Unleashing Scope 3 Action: 2024 Procurement Trends driving Decarbonization

As we navigate through 2024, the procurement landscape is being reshaped by huge supply chain disruptions, increasing costs, and heightened demands by customers and reporting regulations for sustainability. Amidst these challenges, significant opportunities for Scope 3 decarbonization are emerging.

New Opportunities in Sustainable Procurement

A recent survey (Capgemini 2024) underscores this shift and highlights new opportunities:

83% of businesses now evaluate vendors based on sustainability metrics, driven by a surge in data-driven decision-making.

Actionable data and tech is increasingly pivotal in this transformation, 60% of organizations have piloted generative AI, highlighting the need for a data-driven approach that integrates sustainability into technological advancements.

This is in line with insights from Gartner (2023), claiming that 73% of Chief Supply Chain Officers (CSCOs) intend to grasp their opportunity to invest in growth through new technologies.

In this evolving sustainability and tech context, several key trends are set to define procurement practices in 2024 that drive decarbonization. Here’s a closer look at how businesses can leverage these trends to advance their Scope 3 efforts.

1. Elevating Supply Chain Transparency

Supply chain transparency has moved beyond improving internal efficiencies to become a fundamental aspect of corporate responsibility. As companies are increasingly required to provide detailed insights into their environmental and climate impacts, transparency has become essential for meeting regulatory requirements and addressing consumer demands for ethical practices.

In 2024, businesses are expected to invest heavily in technologies that enhance supply chain visibility. European firms, in particular, are prioritizing digital transformation, with three-quarters of companies emphasizing the importance of supply chain visibility solutions, analytics, and forecasting (Reuters 2024). This focus on visibility allows companies to monitor and report on activities from sourcing to disposal, aligning with decarbonization goals and enhancing stakeholder trust.

2. Leveraging Technology for Procurement Decision-Making

Technology plays a crucial role in shaping modern procurement strategies, especially when it comes to Scope 3 decarbonization. The adoption of digital tools, particularly those powered by AI, is accelerating. AI-driven platforms help companies gather, analyze, and utilize supplier data more effectively, supporting informed decision-making that aligns with sustainability objectives.

Read ‘AI’s new Potential for Scope 3 Decarbonization‘

Recent surveys indicate that 73% of supply chain leaders are channeling their technology budgets into growth and performance enhancements (Gartner 2023), with AI being a significant focus. Solutions like The Climate Intelligence Platform form The Climate Choice are at the forefront of this shift, offering advanced tools for assessing suppliers based on climate criteria. However, integrating AI also presents challenges. Thus, companies must navigate these carefully, ensuring for example that their use of sustainability data in procurement aligns with their general digitalisation strategy.

3. Adopting Sustainable Procurement Practices

Sustainable procurement is increasingly recognized as a strategic approach to reducing Scope 3 emissions. This involves sourcing goods and services with lower climate impacts and requesting specific emission factors from suppliers in the procurement process. Additional key best practices to actively reduce emissions, include using renewable energy through Power Purchase Agreements (PPAs), selecting recyclable alternatives, and ensuring compliance with environmental standards.

By adopting these new procurement practices, companies can significantly lower their carbon footprints and demonstrate their commitment to the global sustainability goals. This approach not only addresses environmental concerns but also aligns with consumer expectations and regulatory requirements.

4. Diversifying Suppliers for Resilience AND Sustainability

In response to global disruptions and market volatility, companies are diversifying their suppliers to enhance resilience. This strategy involves near-shoring and re-shoring to mitigate risks and support Scope 3 decarbonization by integrating sustainable practices into the supply chain.

The focus on supplier diversity also requires ensuring that new suppliers align with net-zero goals. This comprehensive approach to supplier management helps build more resilient and environmentally responsible supply chains.

5. Embracing Decarbonization Best Practices with Suppliers

Effective Scope 3 decarbonization requires collaborative efforts with suppliers to implement best practices across the supply chain. Key strategies include:

Circular Procurement Practices: Implementing circular economy principles, such as reusing and recycling materials, helps extend product lifecycles and reduce waste. Partnering with suppliers who prioritize circular procurement can drive significant environmental benefits.

Renewable Energy Agreements: Engaging suppliers in renewable energy initiatives, such as Power Purchase Agreements (PPAs), supports the transition to green energy and reduces overall carbon emissions.

Data Sharing: Transparent data sharing between companies and suppliers enhances the ability to track and reduce emissions. By exchanging data on sustainability practices and performance, businesses can identify improvement areas and collaborate on achieving Scope 3 decarbonization goals.

Find out more here ‘Scope 3 Action Group: Mastering Decarbonization Together!’

As European firms invest in digital tools for monitoring and tracking supplier data, this collaborative approach becomes increasingly effective. The emphasis on digital transformation is evident, with significant investments in visibility solutions, analytics, and forecasting, reflecting a broader commitment to enhancing supply chain decarbonization.

Conclusion

The trends shaping sustainable procurement in 2024 offer a roadmap for effective Scope 3 decarbonization. By focusing on transparency, leveraging technology, adopting sustainable best practices, diversifying suppliers, and embracing collaborative decarbonization efforts, companies can significantly advance their Scope 3 objectives. These strategies not only address current challenges but also pave the way for a more resilient and responsible future.