The 10 largest global companies by cost of revenues (excluding O&G and Healthcare) – we use cost of revenues as a proxy for purchasing power – spend in aggregate the equivalent of 2% of global GDP. Their combined spending power makes them the 8th largest economy in the world, on par with Italy. It is fair to ask, therefore, who has more global economic power, these ten Agents of Change or Italy?
When we think about the decision-making processes at the highest levels of government, the management of country-to-country relationships and of various groups with diverging objectives, authorities’ influence on partners tends to be slow and can be limited. Our Agents of Change, on the other hand, can cut through the red tape and lay out clearly for existing and potential partners/suppliers their conditions for doing business. Apple’s CEO or top management team can decide at a meeting to only work with zero-carbon partners by 2030 and soon enough TSMC will oblige. It is fair to expect these suppliers to play the same role with their own supply chains, thereby radiating positive change through their eco-systems. As each of these mega Agents of Change has, on average, over 100 suppliers, a decision emanating from one Agent and spreading three steps down the supply chain could convert 1mn businesses.
So, what are these Agents of Change doing with all that power? It seems they have followed a similar pattern in terms of embracing a climate policy. They generally started by making genuine improvements internally to reduce direct or Scope 1 emissions, and have moved on to upgrading the climate impact of their extended eco-systems by reducing indirect (Scope 2 and 3) emissions by migrating to the use of renewable sources of electricity and making supplies and products carbon neutral or carbon free.
We present below the environmental objectives of a diverse sample of these Agents of Change: Walmart, Toyota, Amazon, Apple and Daimler. Each has emissions policies that impact their suppliers and we should expect to see many of these suppliers accelerate their adoption of ‘clean’ practices. For each Agent we list their top 10 suppliers, i.e. those with the most at stake, those most highly incentivised to align their policies to the demands of the Agent so as not to be the domino that risks hindering the chain reaction. This is a diverse group of companies in terms of sectors and locations and, therefore, the impact of decisions made at the top of the pyramid can have far-reaching benefits through entire value chains.
All these developments are super encouraging but let’s also remember that the world is quickly exhausting the 1.5°C degrees ‘warming budget’ that nations signed up to as part of their Paris Agreement commitments in 2015.