Decarbonising Bangladesh’s industrial value chain

Illustration: TBS

While conducting the 27th Global CEO Survey, one of the most noteworthy findings among Bangladeshi respondents was the linking of CEO compensation with climate goals. 

While this is largely followed in multinational businesses with operations in Bangladesh, the trend is apparently here to stay and possibly expand.

However, climate goals cannot be achieved without decarbonising the value chains of the industries. Contrary to many business leaders' belief that decarbonisation is a deterrent to competitive advantage, the reality is that the right blend of creativity, commerciality, risk management and modern technology can deliver superior business benefits while decarbonising industrial value chains.

But what is industrial decarbonisation? 

Industrial decarbonization refers to efforts industries undertake to meet the climate goals set in the Paris Climate Agreement, to which Bangladesh is a signatory. These efforts target reducing carbon dioxide emissions, essential for industries that directly emit greenhouse gases. 

Organisations can start their decarbonization programmes in various ways. One approach is business transformation with a customer focus; another is transforming the value chain, which affects supply chains, finance and data platforms.

A recent study by PwC UK revealed that 47% of participating manufacturing organisations felt customer demand for low-carbon products and services. 

While no specific surveys have been conducted in Bangladesh, PwC's interactions with the CEOs of some of the leading manufacturers in Bangladesh indicate that they anticipate that such demands will arise soon. Some of them are confident that their product portfolios are ready to address such customer demands and capture the first-mover advance while a few others are preparing for the next wave of transformation.

However, preparing decarbonized products and services, or those with lower carbon footprints, requires driving change throughout the value and supply chains. The complexity of this endeavour varies depending on the industry and the pace of implementation. Distributors, suppliers, and other business partners must collectively rethink and redesign the value chain to create products and services that meet new demands.

This would be particularly relevant for the industries that are at the starting end of the value chain for most of the industries such as chemicals, construction and heavy industries. For example, any industry would require cement as their direct or indirect input to set up their plants and machinery and run the ongoing operations. 

For the sustained growth of the national economy, the demand for cement should be mitigated by prioritising decarbonisation and manufacturing products with a lower carbon footprint such as cement with a lower proportion of clinker and a higher proportion of fly ash. The good news is that many leading manufacturers in Bangladesh have already embarked on such a journey.

It is crucial that businesses realise the benefits of these new products and services. Tax planning and supply chain redesign will significantly improve the entire value chain. Also, government and regulatory support can assist organisations in their decarbonization efforts.

According to the World Bank, the manufacturing sector contributed 24% of Bangladesh's national GDP in 2023, the highest in the last two decades. With the increasing role of industries in the national economy, it is imperative that the effort on industrial decarbonisation should align with the nation's objectives of decarbonisation efforts.
 

Arijit Chakraborti is a partner with PwC. 

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