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Reaching a carbon-neutral supply chain won’t require massive price hikes, says study

September 28, 2021, 8:30 PM UTC

Many of the world’s largest global corporations, including Apple, British Airways, Ford, Nestle, have vowed to reach net-zero carbon emissions for their supply chains and products by 2050 or earlier. But it turns out that doing so may not be as prohibitively expensive as once believed. 

“Sometimes we underestimate how much progress can be made in a very cost effective way,” Rich Lesser, CEO of Boston Consulting Group, said during Fortune’s Global Sustainability Forum on Tuesday.  

BCG analyzed the top eight global supply chains—food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight—and found that achieving zero supply chain emissions would only push consumer costs up 1% to 4%

For instance, a car sold in Europe is projected to cost €30,000 (or about $35,040) in 2030, Lesser said. But producing the car in a net-zero environment would only add about €600 (or about $700) to the end cost of the vehicle—a difference of about 2%, Lesser said. 

“Yes the steel, the aluminum, the battery, the plastic all go up meaningfully in price, but when you trace how much those things cost in a car today through to the end price, it still represents only a small fraction,” Lesser said. “And that same math held true whether you look at food, whether you looked at smartphones, whether you looked at a whole range of products that people buy.”

In fact, Lesser said that about 40% of decarbonizing the supply chain can be done for less than €10 a ton. Another 40% of the decarbonisation can be done for less than €100 per ton. The last 20%, however, Lesser said is really expensive and needs technological breakthroughs to bring down the cost. “But we shouldn’t underestimate that we can make a huge amount of progress without massive costs, leveraging technology that often already exists,” he added.

The affordability of making these changes, as well as the growing sense of urgency has really driven a real “step change” over the last year or two in how this issue is viewed at the top of leading companies, Lesser said. 

And major corporations are in the position to really drive change. “The large leading companies of the world with these massive global supply chains have enormous power to shape, not just what happens close to their corporate headquarters, but in the far reaches of their supply chains that extend all around the world,” Lesser said. 

If companies can get their supply chains and their key upstream and downstream partners to realize how important this is, the more organizations will make forward-thinking commitments “That gives me some optimism, that we can move the world forward more quickly, not just pockets of the world,” Lesser said. 

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