How can companies move from isolated and enlightened to collaborative and pragmatic to reduce their carbon emissions? With the upcoming publication of Responsible Finance and Accounting: Performance and profit for better business, society and planet with publishers Routledge, a spotlight on book contributor Professor Frederik Dahlmann, Warwick Business School, and his research.
Supply Chains and Climate Impact: The pressing need for companies to become more accountable by Tom Gamble and Frederik Dahlmann.
A widely acclaimed researcher and speaker on strategy and sustainability, Prof. Dahlmann’s work has covered such areas as sustainability objective-setting for companies and organisations, purpose ecosystems as a means to achieve the UN SDGS, and the environmental cost of running IT. Here, Prof. Dahlmann spares us a moment to speak about his research included in the new Routledge-CoBS book on what he calls ‘the Achilles heel of environmental accounting’ – the supply chain.
Companies need to engage – particularly with their supply chain partners
According to Dahlmann, for most firms and organisations, the environmental – and social – impacts created both up and downstream across different tiers of suppliers, customers and end-of-use phases can be substantially higher than those arising from within their own “in-house” operations. For him, this is particularly relevant for the case of climate change where such greenhouse gas emissions are classified as falling into scope 3 – a consequence of the activities of a company but from sources not owned or controlled by it (compared to scopes 1 and 2*).
“Only by engaging with customers and suppliers can companies hope to tackle their biggest areas of impact.”
“To better understand, measure, manage and mitigate such emissions,” states Prof. Dahlmann, “companies need to begin a complex process of engagement, particularly with their supply chain partners, in order to manage the different types of information needs.”
As such, continues Dahlmann, companies broadly adopt three different types of engagement approaches – basic, transactional, and collaborative – that differ in their levels of intensity and effectiveness with regard to driving scope 3 emissions reductions across entire value chains. Specifically, companies draw on a variety of formal and informal communication channels to capture, exchange and use relevant data and information.
Measuring, reporting, and managing impact is a triple win – for the firm, for society, and for planet
In the context of responsible finance and accounting, Prof. Dahlmann brings our attention to the fact that companies are used to accounting for their financial impacts, having developed clear metrics for managing them both internally and with regard to their customers and suppliers. But he sees a new, pressing need for them to apply similar processes and procedures in order to also measure, report and manage their social and environmental impacts.
“Not only is this essential for improving internal efficiencies,” states Dahlmann, “financial analysts, regulators and other stakeholders are increasingly demanding greater transparency about companies’ scope 3 emissions data as well. Critically, measuring and managing these issues matters strongly for the financial sector whose indirect emissions are all effectively embedded in their investment portfolios.”
Research leads to questions, leads to change
“Not only do we need more companies to measure and disclose their scope 3 emissions,” says Prof. Dahlmann, “but we also need to see significant collaborative activity between companies, their suppliers and customers in order to create the radical emissions reductions needed to avoid the worst impacts of climate change.
Indeed, companies can no longer see themselves as isolated actors when it comes to climate change, adds Dahlmann. They need to work together to identify the best technological and organizational approaches that will lead to the greatest emissions cuts.
Prof. Dahlmann recognises that for companies measuring scope 3 emissions is complex and fraught with challenges – but essential for reducing GHG emissions across the entire product life cycles. “And only by engaging with customers and suppliers,” says Dahlmann, “can companies hope to tackle their biggest areas of impact.”
Discover Prof. Frederik Dahlmann’s research insight Why Businesses Need to Account for their Climate Impacts across the Supply Chain in the Routledge-CoBS book Responsible Finance and Accounting: Performance and profit for better business, society and planet
- Read a related article: The Circular Economy: Its challenges and impact across frontiers
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.