How to Select a Supplier Climate Data Collection Solution?

In today’s dynamic business landscape, companies are increasingly focused on sustainability, and the need for supplier engagement has never been greater. To track progress toward supplier engagement targets, businesses must implement effective supplier climate solutions. These solutions play a vital role in building robust supplier engagement programs, providing critical data for target tracking, and enhancing visibility into supplier GHG program maturity. Moreover, they facilitate the collection of primary emissions data, which can refine a company’s GHG emissions calculations and reduction tracking in the future.

The Growing Significance of Sustainable Procurement

Sustainable procurement is a topic gaining momentum, as evidenced by the 2022 Gartner/SPP Sustainable Procurement Pulse Survey, where 83% of respondents acknowledged the increasing importance of sustainable procurement over the past two years. Sustainable procurement applications empower organizations to assess supplier performance across various ESG issues within a unified platform. These applications offer essential capabilities, including:

Data Collection: These solutions enable organizations to request sustainability information from all their suppliers, both public and private, through self-assessment surveys. Suppliers can submit necessary documentation, streamlining the process.
Data Analysis: Sustainable procurement applications allow organizations to analyze supplier data based on multiple criteria, helping identify areas for improvement. They also present an overall “supplier score” for informed decision-making.
Domain Expertise: These applications offer domain expertise and standard questionnaires to gather supplier information, especially for those just starting with sustainable procurement. Some even provide materiality guidance to focus on the most relevant issues.

Market Trends and Adoption

Supplier climate solutions are relatively new but gaining traction rapidly. In the 2022 Sustainable Procurement Pulse Survey, 54% of respondents reported using applications for ESG data collection, with an additional 45% planning to adopt such applications by 2024. The surge in sustainability-related legislation drives interest in these tools, as they are essential for supply chain due diligence and transparency.

Selecting the Right Data Collection Solution

When choosing a data collection solution, companies should consider several key factors:

Determine the scope of data needs, whether solely climate-related or encompassing other ESG aspects.
Decide between using an existing “out-of-the-box” solution or a proprietary questionnaire.
Explore industry reporting tools to minimize duplicate requests to shared suppliers.

Enhancing Supplier Collaboration

Suppliers often receive multiple ESG-related requests from customers. Choosing a supplier climate solution that eases survey burdens increases the likelihood of collecting high-quality data. Standardized surveys that can be shared with customers provide an advantage, although they may not fully meet specific data needs. If a proprietary solution is preferred, align questions with standardized surveys to reduce “survey fatigue.”

To completely avoid direct questioning of suppliers as a first step, new options are available today through AI data pipelines. They allow companies to automatically gather climate-related ESG data of suppliers from public sources like CSR reports. This way, they can acquire data without long lasting survey processes.

Beyond data collection, companies should consider whether their selected solution supports other aspects of their engagement program, including supplier communications, resource sharing, data analytics, and data verification. Collaborating with internal stakeholders early in the process can streamline data requests and optimize systems.

Implementing the Solution

Once a supplier climate solution is identified, integrate it into the overall program implementation plan. Companies can choose a phased approach or initiate data collection with all targeted suppliers right away, depending on their strategy.

Suppliers may have concerns about data confidentiality, particularly with granular GHG inventory data. Addressing these concerns is crucial, as this information can reveal sensitive business details.

Market Recommendations by Gartner

According to the research firm Gartner, supplier sustainability applications benefit all organizations, both public and private, irrespective of size. They are vital for meeting stakeholder expectations and adapting to regulatory changes. Publishing a code of conduct is no longer sufficient; organizations must demonstrate due diligence to ensure supplier adherence. These applications enable scalability and impact, making them a valuable addition to any sustainable procurement strategy.

Key Considerations for Procurement / Sustainability Leaders

Assess the need for a supplier sustainability application based on your sustainable procurement program’s scope.
Create a shortlist of vendors considering the ESG issues you want to address and the necessary application capabilities.
Prioritize vendors that emphasize supplier experience management, as supplier adoption is crucial.
Seek a combination of tools rather than a single solution to address specific sustainability topics in-depth.

In conclusion, sustainable procurement is the way forward, and supplier sustainability applications are a powerful ally in achieving sustainability goals while enhancing supplier engagement and transparency.

