..companies must begin tackling supply chain emissions and starting supplier engagement
Scope 3 supply emissions typically represent ~70% of a company's carbon footprint. Now more than ever companies know that they must take responsibility for their indirect impact on climate change. Emissions reporting of the supply chain has largely been voluntary, driven by consumers, investors and employees. However, a number of regulatory initiatives are underway to make this a mandatory requirement.
Benefits of Supply Chain Engagement
Increased visibility of supply chain emissions can make a critical contribution to decarbonising the global economy. In a nutshell it can:
- Inform corporate decisions around procurement,
- Identify energy and resource risks across the supply chain,
- Earn stakeholder trust whilst avoiding greenwashing,
- Mitigate future carbon-related risks,
- Unlock new opportunities for efficiency,
- Innovation and differentiation, among others.
Don't just take our word for it, the sustainability statistics speak for themselves – 65% of consumers prefer products from companies that have sustainable and transparent supply chains (Source: Food Industry Association), whilst companies with sustainable supply chain practices, on average, outperform peers financially by 15% (source: CPD).
How can your organisation begin its supply chain engagement journey?
There are a number of ways to measure and engage with your supply chain emissions. If you are just getting started on your supply chain journey, a thorough interrogation of in-house procurement processes and understanding of supply chain contracts is a great place to start. Visualising provides a deeper understanding of flow and processes.
The GHG protocol recommends a two phased approach involving internal planning prior to engaging with suppliers and actively working with suppliers to collect emissions data. This article highlights the main steps that need to be taken to establish a robust engagement strategy.
PHASE 1: Development of a supply chain strategy
1. Foundation and target setting
The first step in identifying your supply chain emissions is quantification and target setting of Scope 3 emissions. Ensure that a scientific emission reduction target is set covering as full a picture as possible of your company's supply chain. Following this a materiality assessment, supply chain mapping exercise, and hotspot analysis will identify areas which have the greatest impact and establish a strong starting point from which a mitigation risk strategy can be developed.
Ultimately any business decision comes down to board level signoff, ensure that all high-level decision makers are carbon literate and understand the clear business case for your strategy from the beginning. This will help gain wider stakeholder buy-in both internally and externally.
PHASE 2: Implementation of the supply chain strategy
2. Active procurement engagement
Organisations should seek to integrate climate and emission expectations into the buyer-procurement relationship. Early communications of target expectations to suppliers from top-level management will ensure a unified delivery. An internal KPI reporting framework (supplier scorecards) will support procurement teams in achieving targets and monitoring performance. Supplier's questionnaires and self-assessments will form the basis of your delivery strategy.
As a one size fits all approach may not be suitable for all suppliers – industry and size will play an important role in determining supplier NetZero requirements. An incremental approach focusing on tier 1, 2, 3 suppliers and high emitters provides a structured foundation.
It is your organisations responsibility to implement a communication strategy that will align climate performance, procurement and key account business. Regular dialogue and incentivised recognition will optimise emission reduction potential in your supply chain.
Suppliers will need to be provided with carbon literacy training to improve knowledge and emission calculation tools, to quantify, disclose and reduce GHG emissions. There are many publicly available reporting initiatives; SBTi, CPD, Ecovadis which can be utilised. Third-party technical assistance programs should be made available by your organisation.
4. Implementation and reporting
The implementation and reporting of supply chain emissions is an iterative process, which takes place across several annual intervals. Companies should seek to implement iterative reviews to track progress towards supplier emission goals.
Inevitably supplier emissions will tie into your company decarbonisation targets so it is important to tackle this challenge head on. Collaboration, communication and the incorporation of sustainability into the procurement of goods and services will be the defining factors in your company taking the next steps in a robust supply chain engagement journey.
Getting expert help with Scope 3 Supplier Engagement can give you peace of mind that all emissions are being reported in the most accurate way and all suppliers are being engaged with using a rigorous and established process methodology.
Although mapping and engaging with the supply chain may seem like a daunting task, at Lucion, we are here to assist. Lucion is a purpose-driven company committed to safeguarding both people and the environment. Being led by the latest climate science, our sustainability team can streamline and enhance your company's sustainability transition.
At Lucion Group we have developed a wide range of techniques and strategies to simplify your supply chain engagement process and we're ready to guide you in your efforts to implement a more sustainable business strategy.
For further support with your supplier engagement programme, get in touch with Lucion Group through our website https://luciongroup.com
Alternatively, you can email our Senior Sustainability Consultant at info@luciongroup.com