. Despite a reduction in scope and requirements, its impact remains profound, both within Europe and beyond.

How CRSD & CSDDD are connected

This way CSDDD amplifies the need for comprehensive transition plans, robust climate disclosure and specific supplier engagement on climate action. 

Climate Transitions Plans in line with 1,5° Target

A company’s climate transition plan is a pivotal aspect of its overarching business strategy, focusing on the shift towards a low-carbon economy. This plan typically encompasses four key elements: Governance, Strategy, Risks & Opportunities, and Metrics & Targets, outlining a company’s climate targets, emission reduction timeline, and identified climate-related risks and opportunities.

4 elements of climate transition plans

Crucially, fulfilling climate transition plans necessitates close collaboration with suppliers to obtain specific climate-related data and implement emission reduction measures.

The following supply chain actions are imperative:

In summary, effective climate transition planning requires proactive engagement with suppliers, robust data collection and analysis, and collaborative efforts to drive emission reductions throughout the value chain. By integrating climate considerations into supply chain practices, companies play a significant role in advancing transparency and decarbonization efforts.

Making Scope 3 Action a Business Priority

In the Scope 3 Action Group, leading companies collaborate with each other to accelerate the transformative power of supply chain engagement, with data from over 40,000 companies being gathered in comprehensive supplier profiles and disclosed in the Climate Intelligence Platform.

Scope 3 Action group, October 2024

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Race to Zero, aligning Supply Chains to the 1,5°C Target

We now have a unique but rapidly closing window of opportunity for climate action, to transform the systems that govern our businesses in order to reduce emissions drastically. Businesses can lead this change, but cannot – and should not – do it alone. Transformation requires rejecting the “business as usual” mindset, and acknowledging that we can only achieve transformation if we change the overall system. We are all part of it, and can hence be also part of the solution, too.