A specialized solution for Supplier Climate Action

Our Climate Intelligence Platform offers a comprehensive solution to improve collaboration with your suppliers on climate actions. It automates the process of data collection, streamlining engagement with suppliers, and provides long-term tracking to improve decarbonization efforts.

Start tracking progress towards your Scope 3 targets by accessing existing data from over 35.000 companies and proceed by gathering primary data from your suppliers. Utilize the supplier-specific data to refine your company’s own greenhouse gas emission calculations and reduction tracking.

The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets.

Join them in making a difference!

Contact us today for your individual platform demo.

Your Quick Guide to Scope 3.1 Emissions – the How, What and Why!

In pursuit of their climate goals, businesses are on a quest to uncover the holy grail of decarbonization – identifying where emissions come from and reducing those. Most understand that the answer often lies within the supply chain – and more precisely in Scope 3.1 emissions (Purchased Goods and Services).

This article gives you an introduction to Scope 3.1, why these emissions play a major role, which methods you need to calculate them, and why supplier engagement helps you reducing them.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data tracking and engagement efforts.

What is Scope 3.1?

Scope 3 emissions encompass in 15 different categories all indirect emissions generated throughout an organization’s value chain, from the extraction of raw materials to the disposal of products. Scope 3.1, one of those 15 categories, specifically refers to the carbon emissions associated with the products or services an organization purchases. These emissions are bought in from suppliers and are often beyond the organization’s immediate control.

Why is Scope 3.1 Important?

Understanding and addressing Scope 3.1 emissions is crucial for several reasons:

Holistic Climate Impact: Scope 3.1 emissions often constitute the largest portion of an organization’s carbon footprint. By ignoring them, companies fail to address a significant part of their climate impact.
Stakeholder Expectations: Stakeholders, including investors, customers, and regulatory bodies, increasingly demand transparency and action on Scope 3.1 emissions. Failure to comply can lead to reputational damage and financial consequences.
Regulatory Compliance: As governments worldwide tighten climate regulations, monitoring and reducing all emissions, but especially the significant portion of Scope 3.1 emissions, help companies avoid legal and financial penalties.

How to Calculate Scope 3.1 Emissions

Calculating Scope 3.1 emissions according to GHG Protocol can be a complex task, but essential for informed decision-making. Companies can chose from four different methods. The more effort these methods require, the better the results they produce:

Spend-Based Method
- Calculation Basis: This method relies on the financial expenditures associated with products or services. It calculates emissions based on the amount of money spent on procurement or outsourcing.
- Benefits: The spend-based method is relatively simple and cost-effective to implement, making it suitable for organizations with limited resources. It provides a high-level overview of emissions associated with the supply chain.
Average-Data Method
- Calculation Basis: The average-data method uses industry or sector-specific emission factors to estimate emissions. These factors are based on aggregated data from similar organizations.
- Benefits: It offers a quick and accessible way to estimate emissions, making it a good starting point for companies new to Scope 3.1 calculations. However, it may not be as accurate as other methods because it relies on generalized data.
Hybrid Method
- Calculation Basis: The hybrid method combines elements of both the spend-based and average-data methods. It considers financial data along with industry-specific emission factors for a more tailored approach.
- Benefits: This approach strikes a balance between simplicity and accuracy. It provides a more customized estimate of Scope 3.1 emissions while still being feasible for organizations without extensive data resources.
Supplier-Specific Method
- Calculation Basis: The supplier-specific method involves collecting detailed data directly from suppliers, including emissions from their operations and transportation. It offers the most granular and precise calculation.
- Benefits: This method yields the most accurate and specific results, allowing organizations to pinpoint emission hotspots within their supply chain. It also fosters transparency and collaboration with suppliers, encouraging joint efforts to reduce emissions.

Why the Supplier-Specific Method Stands Out

While the supplier-specific method achieves by far the best results compared to the other methods, it is also the most challenging to implement. The supplier-specific method is distinguished by its precision, aiming to provide a granular view of emissions associated with each supplier. However, this precision comes at a cost:

Data Variability: Suppliers’ emission data can be highly variable, making it challenging to standardize and aggregate across a diverse supplier base.
Data Availability: Obtaining supplier-specific data requires active engagement and cooperation from numerous suppliers, which can be time-consuming and complex.
Data Validation: Verifying the accuracy of supplier-reported emissions adds another layer of complexity, as discrepancies can arise.

