“Value chain emissions” – or Scope 3 emissions – can often constitute more than half of a company’s total carbon footprint.1 Yet the immense complexity of today’s supply chains makes decarbonization a major headache.
Companies might often have to persuade possibly thousands of suppliers to participate in a net-zero program to collect emissions data and take any necessary actions to help reduce carbon emissions. Then there’s the sizeable task of accurately measuring and reporting progress.
Many suppliers are small and medium-sized businesses and lack the expertise or the financial strength to independently put in place decarbonization initiatives, which brings up the thorny issue of who should pay for any solutions.
Rather than face such a daunting prospect, it’s tempting to argue that each supplier, large or small, should be responsible for reducing its own emissions (i.e. Scope 1 emissions, covering their own operations and Scope 2, which cover power consumption).
However, I believe that a collaborative effort across the supply chain will produce a far greater reduction than the sum of each players’ individual efforts. There’s additional pressure from ESG (environmental, social and governance) regulations, requiring organizations to report on decarbonization efforts across their supply chains.
Pulling and pooling the decarbonization levers
By proactively engaging with their suppliers, companies can help educate them on the different levers that drive decarbonization, including procuring renewable power and green raw materials, introducing energy efficiency measures, offsetting and removing carbon, technology solutions like CCUS (carbon capture, usage and storage), fuel switching, and adopting a “circular economy” mindset.
Crucially, such solutions may be far less expensive than imagined – in some cases, adding no additional cost, particularly when it comes to a circular economy, energy efficiency, and long-term renewable energy power purchase agreements (PPAs) that stabilize electricity supplies and prices.
One way to accelerate action is to develop framework solutions for the supplier base, which may involve, for example, a regional PPA contract that all suppliers could tap into. Companies could also provide education and training programs on how to implement circular economy solutions.
In my view, some of the most effective supply chains involve collaboration in pursuit of an excellent customer experience, with every player focused on this outcome. It’s a similar story for decarbonization, pooling the collective resources to help cut emissions and ensure that supply chains remain resilient and sustainable.
1 “Scope 3 Emissions” Global Compact Network UK