Schneider Electric’s Path to Scope 3 Decarbonization

To meet their climate targets, global corporations must reduce CO2 from their supply chain in particular, which can account for up to 90% of their total emissions. The problem: they cannot reduce these Scope 3 emissions themselves, but instead have to enable their suppliers to do so. This collaboration requires, above all, holistic data on the climate performance of suppliers, which does not yet exist.

How does a global enterprise such as Schneider Electric deal with this challenge? This is what we learned at the the CHOICE Event #47 from Kanishk Negi, Sustainable Procurement Director at Schneider Electric. Here you will find the most important insights from his presentation.

Schneider Electric’s corporate sustainability strategy

Schneider Electric SE, the multinational leader in the digital transformation of energy management and automation, is aiming to accelerate sustainable progress for its customers, employees, partners and communities everywhere. For this purpose, the organization has set six long-term commitments:

To ensure compliance, Schneider Electric has committed to achieving 12 measurable goals by 2025.

Schneider Electric's sustainability strategy

The particular importance of procurement is reflected in the fact that one-third of these targets depend mainly on Schneider Electric’s supply chain (marked with a blue arrow in the graphic). Of these four procurement-dependent commitments, let’s now take a closer look at how Schneider Electric is trying to reduce the CO2 emissions of its top 1,000 suppliers by 50%.

The challenges of Scope 3 decarbonization

Decarbonizing Scope 3, or supply chain emissions, is a complicated and challenging undertaking. This is especially true for a large and diversified company like Schneider Electric. The multinational organization employs more than 128,000 people in 115 different countries. Its procurement spend last year was over 14 billion euros. Because of its well-balanced global presence, Schneider Electric’s suppliers come from all parts of the world. Managing this global supply chain effectively is therefore a particularly complex task.

Supplier distribution Schneider Electric

In addition, when Schneider Electric began looking at the climate maturity of its top 1,000 suppliers, further challenges came to light. As it turned out, 70% of these companies were actually new to the idea of decarbonization. This means that they had never calculated or quantified their carbon footprint and were not aware of the difference between Scope 1, 2 and 3 emissions. Furthermore, two-thirds of the suppliers requested were found to be small and medium-sized enterprises. This added another nuance to the challenge, as smaller companies have only limited capacities and competencies when it comes to topics like sustainability and decarbonization. Accordingly, many suppliers initially took particular notice of the high cost factor involved in implementing climate protection measures.

Solving the problem: The Zero Carbon Project

After gathering all these insights and gaining a holistic understanding of the challenges, Schneider Electric launched a comprehensive support program in April 2021 and named it “The Zero Carbon Project”. Under the program, Schneider provides tools and resources in order to help suppliers set and achieve their climate targets. The suppliers participating in the program were first encouraged to quantify their CO2 emissions using the company’s digital tools. This data was then used to set goals and strategies for emissions reduction. 

In order to provide suppliers with comprehensive support for climate actions, Schneider Electric has established a wide range of offerings. So far, more than 130 live training sessions on CO2 calculation and decarbonization measures took place. In addition, Schneider Electric has provided its suppliers with various digital tools on its web portal. Among other things, they can use these for a digital emissions calculation as well as for best practice exchange with peers and partners to access other innovative solutions for decarbonization. The consultation is supported by specialized experts and is also adapted to the different geographical characteristics.

Supplier Support Framework, Scope 3 Schneider Electric

The results of all these intensive engagements have already been promising. 1,016 active suppliers are currently participating in the program and are being engaged in decarbonization measures. 90% of those suppliers have now calculated their CO2e footprint. In addition, the participating suppliers have already reported around 8% reduction in their CO2e emissions.

Streamlining Scope 3 decarbonization with digital tools

Schneider Electric’s pioneering efforts show that, despite today’s challenges, it is actually possible to successfully engage suppliers in decarbonizing the supply chain. Nevertheless, as it stands today, companies can only accomplish this extremely complex task with a great deal of effort, which is why digital tools are now more crucial than ever in order to streamline the process of collaborating with suppliers. 

Climate Ready Supply Chain

One such tool is our Climate Intelligence Platform. The end-to-end Software as a Service platform helps enterprises to capture and manage comparable climate-related performance data and information from their suppliers. Via the secure IT platform, suppliers can easily report their climate data and obtain benchmarks, year-to-year comparisons as well as action-oriented potential and concrete decarbonization measures. Thereby, suppliers and customers can work together in a transparent manner to actively pursue climate goals.

For more information on the benefits of the Climate Intelligence Platform for Scope 3 decarbonization:

Get basic access for free within 5 minutes by completing our form and climate check.

