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Incentivizing supply chain decarbonization through longer-term investments

Published: 6 Sep 2022
Type: Publication

To reach net-zero, businesses across the globe must address Scope 3 supply chain emissions. Decarbonization within the supply chain plays a critical role in realizing net-zero ambitions, and businesses are in a unique position to influence supplier behaviors, operations and investments through incentives.

In the fourth session of the series, the Incentivizing Supply Chain Decarbonization working group hosted by WBCSD in collaboration with PwC considered how to utilize longer-term investments to encourage supplier decarbonization.

Investing in initiatives that support supplier emission reduction plans, or providing favorable loan terms, can help suppliers overcome capital expenditure barriers to decarbonization. Organizations may choose to leverage longer-term investments to provide financial support and reassurance, build trusted supplier relationships, reduce Scope 3 emissions, and to help meet net-zero targets. Key benefits of rewarding progress through longer-term investments are that it reduces decarbonization transition and financial risks, improves supply chain resilience, and signals committed action in line with longer-term supplier partnerships.

Take a look at this issue for more information on the types of investments you can make, where to start, how to implement them, and what to consider.   

For context, the Incentivizing Supply Chain Decarbonization working group considers different decarbonization levers that can be applied to supply chains. These levers range from non-financial to financial, penalty to reward-based, and can be grouped into four areas:

  1. Leveraging procurement
  2. Building capability
  3. Rewarding progress
  4. Enforcing performance

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