This paper is prepared in support of a workshop at the World Business Summit on Climate Change (Summit) on leveraging value chains to reduce climate impacts and build a low-carbon economy.      

It is widely acknowledged that making significant progress on mitigating the impact of climate change depends on reducing the impacts of supply chains. 

A recent McKinsey study shows that 40 to 60 percent of companies’ total carbon footprints reside upstream in their supply chains, suggesting the scale of the opportunity.  Fundamental changes in consumer behavior, supply chain structure and management, and business models are needed for long-term success.

The scope of this challenge is reinforced by a current knowledge gap: most suppliers do not track or report carbon emissions data; buyers do not control suppliers’ emissions or have access to accompanying data, and there is disagreement on how to measure and apportion responsibility for supply chain emissions.  

This paper aims to illuminate the development of value chain approaches that address current challenges and unlock opportunities to capture value.

First, we describe the economic and environmental pressures on existing value chain models.  It is clear that the economic and policy conditions under which extended supply chains emerged in the past quarter-century are changing rapidly as a result of climate, and that these trends may accelerate soon.  In this light, the ongoing viability of current supply chain models can no longer be assumed.

Second, we outline the distinct elements of the value chain model, to illustrate how climate change will impact all links in the value chain, from product development to assembly to distribution to end-of-life.  The paper suggests that companies look at both the full lifecycle of their products and services, and individual elements of the value chain, to identify the opportunities for greatest impact.

Third, we identify promising examples of innovative action that—in collaboration with others along the value chain—are beginning to tackle the monumental challenges we face. 

Finally, we raise questions about policy implications.  Businesses face a parallel challenge of remaking their internal processes while engaging with public officials differently, to support the development of policy frameworks that can support the creation of value chains that will thrive and shape the low-carbon economy.