Kickstart your Supplier-Specific Data Collection

The Climate Intelligence Platform, a specialized Supplier Data Collection and Engagement Solution, offers a streamlined approach to tackle these challenges.

The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets.

Join them in making a difference!

Contact us today for your individual platform demo.

The Crucial Role of Supplier Engagement to Reach Scope 3 Targets

Supplier engagement plays an essential role in addressing Scope 3 emissions and achieving corporate climate targets. With the urgent need to mitigate climate change rising, businesses are under increasing pressure to reduce their carbon footprint across the entire value chain (Scope 3).

In the following, we explore the reasons why supplier engagement is vital for addressing Scope 3 emissions and showcase best practice that help you implement a successful supplier engagement program for achieving your company’s Scope 3 targets.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data and engagement efforts.

Why Supplier Engagement is Paramount for Scope 3

While Scope 1 (own facilities, vehicles, heat, operations, etc.) and 2 emissions (purchased energy) are generated and controlled a company’s own operations, Scope 3 emissions encompass all indirect emissions generated by a company’s activities along the supply chains.

The 15 Categories of Scope 3 Emissions along the Supply Chain

According to the Greenhouse Gas Protocol (GHG Protocol), the indirect Scope 3 emissions include 15 different categories, ranging from the procurement of product and services (Scope 3.1) and transportation (Scope 3.4) upstream, to End-of-Life (Scope 3.12) and investments (scope 3.15) downstream.

Upstream Emissions

3. 1. Purchased Goods and Services – emissions generated by the raw material extraction and processing of goods and services used by a company for its own activities.

3.2. Capital Goods – emissions resulting from the production of plant, equipment, machinery and other long-term capital goods that a company uses in its operations.

3.3. Energy and Fuel-Related Activities – emissions that arise from upstream and network losses of energy and fuel.

3.4. Upstream Transportation and Distribution – emissions generated by the transportation and distribution of raw materials and products delivered to the company by suppliers.

3.5. Waste – emissions from the disposal and treatment of waste.

3.6. Business Travel – emissions that arise from business trips by a company’s employees.

3.7. Employee Commuting – emissions that arise from the daily commute of a company’s employees.

3.8. Upstream Leased Assets – emissions from buildings or vehicles rented from third parties.

Downstream Emissions

3.9. Downstream Transportation and Distribution – emissions that arise from transportation and distribution to customers or end users – or paid for by third parties.

3.10. Processing of Sold Products – emissions from processing products sold.

3.11. Use of Sold Products – emissions generated during the usage of a product by customers or end users.

3.12. End-of-Life Treatment of Sold Products – emissions generated during the disposal and treatment of products after they have reached the end of their life.

3.13. Downstream Leased Assets – emissions resulting from the use of fixed assets rented or leased by a company to other companies.

3.14. Franchises – emissions generated by franchisees’ business activities.

3.15. Investments – emissions that arise from a company’s investments in other companies or projects.

KEY TAKEAWAY

As indirect upstream Scope 3 emissions are typically 11.4x bigger than the direct Scope 1 and 2 emissions of a company, effectively managing and reducing them is paramount to meet corporate climate goals.

Rising Regulatory Landscape requires transparent Scope 3 Data

Overview of sustainability standards and regulation worldwide.

SCOPE 3 CHALLENGE

As Scope 3 emissions are generated, managed and controlled directly or indirectly by suppliers and business partners, supplier engagement is a crucial part of holistic climate management to address the Scope 3 challenge. The importance of doing so, is driven by rising international regulation.

Regulatory pressure for Scope 3 - fro ISBB, SEC and CSRD

Rising Regulatory Pressure

SEC (U.S. Securities and Exchange Commission): SEC is increasingly focuses on climate-related disclosures. In 2022, they proposed new rules to enhance and standardize climate-related disclosures, including Scope 3. Engaging with suppliers to gather accurate emissions data is key in complying with these regulations.
ISSB (International Sustainability Standards Board): ISSB is working on global sustainability reporting standards. Supplier engagement assists in aligning with these standards by collecting emissions data consistently across the supply chain.
EU’s CSRD (Corporate Sustainability Reporting Directive): The EU is tightening its reporting requirements. Under the CSRD, companies must report on supply chain emissions. Even small companies with 1 – 750 employees, can waive Scope 3 emissions only in the first reporting year. Supplier engagement is key to meeting this obligation effectively.

