Without question this has been a milestone week regarding business commitment to Sustainability and CSR actions. Some influencers have rightfully described it as game changing.

In a single day, several large and powerful energy companies encountered what Politico described as: “. a series of extraordinary blows after shareholders, customers and the courts turned on the industry out of concern for climate change.” In the same day, auto maker Ford Motor, with a history of reliance on selling large and more profitable pick-up trucks and SUV’s, announced that it would double its investment in a future electrified powered vehicle line-up by 2025.

What is clearly reverberating is what actually happened in a single day this week. In what is being described as a first-of-its-kind rulings, a Dutch court ruled that Royal Dutch Shell had helped to drive “dangerous climate change” and ordered the company to make deeper cuts in its CO2 emissions, and those of its suppliers by 45 percent by the end of 2020, from a baseline of 2019 levels.

Across the pond, at the ExxonMobil Annual Stockholders meeting, a small activist investor, Engine No. 1, led a movement to win at least two seats, possibly three, on the ExxonMobil board. The activist argued that Exxon’s reluctance to alter its business strategy to account for climate change was endangering profits and called for the oil giant to diversify its investment strategies in order to be ready for a world that requires fewer fossil fuels. This activist secured support from some of Exxon’s largest shareholders including BlackRock Inc, along with some large U.S. pension funds. BlackRock CEO Larry Fink has indicated that “climate risk is an investment risk.” According to financial media, the globe’s largest asset management firm indicated that it voted to support the Engine No. 1 board candidates because of the belief that Exxon and its board need to further assess the possibility that demand for fossil fuels may decline rapidly in the coming decades.

Fred Krupp, President of the Environmental Defense Fund and a leading voice on climate change, energy, and sustainability posted on Twitter:

This moment isn’t just about ExxonMobil. It’s about major asset managers/other influential investors stepping up, making their voices heard and walking the walk, connecting the dots between climate rhetoric and actions.”

Separately, rival Chevron shareholders voted 61 percent in favor of a proposal to cut “Scope 3” emissions generated by the use of the company’s products, which is also being interpreted as a more growing push by the investment community for energy companies to reduce their carbon footprints.

 

Takeaways For Multi-Industry Supply Chains and Services Providers

Global supply chain management teams and stakeholders cannot ignore the significance of this week’s events concerning corporate sustainability and social responsibility efforts.

Beyond the notions of added evidence of game changing shifts and new stakeholder alignments regarding what companies need to commit to address overall business continuity is a more sobering wake-up call for our community.

Take heed of what business media, industry influencers and climate change experts are collectivity concluding from what occurred this week. Company shareholders, investment firms, governments, customers and now a legal proceeding is demanding more actionable leadership, attention and commitment to CSR actions.

In our Ferrari Consulting and Research Group’s 2021 Predictions for Industry and Global Supply Chains Research Advisory published in January of this year, we predicted that the COVID-19 pandemic’s learnings and realizations in 2020 will lead to a more active focus on both business sustainability and corporate social responsibility efforts. That was before this week’s game changing set of developments.

At the EcoVadis Sustain 2021 Conference held in March, senior supply chain executives and various speakers spoke of the opportunity of “building back better” in the new normal of business.  Speakers talked about rethinking of existing supply network strategies that place equal weighting on lowest cost along with that of carbon reduction. In a recent interview this Editor had with Pierre-Francios Thaler, Co-Founder and Co-CEO of EcoVadis after this conference, he reinforced that the tipping-point of more climate action was already occurring over the past 12-18 months. His prediction was that supply chain executive leaders will indeed have to take on a higher leadership profile role regarding CSR objectives and working plans. Thaler also mentioned the more active attention that equity investment firms currently have on the sustainably ratings of individual companies and industries.

Consider the implications of this week’s events amount to. Companies now likely to be made more accountable for the sustainability efforts of suppliers and trading partners. The globe’s most influential energy companies increasingly having their feet to the fire in moving away from fossil fuel toward more alternative energy solutions.

With upwards of 70 percent of emissions influenced by global chain demand and supply network activity levels, consider the impact on ocean shipping and air freight firms, large logistics and transportation carriers, railroads, trucking and material handling equipment providers and users. As noted, consider what this implies for future product design, supply network sourcing and customer fulfillment strategies. Global wide movements of components and material will likely take on a different perspective.

This week’s events in blunt words, is that climate concerns are indeed quickly moving from that of activists to stakeholders that have more powerful influence. Buckets of lobbying money will have limited influence as the impacts to our climate accelerate in more visible ways.

Make no mistake that this not only involves energy companies, but all organizations that consume energy and carbon. That will likely include significant changes in industry supply chain strategies over the coming decade.

 

Bob Ferrari

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