US introduces net zero into its supply chain

Although Cop26 has its critics, one side deal at least is important with significant implications for the supply chain.

?The US government has confirmed that all companies bidding for government contracts worth $5m or more must commit to achieving net zero by 2050.

The US government says that the "Federal Supplier Climate Risks and Resilience Rule covers approximately 85 per cent of the emissions associated with the Federal supply chain, which are estimated to be more than twice as large as the emissions from operating the Federal Government’s 300,000 buildings and 600,000 vehicles combined."

But at OCI, we wonder about what will happen next.

The supply chain is a complex beast — a web of players make it up, and we have long said that auditing your supply chain is vital. And auditing your supply chain doesn’t just mean knowing your suppliers inside out; it also means knowing about their suppliers, or the supplier, to the supplier to the supplier and so on.

The US government now expects its direct suppliers (of a certain size) to have a plan to achieve net zero by 2050.

But we think this is just the first phase — the government will soon expect its entire supply chain to move towards net zero.

Having a plan to hit net zero will not be enough — you will need to know about the net zero plans of all the players that make up the entire supply chain ecosystem in which you operate.?

?Furthermore, the move by the US government is likely to be followed by other governments and large corporations— aside from governments and corporations that have such a policy in place already.

Auditing your supply chain is good business sense, but net zero provides another reason to make such auditing essential. Indeed, it is business critical, and now, to add to all the multiple reasons why auditing the supply chain is essential, we have a thorough understanding of net zero across the supply chain as a prerequisite for picking up their vital contract.