Sowing the Seeds for Supplier Resilience

Being resilient to change and uncertainty has always been a fairly reliable indicator of a company’s long-term prospects; but faced with the unprecedented challenges of today’s increasingly unpredictable and volatile world, ensuring longevity now depends on it. As the social, economic and environmental consequences of climate change become increasing concerns for consumers and business communities alike, business leaders are becoming ever more thoughtful about not just how to prepare for an unsettled future, but also what opportunities lie within it.

 

For retailers and manufacturers in particular, there is only so much a company can do to “future-proof” its business in-house. More often than not, the tangible effects and threats of climate change are being most keenly felt in the regions of the world where their suppliers are based. Ensuring long-term resource availability involves adopting a bottom-up approach, working much more closely with suppliers to improve trading relationships, support sustainable livelihoods, and build resilience in the supply base.

 

Many businesses recognise the need – and are willing to take action - to build supply base resilience in key sourcing areas, but are coming up short when it comes to quantifying robust and effective improvement programmes. But this needn’t be so. As the following case study of a well-known tea and coffee company demonstrates, carbon finance initiatives offer a tried and tested way of delivering verified results and putting the metrics behind the means.

 

An industry facing climate challenges

 

After water, tea is the most-drunk beverage in the world, consumed at a rate of three billion cups a day. But tea as we know it is under threat: aside from being grown in some of the countries most vulnerable to climate change-induced weather extremes, many other factors are leading to rapid change, from competition for land to changing consumer habits and the mass migration of agricultural workers to the city in search of higher wages and better lives.

 

In the face of these challenges, the sector is rallying together. The Ethical Tea Partnership (ETP), for example, was formed in 1997 as a not-for-profit membership organisation working “to improve the sustainability of tea production, the lives of tea workers, and the environment in which tea is produced”. More recently, the collaborative Tea 2030 initiative was set up by global sustainability non-profit, Forum for the Future, to bring together leading organisations from across the tea sector to better understand how current trends will affect the industry and to create a roadmap to tea’s sustainable future.

 

Direct action

 

Bettys & Taylors Group, known for tea and coffee brands Yorkshire Tea and Taylors of Harrogate, is itself a member of both ETP and Tea 2030, and is taking a collaborative, long-term approach to addressing supplier resilience that will deliver long-term results. By 2020, the Yorkshire-based family business aims to have carbon neutral sourcing through a range of activities including planting of one million trees across tea farms in its supplier heartland in the foothills of Mt Kenya, delivering both carbon sequestration and livelihood benefits.

 

The Community Reforestation Programme is being carried out in partnership with Natural Capital Partners, specialists in working with corporations on results-based solutions for their environmental goals. Through the initiative, participating farmers – tea farmers directly supplying Bettys & Taylors - receive a modest annual income for every tree planted on their land, and further revenue as the trees grow and sequester carbon. They will also be sharing knowledge and best practice on how to sustainably manage their land and increase biodiversity through training programmes and seminars in conservation farming and agroforestry techniques. In conjunction, an ongoing life cycle assessment will guide Bettys & Taylors toward an internal reduction target of 20% by 2020. The second phase of the carbon management programme will use carbon finance projects to address the company’s coffee business.

 

More than just a tree

 

Tree-planting has long been linked to carbon offsetting schemes, but while offsetting is an important part of the effort – Bettys & Taylors has pledged to make its entire tea and coffee sourcing operations CarbonNeutral® by 2020 - sequestering carbon is just one of the Kenyan programme’s many benefits.

 

Many of the trees being planted will be fruit and nut trees, which in time will become valuable cash crops for farmers, diversifying their money-making potential and increasing their economic security. Applying conservation agriculture techniques will also help farmers increase yields and improve food security. Planted in the right locations, trees provide useful shading to prevent tea bushes from scorching as well as acting as wind breaks, natural barriers to reduce surface water run-off and even as barricades against roaming elephants. Trees also support soil fertility and reduce erosion, a serious problem in many deforested areas, and provide fallen leaves and bark for mulching and composting.

 

Simon Hotchkin, Head of Sustainable Development at Bettys & Taylors, said the programme provided the “perfect fit” for the company’s carbon neutral ambition and broader environmental and social objectives, and complemented its previous tree planting schemes (Bettys & Taylors Group’s Trees for Life campaign, for example, is responsible for the planting of three million trees worldwide since 1990 and has protected an area of Amazonian rainforest larger than the Yorkshire Dales.)

 

He said: “We could have bought carbon credits as a quick-win solution to achieving our carbon neutral goal, but that’s not the way we do business here. Our top quality tea comes from the Mt Kenya region and so ensuring its continued availability is critical to the future of our business. We wanted an approach that would protect and enhance production while improving the livelihoods of our suppliers and their communities, which in turn would safeguard the supply and quality of our tea. This programme with Natural Capital Partners delivers on all fronts.”

 

He added: “This is not about CSR or philanthropy, this is about building up a sustainable business for all and integrating sustainable development within the whole community. After all, what’s the point in having a sustainable farm in an unsustainable landscape?”

