No company’s action plan is complete without considering how to remove greenhouse gas (GHG) emissions from its supply chain. Corporations are ratcheting up their efforts and using Science Based Targets (SBT) to set supplier emissions targets and address challenging Scope 3 emissions.
The complexity and opacity of global supply chains means Scope 3 emissions are underreported and difficult to measure. However, we cannot wait for perfect information before we act. Companies must move quickly to decarbonise their supply chains. What follows are six proven levers to achieve this.
Lever 1: First-Tier Supplier Projects
This is arguably the most critical lever to reduce supply-chain emissions. Actively engaging their highest-emitting suppliers in strategic categories and encouraging – or financing – projects that reduce emissions is the best way for companies to make reductions. These projects can be instigated by a buying company or developed by suppliers.
In a buyer-led approach to project development, companies identify suppliers that are responsible for much of their Scope 3 emissions and directly engage with them. In a supplier-led approach, companies can multi-stakeholder coalitions to identify projects and facilitate their implementation. Supplier workshops are ideal platforms to foster awareness and share best practices. Collaboration is paramount.
Lever 2: Upstream Raw Materials Projects
Companies should assess risks and opportunities to identify priority ingredients or critical commodities. Upstream raw materials projects encompass sustainable agriculture, forestry projects and other interventions that reduce emissions and can drive other positive impacts. These projects are undertaken within a supply shed (specific supplier geography) in a company’s upstream supply chain for a critical raw material.
They require a good deal of collaboration with key stakeholders that can form coalitions to identify high-impact emissions reduction projects and even fund them. By partnering, companies can unlock shared value at a lower cost or larger scale.
Lever 3: Logistics Decarbonisation Projects
Logistics offers a powerful lever for decarbonisation, but the complexity of transport networks and the pace of technological change makes it challenging to drive action. Companies must analyse their upstream and downstream logistics profile, business models, and modes of transit (road, rail, ship, air).
They can then evaluate the impact of implementing innovative solutions – such as route optimisation, alternative fuels, and advanced e-mobility. Implementing these measures at scale requires collaboration with direct transport suppliers. Together they can tackle areas of transport that are challenging to decarbonise, such as air transport and shipping. By facilitating partnerships, companies can unlock collaborative and competitive efforts that drive market change.
Lever 4: Resource Efficiency At Supplier Sites
Resource efficiency is an established driver of global emissions reductions. Buyers can actively help suppliers with manufacturing sites, distribution centers, or other critical physical infrastructure to identify and finance onsite energy efficiency and emission reduction opportunities. It is relatively easy to encourage suppliers to target impactful and cost-effective projects and report reductions.
Buyers can facilitate (physical or virtual) resource efficiency workshops to help build supplier competencies. Resource management experts can provide hands-on training to help identify hotspots, such as locations with significant efficiency opportunities. By identifying projects with shorter paybacks and clear cost savings, these programs can be entirely self-funding.
Lever 5: Renewable Energy Transition At Suppliers
The availability of renewable energy enables companies to demand that their suppliers transition to renewable power. To accelerate decarbonisation, they must prioritise strategic supplier sites with the greatest potential for renewable energy transitions.
Companies can support implementation by communicating their renewable energy commitments, setting feasible goals, engaging in buyer alliances and advocating for policy change. The goal is to bolster supplier capacity to identify and drive impactful projects. Buying companies can guide action through direct financing or by coordinating local financing. Efforts to understand renewable energy options across a company’s supply chain can help its suppliers overcome lingering barriers.
Lever 6: Supplier Science-Based Targets
Companies can encourage or require suppliers to set Science Based Targets (SBTs). Target setting is crucial to reducing emissions, but is not enough. Companies should help suppliers construct actionable roadmaps to achieve their goals and unlock substantial growth.
Setting SBTs can be costly. Companies can amplify their impact by facilitating supplier workshops and providing strategic financing. They can also share expertise through knowledge-sharing platforms. SBT commitments can drive consistency and accelerate progress by enabling companies to assess which suppliers align with their climate ambitions.
Accelerate Supply Chain Transformation Today
These six ways to decarbonise supply chains can be applied at scale today. So, what are you waiting for? We have a decade. Let’s get to work.