Operations and supply chain decarbonization in the Middle East 

Decarbonization is urgent. Countries representing 90 percent of the world’s GDP have committed to cutting greenhouse gas emissions to as close to zero as possible, and investors, customers, regulators, and employees are all focused on climate change. Companies across industries are setting ambitious goals for reducing various types of carbon emissions. As of October 2023, more than 6,000 companies representing close to 50 different sectors had set or committed to setting Science Based Targets for emissions reduction. That’s up from fewer than 500 companies in 2018. 

Each company and industry faces its own unique decarbonization challenges and opportunities, but it’s fair to say that organizations across the board are struggling to meet their increasingly ambitious targets. A Bain & Company analysis of CDP data finds that more than 20 percent of companies are not on track to reach their reduction targets for the Scope 1 emissions generated by assets they own and operate or the Scope 2 emissions generated by purchased electricity and fuel. More than a third may not meet their planned reduction of upstream Scope 3 supplier emissions.  

Decarbonization is critical to operational excellence

To improve these numbers, companies should integrate carbon footprint reduction into their operating model, treating it with the same importance as enhancing efficiency and cutting costs. This “triangle of optimization” balances production efficiency, cost, and emissions, especially for Scope 1 and 2, where reductions can often lower costs as well. In many industries, executives link decarbonization efforts with energy transition and energy efficiency to reduce their exposure to volatile energy costs. 

Most companies start their decarbonization efforts with Scope 1 and 2 emissions because they are closer to their own control. That doesn’t mean they are easy to address, however. These efforts require new thinking about energy consumption, sourcing, and production and the ability to orchestrate extraordinarily complex change. 

Read more: Decarbonization picks up momentum

Four lessons from successful supply chain decarbonization efforts 

As they plan their strategy to get to net zero, executives should consider these four lessons from leading companies.    

1. When calculating baseline emissions, be pragmatic; don’t wait for perfection. Establishing a baseline for your operational emissions can be challenging, especially for the upstream Scope 3 emissions that companies do not directly control. While an accurate baseline enables more precise goal setting, don’t prioritize perfection over action. By systemizing carbon baselining and accounting—with software tools, for example—and how data is exchanged with suppliers, companies can build a level of insight into their emissions that will only get more precise over time. 
2. Collaborate internally and externally. Achieving decarbonization goals can’t be the responsibility of one internal function. Success requires the entire organization to be committed and informed, from the C-suite to the front line. Building that commitment often requires aligning incentives across functions and roles around common decarbonization goals. Additionally, achieving decarbonization ambitions extends to working with suppliers and other partners to align goals and innovate. Examples might include investing in lower-emission processes or building a consortium of peers for standardizing new lower-carbon practices.
3. Use all levers at your disposal and put in place the tools necessary for them to work. Once targets are set, identify all levers that could help you meet them — like changing suppliers or redesigning products — focusing beyond quick wins to include long-term, innovative decarbonization initiatives. Enablers like internal carbon pricing and new ways of working with suppliers are crucial for reducing emissions. Prioritizing initiatives for their carbon reduction, cost savings, and resilience is also essential. And since many decarbonization initiatives cannot be implemented autonomously, engaging suppliers and customers in evaluating these initiatives is key to their success and impact on cost or revenue. Near-term steps such as managing suppliers can offer valuable carbon reductions, but longer-term efforts often present the greatest opportunities. Designing low-carbon alternatives for metals, alternative raw materials, and low-carbon products in the automotive sector, for example, could reduce upstream Scope 3 carbon emissions by approximately 40 percent to 60 percent or more. To speed that up, manufacturers are collaborating with CO2-reduced green steel makers.  
4. Actively look to create value for your company and customers through decarbonization. Contrary to common perception, many emission reduction initiatives can both lower costs and help increase revenue. For example, optimizing HVAC and lighting to reduce Scope 2 emissions generates savings that can support further decarbonization initiatives or benefit customers. Similarly, companies can boost revenue with green premiums or innovative models guided by customer priorities, thereby achieving carbon reduction goals and benefiting from a low-carbon supply chain.

Five questions for executives to ask today 

To understand how close a company is to making decarbonization a core operational capability and a source of competitive advantage, it’s valuable to ask five questions: 

1. What is my company’s emissions trajectory, and how does that compare to the targets we’ve set? 
2. Has my team spent time on the shop floor (or its equivalent) to understand where renewable energy and energy efficiency could be used? 
3. Do our procurement and engineering teams consider carbon equally important to cost and efficiency in their talks with suppliers and when designing products? 
4. Have we added decarbonization to our management dashboard so we can see it alongside our financial performance and operational efforts? 
5. Have we invested in building the capabilities we need in our team, and do we have training in place for our people to develop the skills to help us reach our decarbonization goals? 

Akram Alami is the Middle East head of Utilities, Aviation, and Sustainability and Responsibility Practices and Torsten Lichtenau is the global head of Carbon Transition Impact Area at Bain & Company.  

For more op-eds, click here.