 

The programme involves an extension of the wider International Small Group and Tree Planting Program (TIST), to tea farms surrounding four strategic factories in the Mt Kenya region important to Bettys & Taylor’s supply and managed by key supply partner, the Kenya Tea Development Agency (KTDA).

 

Smallholders supplying tea to these factories typically come to hear about the programme through word of mouth or organised “come and see” seminars, and those that are interested register their interest to get involved. Bettys & Taylors has made a ten-year commitment to the programme, by which time, it is hoped that over 3,000 local tea farmers will be benefitting from the scheme, with one million new trees sequestering over 84,000 tonnes of CO2 from the atmosphere and offsetting around 40-50% of Bettys & Taylors entire sourcing emissions globally.

 

Sarah Roberts from the ETP said the initiative was an excellent example of how project-based carbon finance programmes could build resilience in the tea industry.

 

She said: “People around the world treasure their daily cup of tea, but are often unaware of the challenges the industry is facing from climate change. It is small farmers who are most vulnerable to the effects of climate change and in Kenya they are fundamental to the tea industry, supplying both more volume and higher quality teas than the large estates. So building their resilience is not only essential for farmers’ livelihoods and the future of their communities, but it is important for tea-drinkers too. The work that Bettys & Taylors’ is doing directly with the farmers that supply them is a brilliant approach to using carbon finance to support rural livelihoods and another example of the incredibly strong and strategic relationship that Bettys & Taylors have with their suppliers. I am sure it will point the way for similar initiatives in the future.”

 

Carbon finance

 

By focusing results-based carbon finance projects within the supply base, companies like Bettys & Taylors are able to meet emission reduction targets while providing a host of additional benefits to communities and biodiversity which are critical to their success. And thanks to organisations like the Climate, Community and Biodiversity Alliance who are working to measure and validate these added positive impacts, taking such a direct course of action is becoming an increasingly easier sell to corporate finance teams and investors.

 

Simon Brown, European Managing Director of Natural Capital Partners, said that Bettys & Taylors’ long-term commitment to the project is indicative of a shift in businesses’ interest from simple carbon offsetting schemes to projects where additional sustainable impacts like biodiversity, education, water provision, empowerment and job creation are the primary focus. Through Natural Capital Partners Project Catalyst solution, a number of corporates are customising and developing projects to meet targeted sustainable development outcomes that align with business goals.

 

He said: “It is hard to conceive of any business in the food and drink sector that is not aware of the risks and issues presented by climate change and don’t have some form of plan – it would be negligent not to. But there is a difference between awareness and taking action through leadership. Leaders like Bettys & Taylors see the bigger picture, but also realise that the only way they can achieve it is if they are prepared to stick with the project for many years.

 

“In doing so they are demonstrating to their suppliers that although they may have different challenges in the face of climate change, they are in it together.”

 

Photograph: Natural Capital Partners.

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Environmental Instruments: Going Beyond “Bridging the Gap”

In response to the increasingly urgent call for significant global reductions to greenhouse gas (GHG) emissions, businesses large and small are setting more challenging climate targets. For many of these companies, climate leadership is now about carbon neutrality, or net zero emissions.

 

Reaching carbon neutral status isn’t easily achievable through internal actions alone. Even the most stringent of energy management systems, low-carbon product designs and effective behaviour-change strategies will get you only part of the way. So how are these climate leaders “bridging the gap” between their own efforts and their ultimate target? This is where carbon credits and renewable energy certificates step in.

 

Carbon offsetting delivers finance to where it is most needed

 

Carbon credits enable companies to deliver finance to emission reduction projects, such as wind farms or forest conservation, which would not otherwise be financially viable. Each tonne of carbon avoided by the project produces a carbon credit, which can be purchased by a company to offset their Scope 1, 2 and 3 emissions.

 

These instruments can help businesses to reach their climate targets immediately and deliver much needed finance to low carbon development in other parts of the world. Climate leaders are using environmental instruments in parallel with internal reductions as part of their climate action plan, and to bridge the gap towards stretching and impactful reduction targets. In fact, recent research by Ecosystem Marketplace found that companies that included offsetting in their carbon management strategy typically spent about 10 times more on internal emission reduction activities than companies that didn’t offset.

 

Former United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary Christiana Figueres has said that carbon neutrality is what policy and regulation will have to deliver by the end of the century, if not sooner. She stressed that the vast majority of businesses, individuals or nations wishing to make absolute reductions to their emissions now will have to rely on quality offsetting.

 

Customising carbon project portfolios for greater impact

 

Leading media and communications company Sky has been certified CarbonNeutral® for 10 years. For Fiona Ball, Head of Responsible Business, internal emissions reductions and offsets go hand in hand: while investing in carbon offsets to meet its carbon neutral goal, the company has also made significant efforts to reduce its actual company emissions, including installing on-site solar, wind and biomass power generators.

