Author: James Lewis is an expert in international renewable energy markets, with an emphasis on emerging markets in India
Since Climate Week 2016 in New York City, the total number of RE100-pledged companies increased to 81. Apple is one of the most recent – and interesting – additions. Apple’s approach to achieving 100% renewable energy goes beyond its daily operations and is rooted in engaging its international supply chain. Within the last two months, three of Apple’s major global suppliers (Lens Technology, Solvay Specialty Polymers, and Catcher Technology) pledged 100% renewable energy for all Apple production. In total, these suppliers’ commitments represent over 1.5 billion kilowatt hours of clean energy by 2018.
Multinational organizations spanning a broad range of industries are employing a similar environmental strategy. Nike recently partnered with Apollo Global Management to create a new apparel manufacturing supply chain company, and others such as Adidas and Tetra Pak have ambitious supply chain goals. This activity is driven, at least in part, by competitive and NGO pressure from entities such as CDP, The Sustainability Consortium (TSC), and the Sustainable Apparel Coalition (SAC).
The process of engaging international suppliers on renewable energy typically manifests in one of two ways. One approach is for a company to encourage its primary suppliers to explore renewable opportunities, such as a power purchase agreement (PPA). A PPA is a long-term contract between a renewable energy developer and a dedicated, credit-worthy offtaker. The offtaker benefits by reducing risks associated with conventional energy generation and has the potential to save money on their energy costs by locking in predictable energy prices from a clean power source.
A second method of engaging a supply chain is via electricity load aggregation. When a company aggregates the load of 3 or more of its suppliers to support a renewable energy project (typically in the form of a PPA), it gains a higher threshold, increased purchasing power, and greater economies of scale. Further, the renewable energy project is able to move forward more easily when it has a full complement of offtakers.
In August 2016, CDP announced that supply chain engagement will become a key element of their reporting structure. Moving forward, they will begin rating companies on how well they manage their renewable energy and carbon-reduction efforts throughout their global supply chains.
This recent shift in reporting standards has made a supplier engagement strategy increasingly more attractive. It allows companies to not only comprehensively meet their own sustainability targets, but also to support their supplier partnerships. Collaborating with supply chain partners – rather than pushing mandates upon them – is an advantageous way to help both parties reach their environmental and economic goals.
Why would suppliers be interested in entering into a PPA? First and foremost, it makes financial sense. PPAs have the potential to give suppliers an established, stable, long-term electricity price which may reduce energy costs. They also advance progress on renewable energy and carbon-reduction commitments, mitigate conventional energy volatility, and contribute to a socially responsible brand that stakeholders demand.
Interested in learning more? Reach out to us today—we’d be happy to have a conversation about engaging your supply chain with a renewable energy PPA and how we can help.