The Domino Effect of Scope 3 Emissions

Today, many companies are already regularly calculating their direct corporate CO₂ emissions. But it is not yet known that there is a big potential behind these emissions. Emissions from the value chain in Scope 3 can have a big leverage effect on a company’s reduction potential. However, according to recent insights about the carbon maturity of companies only 10% of large companies have reduction targets for their Scope 3 emissions and only 2% of medium-sized companies. Let’s have a look at this hidden leverage effect! 

Find out here how our Climate Intelligence Platform supports companies to set up Supplier Engagement Programs for Decarbonization!

WHAT ARE SCOPE 3 EMISSIONS?

The Greenhouse Gas (GHG) Protocol divides GHG emissions into Scope 1, 2 and 3. Scope 1 emissions come from sources that are owned or controlled by a company and include direct emissions generated e.g. by buildings and its own mobility. Emissions from Scope 2 are indirect and include purchased energy, steam, and heating/cooling. Scope 3 includes only indirect emissions that are generated in 15 distinct reporting categories along the supply chain. The 15 categories provide companies with a systematic framework to measure, manage, and reduce emissions across the entire corporate value chain. 

Scope 3 Emissions Greenhouse Gas Protocol

This is why the consideration of Scope 3 emissions proves to be particularly important, as they typically account for up to 90% or more of a company’s total emissions

WHERE DO SCOPE 3 EMISSIONS OCCUR

The GHG Protocol identified 15 categories of Scope 3 emissions, from upstream to downstream activities:

3.1 Purchased goods and services

3.2 Capital goods

3.3 Fuel- and energy related activities (not included in scope 1 or scope 2)

3.4 Upstream transportation and distribution

3.5 Waste generated in operations

3.6 Business travel

3.7 Employee commuting

3.8 Upstream leased assets

3.9 Downstream transportation and distribution

3.10 Processing of sold products

3.11 Use of sold products

3.12 End-of-life treatment of sold products

3.13 Downstream leased assets

3.14 Franchises

3.15 Investments

For many companies, the first category (Scope 3.1) contributes a major part to their GHG inventory. It covers upstream emissions from the production of purchased goods and services, which includes emissions generated from processing and transporting them along the supply chain – up to tier 1 (direct) suppliers. 

BUILDING SCOPE 3 INVENTORY FOR THE ENTIRE SUPPLY CHAIN

Scope 3 data is often missing as suppliers are often not yet climate ready and cannot provide the necessary data. Primary data from the supply chain is therefore missing and companies work with average data. This data does not help to identify issues in the supply chain or to improve the efforts of existing suppliers. Moreover, the sole focus on CO₂ as leading KPI is misleading, as it is a so-called lagging KPI, which is backwards oriented.

In order to make assumptions about future risks and opportunities, it is necessary to use leading KPIs that allow to manage upcoming challenges. Therefore a holistic climate management is needed in the supply chain. This includes using a set of indicators in the areas: climate governance, strategy, risks, metrics and decarbonization actions.

5 Dimensions of Climate Management

GETTING SUPPLIERS ON BOARD

Collecting this climate-relevant data from suppliers can be a major undertaking, and often presents the biggest challenges to conducting a Scope 3 Decarbonization Strategy.

Especially small and medium sized enterprises are not  “climate ready” yet, i.e. they cannot provide the needed climate-relevant data to business partners and third parties. Software solutions such as our Climate Intelligence Platform help companies to get their suppliers on board, align around their climate strategy and gain the necessary primary data in a structured and comparable way. 

Discover how our customers work towards Supply Chain Deacrbonization!

5 STEPS FOR SUCCESSFUL SUPPLIER ENGAGEMENT

There are five key steps that support companies in working with suppliers along the supply chain on a joined decarbonization strategy. Those are:


1. Announce the program to the supply chain before sending any survey forms
2. Provide a training or information session on the data collection methodology
3. Check-in periodically with suppliers regarding their progress on completing the survey
4. Provide benefits such as shared data, benchmarks and incentives for all participating suppliers
5. Assess data quality and share the results, best practices and next steps with all participating parties to allows for a joint decarbonisation strategy and improvements

DRIVING DECARBONIZATION

90% of a company’s emissions originate in the supply chain. Getting your suppliers on board of your climate transformation therefore has a major leverage effect of your decarbonization measures. To access climate relevant data from your suppliers, frequent and clear communication with suppliers, reciprocal feedback on the process and structured, comparable data management is key. 

Our Climate Intelligence Platform can help you with getting your suppliers on board. You can invite your suppliers to be part of the solution, capture their holistic climate management profile via Climate Performance Assessments, which can be shared securely and comparably on the Climate Intelligence Platform.

Learn more about how our Platform can give your company’s climate transformation a boost.