 

Projects that sell carbon credits include wind farms which displace fossil fuels, efficient cookstove projects which reduce fuel requirements in low-income households, forest protection from illegal logging, reforestation for smallholder farmers, as well as run-of-river hydro power and geothermal energy. These projects must demonstrate that they require carbon finance from the sale of carbon credits in order to be financially viable and achieve GHG reductions.

 

Over the past 10 years, voluntary climate action has grown, delivering $4.5 billion in carbon finance for 1 billion tonnes of GHG emissions reductions from a broad range of climate change mitigation projects worldwide. By supporting carbon-offset projects, businesses can deliver positive impacts far beyond the carbon reduction. While these co-benefits vary by project, recent research by Imperial College London and the International Carbon Reduction and Offset Alliance (ICROA) found that for every one tonne of carbon offset, $664 of benefits are delivered to communities, infrastructure and biodiversity.

 

Sky carefully considered how its offset programme would engage its employees and align with other parts of its Bigger Picture strategy. Sky’s Rainforest Rescue project in partnership with WWF has helped to save one billion trees in the Acre region of the Amazon rainforest in Brazil, and several of the offset projects Sky invests in are based in the same region. These projects are working with the local community to provide alternative models of economic development which avoid destruction of pristine rainforest in the Amazon basin, thereby avoiding the carbon emissions associated with deforestation while protecting some of the world’s most biodiverse habitats.

 

Supporting the climate actions of others

 

The results of Sky’s work stretch even further: the company has engaged and inspired 50 of their most carbon-intensive suppliers to save around two million tonnes of carbon and around USD $104 million. Climate leaders have not only already achieved their climate goals and are maintaining them as the company grows, but are thinking of new and innovative ways to engage others in their journey.

 

Elopak is another international company with an impressive mission. The company supplies large businesses with paper-based packaging solutions for liquid food and aims to have zero impact on the environment. As part of this broader goal, Elopak became CarbonNeutral® in June this year. The company’s commitment to sustainable forestry aligns with one of the projects Elopak sources carbon credits from: a rainforest conservation project in Indonesian Borneo that additionally protects orangutans and improves the health and economic prosperity of forest-dependent communities.

 

Elopak aims to reach “absolute sustainability” and is vocal about what this means to the business. To achieve this strong vision and reduce carbon emissions at the pace recommended by climate science, Elopak is among the list of climate leaders looking beyond their own boundary and working closely with suppliers to reduce GHG emissions in the value chain.

 

Scope 3 emissions are indirect emissions that occur in a company’s value chain, including both upstream and downstream. By offering CarbonNeutral® packaging solutions, Elopak is helping its customers to reduce their impact on the environment and is proactively engaging with suppliers to make their products even more sustainable. Similarly, UKCloud is the first and only company to offer CarbonNeutral® cloud services to its clients, which have similar climate goals and therefore appreciate UKCloud’s efforts as their service provider.

 

Certificates support business targets of 100% renewable electricity

 

Along with Sky, Elopak is part of the RE100: a group of climate leading companies who have pledged to source 100% of their electricity from renewable sources.

 

Of course, it is not always feasible to build a wind turbine next to an office or factory, and businesses with complex supply chains covering the globe can find it difficult to directly source renewable electricity in every country of operation. Companies wishing to address their Scope 2 emissions, which come from the generation of purchased energy, can purchase carbon credits or renewable energy certificates. A renewable energy certificate is generated for every MWh of energy produced by a solar, wind, hydro or geothermal power plant. The GHG Protocol Scope 2 Guidance endorses these instruments as a credible way to quickly and cost-effectively claim that all electricity sourced is 100% renewable. The release of this guidance has resulted in the rapid development of the renewable energy certificates market, offering corporates solutions beyond Power Purchase Agreements (PPAs) and on-site investment, both of which can involve long-term, complex contractual agreements. H&M and BNY Mellon are just two of the many companies which have purchased these instruments to address their Scope 2 emissions.

 

Benefits beyond compliance drive the low carbon economy

 

 As with carbon credits, companies can customise the selection of their renewable energy certificates according to the type or project, location and cost. It is this ability to build a customised portfolio of environmental instruments from global projects according to business operations, geography, finance and long-term sustainability strategy, which enables businesses to engage their employees, customers and investors and see greater value from their investment. In this way, companies are not just purchasing environmental instruments to “bridge the gap” and reach absolute climate targets, but to serve a range of benefits that align with business goals and deliver low carbon sustainable development.

 

It is through these immediate, impactful programmes that climate leading companies have a compelling story to tell. This can help to attract and retain talent and customers, can generate revenue, and can increase market share by differentiating products and services with a powerful statement of environmental credentials.

 

Carbon offsets and renewable energy certificates alone will not provide a solution to global warming, but alongside internal efforts, the wider benefits they deliver are encouraging more corporates to incorporate environmental instruments into their climate action plans. The benchmark for climate leadership is going beyond compliance and beyond the immediate boundaries of a company’s emissions, to meet a meaningful reduction targets and deliver finance for low carbon sustainable development throughout the world. 

 

Rosie Helson is Marketing Manager for Natural Capital PartnersFor more information visit Natural Capital Partner’s Project Browser

 

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