Multinationals' supply chains 'cause fifth of global emissions'

11 September 2020

Carbon footprints should be allocated to the home country of large multinational enterprises (MNEs) to stop firms “outsourcing” emissions to developing nations, a study has said.

The study, conducted by researchers at five universities across the UK, China and Norway, found the supply chains of MNEs such as BP and Coca-Cola were responsible for almost a fifth (18.7%) of global carbon emissions in 2016. 

However the report said carbon footprints of some of the world’s largest MNEs are often concealed due to the way emissions are measured.

Researchers said carbon transfer through foreign direct investment (FDI) meant “a country reduces its territorial emissions by relocating domestic production to other countries through cross-border investment” and  emissions are effectively “outsourced” through the supply chain.

It said: “Over the study period 2005–2016, the carbon footprints of MNEs hosted by the United States and the European Union remained relatively stable and even decreased slightly,” the study found.

“However, the carbon footprints of MNEs hosted by developing countries, such as the Chinese mainland and India, increased sharply as developing countries have become increasingly attractive FDI destinations.”

According to the study, carbon dioxide produced by large foreign affiliates of Total SA and BP, headquartered in France and the UK respectively, exceeded oil industry emissions from most countries (Canada, mainland China, Germany, India, Italy, Singapore and the UK) apart from the US. 

“The total volume of the carbon footprints of the foreign affiliates of Coca-Cola, an American MNE, was almost equal to the volume of CO2 emissions embodied in the foreign-owned food enterprises of the Chinese mainland,” researchers said. 

While MNEs such as Apple generated a lower volume of CO2 emissions per unit sales than the average sectoral level, “climate actions still represent crucial supplements to carbon control measures adopted by different countries or regions”, the report said. 

The study noted that some MNEs had played an active role in the fight against climate change, citing Apple’s supplier clean energy programme, which was launched in 2015, and Walmart’s Project Gigaton, which aims to reduce the carbon emissions of Walmart and its upstream suppliers by 2030. 

However it added: “MNEs are facing great uncertainty in climate policies, green technology, investment profitability and so on. MNEs tend to be cautious in their climate activities. More than half of the companies with quantified carbon reduction targets have set only short-term targets.”

Researchers called for an “investment-based accounting framework” that allocated the carbon footprints of MNEs to the home country to motivate MNEs to adopt more ambitious climate actions.

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