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In this Q&A, managing director Liam Dowd talks with Liza Schillo, manager, global product sustainability at Levi Strauss & Co, on the company’s recent announcement regarding new climate targets
Companies are increasingly taking climate action within supply chains as part of their commitment in helping meet the Global Goals and two-degree target. It’s critical that companies are engaging their supply chain on climate goals and action. A report published earlier this year by CDP and McKinsey assessed the supply chains of nearly 100 major corporations. They found total emission reductions from over 4,800 suppliers in 2017 reached 551m metric tonnes of CO2 – more than the whole of Brazil’s greenhouse gas (GHG) emissions in 2016.
In the build-up to the 2nd Annual Responsible Business Summit West, I talked with Liza Schillo about Levi Strauss’s new climate targets and how the firm will work with suppliers to meet the 40% reduction in GHG emissions in the supply chain.
Q: LS&Co. recently annoucned it will take climate action within its supply chain – which included committing to Science Based Targets. Of the three commitments I would envisage the target to reduce 40% of greenhouse gas emissions in the supply chain will be both the hardest and also most rewarding. How challenging is this, how did you convince the business to embrace such a bold target?
A: Yes, this will be our most challenging commitment. Largely because we must rely on the adoption of energy efficiency and renewable energy opportunities by our suppliers. We are going to achieve it largely through the implementation of a project we’ve been piloting for the past several years called PaCT.
We had proof points of its success, and also an interest from our CEO in putting something out there that was industry-leading. Fortunately, today there is, I think, general acceptance that we all have a role in addressing climate change, and I’m lucky to have the support of my leadership in that understanding.
Q: I imagine you worked closely with certain suppliers both before and since setting your Science Based Targets. How have you engaged them to help you take action? What were some of the biggest hurdles and how did you overcome them?
A: We did not actually work with our suppliers to set the targets themselves, but we did work with suppliers to implement a pilot of our PaCT project (six facilities in Asia). The greatest challenge will be encouraging our suppliers to take the step to invest in their facilities for greater energy efficiency and renewable energy.
The way that the PaCT programme works, we go in with the IFC (International Finance Corporation) and our supplier and conduct onsite energy (and water) efficiency assessments, renewable energy opportunity analyses, and recycled water opportunity analyses. From here we can only make recommendations to the supplier, the supplier must decide s/he wants that for the facility. But our programme also provides access to low-interest loans. The interest rate is linked to their score on our Terms of Engagement, so the more environmentally and socially minded our supplier is going into discussions, the better rate they will achieve on their loan.
Q: Looking at the collaboration aspect – a quick search of the companies listed as taking action on the Science Based Targets website – I can see the likes of Nike, Kering among others. Are you working with them or others in the industry to drive greater impacts?
A: Yes, we will be working with our industry peers, with whom we share many of our supplier facilities, to determine how we can collaborate to implement PaCT for maximum energy and cost savings.
Collaboration will be critical to demonstrating to our suppliers the importance of making these investments in their own facilities and sharing costs. I was also in touch with a number of peers during the process of setting our target and found a great challenge is determining how to account for carbon emissions reduction programs in shared facilities. This is something I’ll be working on over the next year, in partnership with industry peers and NGOs.
One of my fears around tackling the supply chain footprint in apparel is that the uncertainty of how to account for impact will hold back companies who want to commit to Scope 3 emissions reduction, but don’t know how they’re going to measure it or prove their efforts were worth it (the apparel supply chain is pretty complicated).
I’m hoping that by setting such an aggressive target, LS&Co. has broken that barrier and can forward the conversation of addressing onsite footprint reduction as part of a team of industry players all working toward the same goal (and saving our supplier money too). After this effort has been maximized, or ideally in parallel with, we can really shift the conversation to grid-level clean energy and better energy policies in the developing markets where our products are manufactured.
Levi PaCT IFC science-based targets