Supply Chain Decarbonization – Why primary data is key for action
Companies only achieve their climate targets, when suppliers align with their climate strategy. This is why leading businesses collect primary climate data from their supply chains and establish collaborative supplier networks for decarbonization.
Future-oriented companies see the urgency to act. The world wants them to do. More and more companies are accused of acting superficially as “climate neutral”. Therefore companies do not only need to set climate targets, but need to develop clear actions and measures that find their way into business processes. Procurement plays a major part here as up to 90% of a company’s emissions come from the supply chain. Climate compatible supply chains are the most important lever for a company to reduce emissions.
In our CHOICE Event #43, Maximilian Droste from amc Group and Yasha Tarani from The Climate Choice shared insights on how procurement leaders can speed up the decarbonization process of the supply chain by collecting validated data on the overall climate performance of suppliers. Find the most important insights in the following.
The new role of procurement in climate strategies
First of all: The role of procurement is shifting – becoming a climate champion means anchoring climate targets and carbon reduction measures into procurement processes. Scope 3 emissions, those emerging along the supply chain, account for up to 90% of a company’s total carbon emissions. Hence, a company will reduce emission on a far greater scale, if it gets all relevant suppliers on board with their own climate strategy. Establishing a functional supplier engagement program, which allows for cooperation on climate measures, is needed.
Obtaining reliable primary data as baseline for collaboration
Companies need to understand: How are my suppliers managing their transition towards a low carbon economy? Do they set climate targets, do they alig with our climate strategy and which data can they already report?
To answer these questions, a set of multi dimensional climate-related data is required. A company needs to have a comprehensive understanding of the climate performance of its most relevant suppliers. This allows to identify the main levers for decarbonization along the supply chain and work towards meaningful actions.
In order to establish a climate-relevant primary data foundation, companies must set up a scalable and consistent process for collecting comparable, high quality supplier data. This goes beyond gathering carbon footprints, since emission data itself is not sufficient enough as baseline for transformation processes. Tackling climate transformation additionally requires forward-looking metrics and indicators in order to assess the supplier’s climate risks and transition opportunities.
Empowering supplier collaboration on supply chain decarbonization
In order to put these processes into action, it is important to have a clear value propositions for both, suppliers and buyers. This means, that all involved parties need to benefit from the opportunities and advantages of measuring climate-revenant data and developing carbon reduction measures together. While buyers gain audit-quality primary data from their supply chain, suppliers obtain forecasts of individual climate risks, benchmarks and suggestions for improvements.
4 Steps for collaborative Supply Chain Decarbonization
Today we see that Supply Chain Decarbonization is not a cost driver for companies, but is a perfect justifiable investments in the future viability of a business! In the following, you find the most relevant steps to tackle collaborative decarbonization.
1. Materiality of top suppliers
Starting small is best to test is the most efficient way going forward, before rolling out new processes. Conduct a materiality analysis of suppliers and commodity groups to identify the 5 – 10 most relevant suppliers in terms of decarbonation effects. This helps companies to prioritize the most relevant reduction levers along the supply chain.
2. Climate Performance Assessment
Have a structured and data-based analysis of the current climate performance of the top 5 suppliers, based on the Climate Performance Assessment.
The assessment software tool is aligned with internationally recognized disclosure frameworks and thereby covers all relevant dimensions of climate performance, such as Governance, Strategy, Transparency, Metrics & KPIs and Decarbonization Measures.
3. Measures for CO2 reduction
As part of joint one-day workshops with the top suppliers, companies can evaluate and discuss the findings for each supplier and develop concrete supplier-specific measures to reduce CO2. amc group provides support throughout this process and accompanies the entire implementation of the workshops as well as preparation and follow-ups.
Reviewing and optimization
Finally, review. This step is often underestimated, but inherently important in order to achieve effective change. Without feedback loops, suppliers and companies cannot revise measures, so that new processes can not add much value.
Conclusion: Decarbonization is a purchasing issue! Take the opportunity to proactively shape climate transformation form within purchasing. In order to achieve real change, companies and suppliers collaborate to transform supply chain processes and move towards a low carbon economy together!
You are interest in supplier collaboration and want to know more about how to collect primary supplier data? We invite you to book a demo with us.