BCG: supply chain collaboration 'vital' for green markets

BCG Joint Report With WEF Says Collaboration is Needed if Supply of Sustainable Plastics & Chemicals is to Match Growing Demand

Upstream and downstream suppliers are central to global progress on carbon emissions, a new report from Boston Consulting Group says.

The report, Winning in Green Markets is co-published with the World Economic Forum, and says that business leaders increasingly understand “that partnership is the new leadership”.

Patrick Herhold, BCG Partner, Center for Climate & Sustainability, says that in many downstream sectors “companies with science-based emission reduction targets across their entire value chain are close to making up a majority of the market”. 

At the same time, he points out, “the cost gap for sustainable goods is closing, government support for transformation is accelerating, and so is technology innovation.

This, he says, is creating large markets for low-carbon materials, products and services – demand that in the run-up to 2030 is at risk of being undersupplied.

He adds: “For companies in upstream markets, this is an enormous opportunity to escape the commodity trap and realise value from decarbonisation.

“Doing so successfully will require a different go-to-market with new approaches to a green value proposition, pricing, customer engagement and market shaping.” 

Herhold says early movers who can commercialise net-zero alternatives first have a strong chance of finding an undersupplied market, and that companies that wait for demand to materialise before investing might be too late.

Downstream markets 'need upstream partnerships'

He adds: “Companies in downstream markets should prepare for a market in which the supply of sustainable materials is predictably scarce. Overcoming this scarcity will require new forms of upstream partnerships and a longer-term perspective on material sourcing. 

“Companies can work with suppliers to secure and develop supply, often sharing the costs across the value chain. 

“They can even work with competitors to scale the critical supply, demand, transparency and infrastructure needed for green markets to materialise.”

The report says the highest scarcity risk for 2030 is projected to be in green plastics and chemicals, where production capacity will likely not meet consumer demand. 

But it says green steel, while currently scarce, will see producers “bring significant production capabilities online this decade”.

Other headline finding include:

  • Some green technologies have reached cost parity during the past decade but others, especially in industry, still need to scale
  • Willingness to pay a ‘green premium’ is growing
  • This decade, demand for several green materials could outpace supply – an opportunity 
  • To win in green markets companies should rethink their go-to-market approach.
  • Pioneering green markets is a bet, but it will likely pay off

WEF: Business eclipsing government on green action

In her foreword to the report, WEF Head of Climate Action Antonia Gawel urged businesses not to allow “near-term problems to distract from moving with urgency on the growing threat posed by a warming world”. Climate action, she adds, “remains insufficient”. 

Gawel points out that current projections are that emissions will rise nearly 11% on the 2010 figure, which she says is “far from the 43% decline that is needed to limit warming to 1.5°C”. 

She adds: For two decades governments called upon the private sector to engage on climate but that dynamic has shifted. 

“Corporate leaders are increasingly urging governments to act while moving on their own to take action that will preserve our economies and livelihoods alike. 

“They understand how decarbonisation commitments made by consumer-facing corporations and evolving government policy will drive green demand.”

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