Increasing Stakeholder Expectations

Investors: Investors focus on ESG (Environmental, Social, Governance) criteria, consider supply chain emissions when evaluating investments. Engaging with suppliers to reduce emissions demonstrates commitments towards sustainability, while reducing risks.
Customers: The new generation of so-called ‘ethical consumers’ demands transparency. Backed by the new EU ban of ‘green product claims’, supplier engagement is essential for companies to provide detailed information about their products’ environmental impact, enhancing brand reputation and prohibit greenwashing.

Importance of Supplier Engagement to meet Scope 3 Targets

The new market requirements of regulatory authorities and stakeholders result in numerous consequences for the future-oriented business strategy of companies.

The strategic importance of supplier engagement is growing rapidly, driven by:

Risk Mitigation – Supplier engagement helps decision makers identify high-emission suppliers, allowing companies to assess climate-related risks and diversify their supplier base to reduce exposure to carbon-intensive sources.
Cost Reduction – Collaborating with suppliers on emission reduction strategies leads to cost savings through improved efficiency and resource use.
Innovation: Partnering with suppliers to reduce emissions fosters innovation. Suppliers may develop low-emission products and processes, giving the company a competitive edge.
Market Access – Some markets, like the EU, already restrict imports from companies with high carbon footprints. Supplier engagement aids in meeting these market access requirements.

Best Practices for successful Supplier Engagement Program

GETTING STARTED

The critical role of supplier engagement in managing Scope 3 emissions and meeting Scope 3 Targets is becoming evident. Explore best practices from practice to build up your successful supplier data tracking and engagement program.

8 Best Practices that support you in overcoming the Scope 3 Challenge

1. Assessment and Prioritization – Start by assessing the individual climate maturity of your suppliers. Identify high-impact suppliers to prioritize engagement efforts.

2. Set Clear Expectations – Define Scope 3 climate targets and set expectations for your suppliers. Use contracts, agreements, and codes of conduct to communicate those and get commitment. Clearly communicate the importance of focusing on measures to truly reduce emissions.

3. Collaboration, Capacity Building & Education – Collaborate with your suppliers to develop shared decarbonization goals. Offer trainings and resources to help them understand their own climate performance and implement best practices to reduce emissions.

4. Data Collection & Monitoring – Implement digital systems for tracking and reporting supplier climate targets, risks, emissions and actions. Regularly review progress towards Scope 3 targets, address issues promptly and promote top achievers.

5. Incentives & Recognition – Offer incentives for your suppliers that meet or exceed your expectations. Recognize and celebrate their achievements, fostering motivation for continuous improvement.

6. Transparency – Be transparent about your own climate journey and progress. This encourages your suppliers to follow suit and promotes a culture of shared responsibility.

7. Technology Integration – the Climate Intelligence Platform supports you in streamlining data collection and engaging your suppliers across the supply chain.

8. Continuous Improvement – Encourage continuous innovation and improvements. Regularly reassess your goals and adapt to changing circumstances.

Supplier Engagement indispensable to overcome the Scope 3 Challenge

Supplier engagement is indispensable to gather accurate Scope 3 emissions, align with international regulatory requirements and meet your own Scope 3 targets. Implementing successful best practices in your supplier engagement program allows you to prioritize decarbonization, collaboration, and transparency. As the global focus on Scope 3 intensifies, supplier engagement is not only a compliance necessity but a strategic advantage for future-driven organizations.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data and engagement efforts.

Kickstart your supplier climate engagement program

Climate Intelligence Platform from The Climate Choice to track supplier specific climate data and enage suppliers in a company's decrabonization journey.

The Climate Intelligence Platform is a climate specialized Supplier Data Collection and Engagement Solution to enable you kickstarting your program in days versus months.

Start tracking progress towards your Scope 3 targets by accessing existing data from over 35.000 companies and proceed by gathering streamlined primary emissions data from your suppliers. Utilize the supplier specific data to refine your company’s own greenhouse gas emission calculations and reduction tracking.

