Scope 3 Decarbonization – From Data to Climate Action
The Importance of Supplier Engagement and Climate Maturity in Scope 3 Decarbonization
In our CHOICE Event #63 Luke Abbott from Equipoise Earth, one of the Top 10 Sustainable Procurement consultancies, and our CEO Yasha Tarani shared their insights on the importance of supplier engagement to gather climate data and understand your suppliers climate maturity to drive Scope 3 Decarbonization.
Discover in the following why every company needs to get started with their climate data program to increase value, mitigate risk and optimize costs through their supply chain.
Mission of Sustainable Procurement to drive Decarbonization
- Rebalance a company’s impact on planet and society through sustainable procurement action.
- Ensure the importance and foundation of sustainability performance in the supply chain.
- Provide transparency to allow for smart climate choice that reduce emissions.
In the pursuit of a more sustainable and climate compatible future, organizations are increasingly recognizing the significance of Scope 3 Decarbonization. This involves especially reducing emissions associated with the procurement of goods and services (Scope 3.1), which often make up a substantial portion of a company’s total carbon footprint.
To embark on this journey effectively, initial data collection is critical, and it hinges on two key components:
- Supplier Emissions Data and Supplier Climate Maturity Data.
Supplier Emissions Data
- What It Answers: This data answers the fundamental question, “What portion of my total carbon footprint results from the procurement of goods and services?”
- The Spend-Based Method: The journey begins with the spend-based method. Organizations categorize their procurement spend, associating each supplier with their respective spend in specific categories.
- Calculating Emissions: To estimate emissions, organizations align suppliers with industry-average spend emission factors. These factors are typically provided by government organizations, offering insights into the emissions associated with spending in various sectors.
Supplier Climate Maturity Data
- What It Answers: Supplier climate maturity data addresses the readiness of suppliers to support an organization’s decarbonization targets.
- The Role of Climate Scorecards: A consistent scorecard for the climate maturity is essential for comparing qualitative supplier climate data. It assesses factors like strategy, targets, governance and actions taken by suppliers.
- Assessment Method: Rather than sending long in-depth surveys, a quick screening of the climate maturity of suppliers can be done with public data via AI-driven data pipelines or with an easy to handle Climate Readiness Check.
From Data Collection to Scope 3 Decarbonization
- Important to note: Data collection is no means to an end. It is only as valuable as it is actively use. First and foremost, it serves as the foundation to develop a Scope 3 decarbonization strategy and implement actions – together with your suppliers.
- Take smart buying decisions: Supplier specific climate data helps organizations to prioritize actions and decide on the most suitable approach for supplier engagement. Taking data-driven climate choices is key to drive the value creation in your supply chain!
How to Prioritize Climate Actions in Procurement
To transform the way companies take buying decisions and work together with their suppliers to reduce emissions, they needs to take an active role. Best Practices is not a top-down approach, but to support your business partners and walk the talk.
This includes managing your own climate performance first, committing to strong science-based targets and providing resources for suppliers to emphazie your decarbonization agenda in specific categories.
Supplier emissions and maturity data should therefore be considered to inform the prioritisation and the approach for supplier engagement:
- Tactical Interventions: Selective investments and partnerships might be necessary to drive decarbonization.
- Secure Your Supply: Being an early mover in decarbonizing the supply market can offer a competitive advantage.
- Let the Market Provide: Leveraging market options as they become available can be an effective strategy.
The 4E’s – Pillars of Successful Supplier Engagement
Supplier engagement is an ongoing process that focuses on collaboration, offering benefits to both the organization and its suppliers.
- Engage: Clearly communicate decarbonization objectives and maintain open communication channels.
- Educate: Deliver targeted training, equip suppliers with essential tools, and connect with peer networks for best practices.
- Encourage: Leverage influence for target setting, establish clear contract expectations, and engage in ethical advocacy and lobbying.
- Endow: Provide motivating non-financial incentives, consider preferred payment terms, and commit to necessary financial investments.
Leveraging Digital Tools: Investing in digital tools is crucial to underpin at-scale supplier engagement efforts and implement your Decarbonization Levers. Supplier collaboration on a digital platform can take various forms, starting with the data collection, and moving towards providing concrete best practices how to advancing and supporting supplier actions.
Here are some real-world examples:
- Renewable Energy Adoption: Companies encourage their suppliers to buy renewable energy, partnering for example with energy suppliers to provide favorable energy prices (like BT).
- Decarbonizing Transport: Companies set up decarbonization guides for their suppliers, focusing on energy-saving training, low-carbon emission driver systems, and smart technology for transport (like Siemens’ Carbon Reduction Supplier Programm).
- Waste Reduction & Circular Procurement: Companies are collaborating with plastics suppliers to create renewable and recycled material that reduce fossil oil-based materials in production (like neste).
In conclusion, the journey toward Scope 3 decarbonization starts with data collection, which hinges on emissions data and supplier climate maturity data. This information must be used to drive supplier engagement and the pursuit of decarbonization actions.
Collaboration drives Transformation
While procurement used to be mainly based on cost saving, today collaboration among peers on sustainability and along international climate targets is essential, as is sharing best practices and insights to encourage chance.
Digital tools, such as the The Climate Intelligence Platform, are critical for making an impact in sustainable procurement.