Driving Decarbonization: 5 Steps to Engage Suppliers in Renewable Energy Transition
17th November 2023 marked our calendars – as the first time the world briefly exceeded the 2-degree global warming threshold. In the face of escalating climate change, businesses are under increasing pressure to not only pledge climate targets, but actually reduce their carbon footprint. The imperative to achieve a net-zero future has prompted a shift towards transparency on sustainable practices, particularly in supply chains where typically up to 90% of a company’s GHG emissions come from.
Taking smart buying decisions, based on data and evidence, is therefore essential to rapidly reduce emissions. More and more companies hence gather climate-relevant data of their suppliers and engage with them to create and implement an holistic decarbonization strategy.
In our CHOICE Event #65 we explored together with Josh Seidenfeld, former Supply Chain Clean Energy Lead at Apple and Meta, the pivotal role of renewable energy in supply chain decarbonization. Find here the strategic five-step approach for businesses to engage suppliers in this transformative journey, Josh outlined.
How to Engage Suppliers on Decarbonization
1. The Foundation: Data Collection and Analysis
The first step in decarbonizing the supply chain involves a meticulous understanding of the climate maturity of your supply chain – Which climate targets are set? Are emission and energy data monitored? Which reduction efforts are already implemented? Are more actions planned?
Collaborating with your supply chain partners for accurate data collection is crucial. Because: Bad data in, results in bad data out. Companies should invest in screening of available published data, robust data systems to track, manage and use gathered data and /or partner with credible data platforms to ensure consistency and transparency. The use of messy Excel spreadsheets or aggregated data in email conversation can hinder the credibility of your emission reduction.
Do the work: Outline climate risks along your supply chain using available data sets, and improve those by directly collecting primary data from your suppliers – to foster transparency, accuracy, and the credibility of your decarbonization initiatives.
2. Overcome Black Box: Scope 3 Strategy
Armed with accurate data, businesses can develop a robust scope 3 strategy. Segmenting your supplier base, you can iIdentify high-impact and high-risk suppliers, while setting ambitious yet achievable emission reduction targets and data transparency requests. The integration of renewable energy sourcing as a central pillar in the supply chain decarbonization strategy ensures alignment with Science-Based Targets initiative (SBTi) criteria, contributing meaningfully to global climate objectives. Crafting a comprehensive supplier engagement program further supports suppliers in meeting their renewable energy sourcing goals.
Do the work: Data collection is no means to an end. It serves you as strong, smart foundation to create a decarbonization strategy that is based on data and can be tracked over time. Use is also to segment your suppliers and create improvement requests fitting to their individual climate maturity level.
3. Engage Suppliers: On Decarbonization
Engaging supply chain partners goes beyond transactional relationships, necessitating a shared commitment to sustainability. State which climate targets you are following and why – also provide educational resources, workshops, and knowledge-building activities to impart insights into reducing emissions. Best Practice: Transitioning to renewable electricity sources! Technical support in setting ambitious yet achievable targets enhances the effectiveness of supplier engagement programs.
Do the work: Set up a supplier engagement program that is tailored to the specific needs of your supplier and allows you to work towards your Decarbonization targets. Make sure your Procurement and Sustainability team work hand in hand to implement your company’s strategic goals into actions – together with your supplier!
Therefore, encouraging your suppliers to participate in your deacrbonization journey and specifically the transition to renewable energy involves highlighting four main motivational factors:
a. Business Relationship
- Participating in your climate supply chain program will strengthen your business relationship.
- With rising climate policies, adopting sustainability practices, reporting climate relevant data and switching to renewable energy is not just environmentally responsible but aligns with regulatory requirements. It positions suppliers on the right side of evolving market requirements.
- Many climate actions reduce costs and open up new business opportunities. Renewable energy provides a way for suppliers to lock in lower, less volatile energy prices. This economic benefit also appeals to CFOs and strategic leaders aligning financial considerations with sustainable practices.
d. Business Leadership
- More and more companies recognize the need to take climate seriously for long-term survival and leadership in the 21st century. Participation in decarbonization initiatives establishes a company as a leader addressing climate challenges.
4. Implementation: Renewable Energy Solutions
Translating intention into concrete climate action requires pragmatic solutions. You can facilitate the adoption of renewable electricity along your supply chain through various avenues:
- Purchasing unbundled Energy Attribute Certificates (EACs)
- Corporate Power Purchase Agreements (PPAs)
- Onsite generation through solar panels, wind turbines, or other renewable technologies
- Offsite: Green tariffs provided by local power utilities or retailers
5. Track Progress: Use Reliable Data
Accurate and transparent progress tracking is crucial for validating supply chain decarbonization efforts. Establishing robust monitoring and reporting mechanisms ensures the documentation of efforts taken and actual emission reductions achieved, including renewable electricity consumption, and overall climate performance. This data informs your decision-making, enhances accountability, and builds stakeholder trust.
Do the work: Build up your own holistic climate management data system, which does not only track emissions along Scope 3, but also efforts taken and achievements made towards your reduction targets.
Getting Started with your Supply Chain Deacrabonization Program
As all businesses navigate complex climate challenges today, engaging suppliers on decarbonization and adopting renewable energy within the supply chain emerges as a powerful tool for industry leadership and responsibility. Moreover, aligning with SBTi guidelines and providing strategic benefits for supplier participation positions companies as leaders in the global effort towards a more resilient future.
The urgency of today underscores the need for collaborative approaches in engaging supply chains on our overall decarbonization journey. The upcoming Scope 3 Action Group 2024 offers you to join leading businesses in driving meaningful change, setting up your supply chain climate program sand contribute to a sustainable economy.