Decarbonising the industrial value chain in Bangladesh

When conducting the 27th Global CEO Survey, one of the most notable findings among Bangladeshi respondents was the linking of CEO compensation to climate goals.

While this trend is largely driven by multinational companies with operations in Bangladesh, it appears to be continuing and possibly even expanding.

However, climate targets cannot be achieved without decarbonizing industrial value chains. Contrary to the belief of many business leaders that decarbonization harms competitive advantages, the right mix of creativity, economics, risk management and modern technology can deliver excellent business benefits while decarbonizing industrial value chains.

But what does industrial decarbonization mean?

Industrial decarbonization refers to the efforts of industries to achieve the climate goals of the Paris Climate Agreement, to which Bangladesh is a signatory. The aim of these efforts is to reduce carbon dioxide emissions, which is crucial for industries that directly emit greenhouse gases.

Companies can start their decarbonization programs in several ways. One approach is customer-centric business transformation; another is value chain transformation, which affects supply chains, finance, and data platforms.

A recent study by PwC UK found that 47% of participating manufacturing companies saw customer demand for low-carbon products and services.

While no specific surveys have been conducted in Bangladesh, PwC’s discussions with CEOs of some of Bangladesh’s leading manufacturers suggest that they are anticipating the emergence of such demands. Some of them are confident that their product portfolios are ready to meet such customer demands and take a first-mover advantage, while some others are preparing for the next wave of transformation.

However, to deliver decarbonized products and services or those with a lower carbon footprint, changes must be driven along the entire value and supply chain. The complexity of this endeavor varies by industry and pace of implementation. Distributors, suppliers and other business partners must work together to rethink and redesign the value chain to create products and services that meet the new requirements.

This would be particularly relevant for those sectors that are at the beginning of the value chain of most industries, such as chemicals, construction and heavy industries. For example, each industry would need cement as a direct or indirect input to build its plants and machinery and to maintain ongoing operations.

To achieve sustainable economic growth, demand for cement should be mitigated by prioritizing decarbonization and producing products with a lower carbon footprint, such as cement with a lower clinker content and a higher fly ash content. The good news is that many leading manufacturers in Bangladesh have already embarked on such a path.

It is crucial that companies recognize the benefits of these new products and services. Tax planning and supply chain redesign will significantly improve the entire value chain. Government and regulatory support can also help companies in their decarbonization efforts.

According to the World Bank, the manufacturing sector contributed 24% to Bangladesh’s national GDP in 2023, the highest in the last two decades. Given the increasing importance of industry in the national economy, it is imperative that efforts to decarbonize industry are aligned with national decarbonization goals.

Arijit Chakraborti is a partner at PwC.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.