The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets. Join them in making a difference!

AI’s new Potential for Scope 3 Decarbonization

In order to meet climate targets within their supply chain (Scope 3), companies must gather and interpret extensive data on emissions, climate risks, and other factors from their suppliers. Until now, this widely dispersed data could only be acquired through manual processes and individual supplier consultations, demanding significant time and resource investments. However, a transformation is underway. Advanced AI technology now enables the quick and automatic aggregation of climate-related supplier data from public sources, facilitating its analysis for scope 3 decarbonization.

Unlock the Potentials of AI for your Supply Chain Decarbonization! Get Exclusive Access to our AI Supplier Screening Programm, to manage Scope 3 Data and implement Actions.

How exactly can this work? That’s what we shared at CHOICE Event #61 with Yasha Tarani (CEO) and Nikolas Martens (Head of Engineering) from The Climate Choice. Find here their most important insights.

Why is Scope 3 Decarbonization important?

Deloitte conducts an annual study that delves into the priorities of top executives (CxOs) in large companies across the globe, shedding light on why they choose to address specific issues. Their findings reveal a significant shift in the corporate landscape. Notably, climate change has ascended to a position of paramount importance, second only to economic outlook. This signals a pivotal moment where climate concerns have permeated the highest echelons of corporate leadership. However, it’s imperative to recognize that the impetus to act on climate issues doesn’t merely stem from regulatory pressures. It also emanates from a multitude of stakeholders who demand action.

One crucial aspect that emerges prominently is the role of supply chain emissions (Scope 3). These emissions represent the lion’s share, comprising an average of 85% of a company’s total emissions. Yet, addressing supply chain emissions is a formidable challenge due to their indirect nature, which presents multiple complexities and obstacles.

Why is Scope 3 Decarbonization so hard?

Companies striving to meet their Scope 3 decarbonization targets encounter several significant challenges when it comes to effectively utilizing supplier-specific data. These challenges can impede their ability to take meaningful actions. Here’s a breakdown of these challenges and their implications:

Continuous Tracking:

Challenge: Managing annual data collection from a vast network of thousands of suppliers can be a daunting and resource-intensive task.
Implication: This continuous tracking requirement demands a robust system that can efficiently gather data from a multitude of sources without overwhelming the company’s resources. It also necessitates real-time or near-real-time data updates to stay current.

Data Quality:

Challenge: Supplier data often comes in various formats, documentation styles, and may lack comparability, making it difficult to draw meaningful insights or comparisons.
Implication: Ensuring data quality is paramount. Implementing standardization protocols, data validation, and normalization processes is crucial to derive accurate and actionable insights from diverse data sources.

Assessment Fatigue:

Challenge: Suppliers are frequently inundated with data requests from different customers, each with varying data needs, creating a state of assessment fatigue.
Implication: Companies must adopt a more strategic approach to supplier engagement. This includes minimizing repetitive requests, streamlining communication, and aligning data requests with suppliers’ capabilities and priorities to maintain productive relationships.

Lack of Incentives:

Challenge: Encouraging suppliers to actively engage in decarbonization efforts can be challenging, as they may lack motivation or a clear understanding of the benefits.
Implication: To address this, companies must develop a Theory of Change that outlines the incentives and benefits for suppliers to participate in sustainability initiatives. This may include cost savings, improved market access, or enhanced brand reputation.

The solution: the Climate Intelligence Platform

At The Climate Choice, we focus on solving the key challenges of Scope 3 decarbonization. We have therefore built the first climate-specialized platform that unites supplier data & engagement to rapidly reduce emissions. Our approach is designed to help companies kickstart their supplier climate program in days rather than in months.

So what does the approach look like? Here are the key steps:

Leveraging AI for Scope 3 Analysis: Begin by harnessing the power of artificial intelligence (AI) to analyze suppliers with publicly available data. This automated analysis provides valuable insights into their environmental performance, emissions, and climate-related practices. This initial assessment sets the foundation for informed decision-making.

Engaging Suppliers without Public Data: Recognize that not all suppliers may have publicly accessible environmental data. For such suppliers, the approach shifts towards assessing their maturity level in terms of sustainability practices. This assessment serves as a starting point, allowing you to provide constructive feedback and guidance.

