Supply Chain Decarbonization: Why it Matters and Where to Start

The imperative to understand your organization through a carbon emissions lens is speeding up. Regulators, investors, partners, and customers are putting a magnifying glass on company environmental practices. While it used to be sufficient to focus only on the near-to-you emissions (Scope 1 & Scope 2) it is becoming common practice to need to include the Scope 3 indirect emissions of your supply chain as well.

What most companies entering the world of environmental responsibility may not realize is that the majority of their carbon dioxide emissions are not likely attributable directly to them. Businesses looking to gain the most ground are looking beyond their walls and vehicles to establish more efficient, environmentally-friendly supply chains.

What is Supply Chain Decarbonization?

There are three categories (called scopes) used to categorize greenhouse gas emissions (Scope 3 emissions include the supply chain).

  • Scope 1 emissions are produced directly by the company.
  • Scope 2 emissions come primarily from purchased electricity.
  • Scope 3 encompasses greenhouse gasses created outside the reporting company but are tied to the company’s emissions. This is in large part generated in the upstream and downstream value chain.

In its January 2021 report, titled “Net-Zero Challenge: The supply chain opportunity,” the World Economic Forum (WEF) notes that this initiative is a “game-changer” for the impact of corporate climate action. It’s a global movement that should spread as far as your partner network (and hopefully their partners). When companies hold partners and suppliers accountable, a domino effect of decarbonization follows.

Supply Chain Decarbonization Matters

Striving for greener practices in your supply chain is an important initiative when it comes to corporate responsibility, but it’s more than that. It’s simply a smart business decision. As consumers and B2B customers increasingly put their money where their mouth is and standards increase, eco-positive companies are poised for the cultural and regulatory swing towards sustainability.

Consumers care

Companies that sell consumer-facing products stand to benefit from increasing consumer interest in making purchases that align with their values. Nearly 6 in 10 consumerssurveyed are willing to change their shopping habits to reduce environmental impact. Additionally, research from BCG shows that most companies can achieve supply chain decarbonization with only a marginal impact on product costs, meaning customers won’t see a noticeable price increase.

Regulations are changing

Governments and regulators are beginning to demand that businesses participate fully in global climate change efforts. Many suppliers have realized that these changes will affect them and are more open to changing their practices to avoid interruptions or heavy fines. As more corporations ask for these changes, there will be even more incentives for suppliers.

Change is economically feasible

A WEF report found that around two-fifths ofall emissions in the analyzed supply chains could be eliminated with readily available, affordable levers such as circularity practices, energy efficiency, and renewable power. Even net-zero supply-chain emissions are achievable with limited impact on product costs. In fact, the report shows that 40% of all emissions could be eliminated with measures that create savings.

Ideas for Supply Chain Decarbonization

There are many ways for businesses to get creative with supply chain decarbonization. We are confident that no matter your business model, you can find ways to reduce the carbon footprint of your supply chain. A few simple methods to consider include:

  • Reducing the emissions of first-tier suppliers by providing them with support and taking baseline measurements to track improvement. For example, BMW requires all battery suppliers to include their carbon emissions in response to RFPs.
  • Seeking more environmentally responsible raw materials suppliers. Consider forming coalitions to encourage producers to make changes.
  • Analyzing logistics, including upstream, downstream, and even your overall business model, to uncover areas for improvement.
  • Help supplier sites improve efficiency in areas like facility energy consumption.

These areas are solid starting points, but every supply chain is unique. Nothing beats good, old-fashioned communication. So, talk to suppliers, transportation companies, and partners to find small wins that could lead to big gains for the planet.

Getting Started with Supply Chain Decarbonization

Of course, it’s a great idea to look for improvement within your own operations, and crystal-clear sustainability data is a big help. When you’re ready to look at your supply chain, the first step is assessing and understanding emissions.

Companies that embark on the journey of supply chain decarbonization must continue taking steps for improvement, including making low carbon output a priority when vetting future supply chain vendors. Consider partnering with companies that can help you achieve more meaningful emissions reporting, rather than relying on generic benchmarks and external data.

Automating data collection and cleansing will not only make tracking easier, it will also result in more reliable data that can be used for monitoring emissions or press opportunities. Working with a system that offers dynamic visualization makes it easier than ever to see how you’re contributing to the reduction of greenhouse gasses daily. Plus real data will enable you to design a real strategy and actions that have a measurable impact.

Ready to get started? Schedule a demo to learn how SustainaBase ensures you have what you need today and that you are also future-proof for what’s coming next in sustainability. Whether you’re ready to take your carbon footprint reduction to the next level or you don’t know where to start, we’re here to help!

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