This may come as a surprise to exactly no one, but multinational companies are the culprits of the highest levels of carbon emissions. According to new research published in Nature Climate Change, the emissions of huge multinational companies’ global supply chains account for one-fifth of the world’s emissions. And because these companies are mostly owned by big, rich countries and get their labor and resources from small, poor countries, those poor countries are the ones receiving the brunt of the deal. This is an issue that can be resolved by those interested in supplier management solutions.
But to look at it from another perspective, the researchers behind the study say that calling out these multinational companies could encourage them to improve their practices in their global supply chains – and such a change of practices could, in turn, have a huge impact on the world’s carbon emissions.
"Multinational companies have enormous influence stretching far beyond national borders. If the world's leading companies exercised leadership on climate change - for instance, by requiring energy efficiency in their supply chains - they could have a transformative effect on global efforts to reduce emissions,” says Professor Dabo Guan from the UCL Bartlett School of Construction & Project Management.
“However, companies' climate change policies often have little effect when it comes to big investment decisions such as where to build supply chains. Assigning emissions to the investor country means multinationals are more accountable for the emissions they generate as a result of these decisions."
The research team worked to develop a map of emissions from multinationals' assets and suppliers; they say that despite the fall in multinationals' foreign investment from 22% of all emissions in 2011 to 18.7% in 2016, the flow of carbon transfer from developed to developing nations is concerning.
Lead author Dr. Zengkai Zhang, from Tianjin University, elaborates, saying, "Multinationals are increasingly transferring investment from developed to developing countries. This has the effect of reducing developed countries' emissions while placing a greater emissions burden on poorer countries. At the same time, it is likely to create higher emissions overall, as investment is moved to more 'carbon intense' regions."
The researchers say that despite the “deglobalization” trend that foreign investment has seen in the past several years, the emissions generated through this type of carbon transfer are still massive. They report that from 2011 to 2016, emissions generated through investment from China to south-east Asia jumped from 0.7 million tons to 8.2 million tons while emissions generated through investment from the US to India increased from 48.3 million tons to 70.7 million tons. The study highlights BP, Walmart, and Coca-Cola as some of the worst offenders of emissions generated through direct foreign investment.
So, what can be done about this?
The authors are very clear: “We propose an investment-based accounting framework to allocate carbon footprints of multinational enterprises to the investing country. Investment-based accounting of emissions could inform targeted and effective climate policies and actions,” they write. They continue, concluding, “For instance, some large multinational enterprises play a crucial role in carbon transfer, therefore their originating country should bear more responsibilities of carbon emission reduction as an investor.”