Focused Benchmarking and Incentives: Identify your top suppliers and those contributing significantly to emissions within your supply chain. These key players warrant a more detailed and granular benchmarking process. Additionally, consider implementing incentive mechanisms to encourage these suppliers to actively reduce their environmental footprint. Incentives can take various forms, such as financial rewards or preferential treatment within your supply network.

The first step: AI Supplier Screening

To speed up the launch of your supplier engagement program while minimizing resource requirements, we present our new AI supplier screening program. This program leverages cutting-edge technology to streamline the process, ensuring efficiency and effectiveness throughout. Here’s a breakdown of how the AI supplier screening program operates:

1. Comprehensive Data Collection: The program incorporates an AI-driven data pipeline that autonomously gathers detailed Scope 3 information from diverse sources. This data pipeline is designed to collect granular data pertinent to your supplier profiles.

2. Robust Data Analysis: Once the data is collected, our system performs a meticulous analysis. It scrutinizes a range of climate data documents and taps into publicly available data sources to create a comprehensive profile of each supplier. This analysis extends beyond surface-level assessments to provide a deeper understanding of their climate-related practices.

AI turns sustainability reports into insights for Scope 3

How AI Supplier Screening Works:

List of Suppliers: The process commences with a list of your suppliers, encompassing the entirety of your supply chain network.
Identify Company: The AI system employs advanced algorithms to identify each supplier as a distinct entity, ensuring accuracy in the subsequent steps.
Identify Reporting Entity: It further distinguishes the reporting entity within the supplier organization, recognizing the entity responsible for providing climate-related data.
Identify Data Sources: The program identifies and categorizes the various data sources associated with each supplier, whether internal or external.
Extract & Verify Data: Leveraging state-of-the-art data extraction techniques, the AI system extracts and verifies the pertinent climate data from these sources, ensuring data accuracy and reliability.

What are the tangible outcomes of the AI supplier screening?

The AI supplier screening program yields a range of tangible outcomes that can significantly benefit your organization in its pursuit of Scope 3 goals. Here are the notable advantages and insights that emerge from this innovative approach:

Automated Analysis of Thousands of Companies: The program’s capabilities extend to the automated analysis of thousands of companies within your supply chain ecosystem. This extensive coverage ensures that you can comprehensively assess and engage with a wide array of suppliers, maximizing the program’s effectiveness.

Inclusion of Meta Data: In addition to climate-specific data, the analysis encompasses meta data that provides valuable context. This includes details such as revenue figures and sectors in which these companies operate. Such comprehensive insights enable more informed decision-making.

Audit-Ready Data: The data generated through the AI screening program is audit-ready, ensuring that it meets the highest standards of accuracy and reliability. This audit readiness is pivotal, especially when it comes to compliance requirements and reporting.

Accessibility via API: The convenience of accessing the data via an Application Programming Interface (API) streamlines its utilization within your organization’s existing systems and workflows. This seamless integration enhances the efficiency of your sustainability initiatives.

Key Insights Uncovered

The program goes beyond data collection to uncover key insights that can inform your sustainability strategy. These insights encompass:

Use Case for AI for Scope 3 Decarbonization — Use Case Example: Supplier Maturity Structure

Supplier Maturity Structure: You gain a clear understanding of the maturity levels of your suppliers concerning sustainability practices. This allows you to tailor engagement strategies accordingly.

Trends in Climate-Related Data: The program identifies and highlights trends in climate-related data, providing valuable intelligence for decision-making and future planning.

Scope 3 Emission Breakdowns: Detailed breakdowns of Scope 3 emissions help you pinpoint areas of focus and prioritize decarbonization efforts.

Decarbonization Actions: The program’s analysis identifies potential decarbonization actions that can be taken. It offers actionable pathways to reduce emissions and improve sustainability performance.

Join the Early Access Program today

You can now seize the opportunity as one of the early adopters, accessing the full array of AI benefits for your Scope 3 targets through our exclusive Early Access program. By joining, you’ll experience firsthand the advantages we offer. We anticipate an average savings of 90% in both time and cost for the collection and analysis of supplier data. Don’t miss out on the chance to be at the forefront of this transformative technology.

Request to join the Early Access Program today, it’s limited!

