How to generate Value from Supplier Climate Data

New reporting requirements and stakeholder expectations are driving large companies to collect climate-related information from their suppliers. Once they have overcome the first hurdle of collecting data along complex supply chains, they immediately face the next challenge. What do I do with all this supplier climate data now? How can I generate value for my company from it? How can it help me to achieve my sustainability targets?

This is what we learned at the CHOICE Event #52 from Neele Franke and Hugo Ernest-Jones from IBM Consulting. Here you will find the most important insights from their presentation.

Companies struggle with operationalizing climate strategies

When it comes to sustainability and climate efforts by large companies, it is striking that today many of them are already publicly committing to climate targets and developing strategies for their implementation. While most have ambitious plans, however, many are still struggling to operationalize them. A recent survey among over 2,000 CEOs worldwide revealed that 86% of companies have a sustainability strategy, but only 35% have acted on that strategy (Source: IBM Institute for Business Value (2022): Sustainability as a transformation catalyst).

So while the “What” seems to be rather clear, the “How” of getting it actually done remains a big challenge. Added to this is the increasing pressure and complexity of regulations and frameworks for corporate sustainability and climate disclosure. Regulators are mandating minimum levels of reporting – putting the responsibility onto corporations. They, in turn, have to find their way through the jungle of new standards and initiatives defining the most important climate data in companies. Since up to 90% of a company’s emissions originates from the supply chain, they must also manage to collect this data from their suppliers.

The evolution of a sustainable enterprise

For companies that start collecting supplier climate data, it is important to understand that next to compliance and reporting purposes, they can also generate huge amounts of value from their data collection. If done right, it can help the company to operate more effectively, more profitably, with reduced costs and in a more innovative way to develop new products and services. 

Based on this insight, companies can be classified in a maturity curve for their sustainable evolution in three stages.

Stage 1 – Sustainability Compliance

Focus mainly on license to operate and meeting regulatory or compliance requirements. Digital maturity is low, processes and systems are siloed, and data collection and aggregation is a manual process.

Stage 2 – Sustainability Optimization

Sustainability initiatives exist for Social, Environmental & Governance, across operations and support functions. Acceleration of digitization and automation of sustainability data collection and reporting.

Stage 3 – Sustainability Transformation

Sustainability is embedded as a core value and mission statement across all company departments and functions. Technology is focused on differentiation, advanced analytics and futuristic, with the objective of leveraging sustainability as a competitive advantage.

Key steps in operationalizing supplier climate data

How can companies leverage their supplier climate data to move from mere sustainability compliance to real sustainable transformation? The following key steps can serve as a guide to successfully operationalize the data collected in order to drive action.

1. Data Collection

There are two different options when collecting climate data from suppliers. Real supplier “primary” product level data is the preferred where available, though availability is limited. “Secondary” averages data on the other hand are readily available, but of limited quality. Clients should therefore collect and integrate primary data for selected high impact/strategic suppliers (at least scopes 1 and 2) where possible and use secondary data sources to model remaining emissions.

2. + 3. Data Integration and Engine

While many companies still collect and integrate their data manually in Excel spreadsheets, the goal should be to automate this process as much as possible. Specialized software solutions are already available for this purpose, such as the Climate Intelligence Platform. This has the advantage that time-consuming processes can be carried out efficiently and cost-effectively, and the data is also auditable.

4. Visualization and reporting

Once companies have collected and integrated the supplier climate data, they should visualize the results next in order to draw out insights to inform reporting and strategy. Smart visualization with specialized tools also supports the management of data availability and quality.

5. Simulation and strategy

In order to use the data not only for insight into the past, but also for future planning, the next step is strategy work. Companies can now leverage the supplier climate data to help guide decision making around reducing emissions along the supply chain. This is where modeling and simulation comes in and links with the next and last step: supplier engagement.

6. Supplier Engagement

Collaborating with and engaging suppliers is the core and end goal of every effort to decarbonize the supply chain. It is important to note that successful supplier engagement must occur at three levels.

Process & Governance – Companies should design a strategy and operational model aligned to supplier benefits and user outcomes that are fair, democratic, transparent and evolving.

Business Value – In order to secure participation, companies must design a business model that includes appropriate incentives to stimulate collaboration and network effects.

Technology – Technical solutions with winning human experiences help to drive mass adoption of new digital products and services with privacy, trust and security.

Start with joining the Scope 3 Action Group

The best approach to finding the entry point to collecting and leveraging supplier climate data is to “start small and think big”. The Scope 3 Action Group offers a perfect start for companies looking to gather data and engage their suppliers for climate action. The group offers a 4 month peer leanring journey to develop your Scope 3 decarbonization startegy and kickstart your data and engagement program.

Here you can find out more about the program and how you can join.