The Climate Power of Supply Chains – 10 Steps towards Decarbonization in Scope 3.

The pressing issue of climate disclosure are making it clear. CO₂ numbers are not enough to understand the climate performance of a company – as we all know. Instead, companies are establishing holistic climate management approaches in order to drive real change. A market transition that is very much highlighted by rising regulations such as the European Supply Chain Due Diligence Directive (CSDDD), the Corporate Social Responsibility Directive (CSRD) and the de facto standard for climate-relevant information from the Task Force on Climate Related Financial Disclosures (TCFD).

What is holistic climate management in supply chains all about?

However, there is even one step further to take. Sustainability leaders know that climate impacts, risks and necessary decarbonization actions don’t end at the office door. Instead, investors, customers and policymakers urge companies to take responsibility for their entire value chain and purchasing decisions. The growing climate crisis shows that supply chain resilience and the transformation of entire business models are more important than ever.

Challenge of going beyond the basic CO₂ Footprint in Scope 1 & 2

When addressing climate responsibility within and beyond the own company, it becomes tricky. As climate-relevant information in Scope 3 are connected to hundreds and sometimes thousands of suppliers. Meanwhile, your climate data needs to be accurate, granular, and auditable.

Achieving net-zero for Scope 1 and Scope 2 emissions presents a substantial technical and economic challenge for many companies. Addressing Scope 3 emissions adds an additional layer of complexity. Such as, but not limited to:

Consistent carbon accounting and climate performance tracking practices
The need to work collaboratively with suppliers and business partners
Handling multi-tiered supply networks and difficulties of engaging them in the improvement process

So how do sustainability and procurement leaders alike overcome this challenge?

Manage your Decarbonization Journey in Scope 3

Overarching climate goals in the supply chain can only be achieved by treating and involving the supply chain as a crucial aspect of any firm’s holistic climate performance. Therefore, businesses must collaborate with their suppliers to enable them to play a vital role in their climate transformation.

By publicly disclosing climate targets for Scope 3, emissions and decarbonization measures along the supply chain, an organization demonstrates accountability and provides stakeholders with vital information for understanding its climate performance. Beside regulatory pressure, new market mechanisms already show that those companies gain competitive advantages and are ahead of their peers. Undergoing a significant shift, business partners, customers and stakeholders alike increasingly consider climate impact in their decision-making. This presents the opportunity to align business strategies with market expectations and respond to the growing decarbonization demands proactively.

10 Steps towards climate-relevant data in Scope 3 – powered by Supplier Engagement

STEP1 – SET YOUR FOUNDATION

To embark on the path of supply chain decarbonization, you must begin by establishing a solid foundation. Start by making your climate commitment public, setting ambitious targets that include your supply chain. Assess your emissions and clearly define your priorities for implementing actions and solutions in your own transition. Aim high and align your goals with the Paris Agreement’s 1.5°C target.

STEP 2 – ACCEPT THE AMBIGUOUS STATUS QUO

Acknowledging the diversity of targets, strategies, incentives, and requirements within your own company is crucial. Align your sustainability and procurement offices to ensure a successful program outcome. Assemble a dedicated #TeamClimate and ask yourselves the important questions: Why do we need this program? What outcomes do we anticipate? Who needs to be involved? With these answers, you can set the stage for success.

STEP 3 – BE SIMPLE!

Simplicity is key when starting your supply chain decarbonization journey. Avoid overwhelming complexity right from the beginning. Instead, focus on asking your suppliers simple yet essential questions: Have you set climate targets? Have you calculated your emissions? What climate actions are you planning to implement? By keeping it simple, you can prevent frustration and maintain momentum.

STEP 4 -START WITH YOUR HOTSPOTS IN THE SUPPLY CHAIN

Having set your climate targets and aligned your internal team, it’s time to identify the hotspots in your supply chain. Utilize third-party data, databases, screening or a spend-based approach to gain an initial understanding of your value chain’s status quo. Cluster suppliers based on their climate maturity and strategic importance to pinpoint the hotspots that require your attention. The Climate Intelligence Platform offers a swift and straightforward way to screen your supplier base and kick-start your supplier climate engagement program.

STEP 5 – CLARIFY DATA NEEDS FOR TEAM SUSTAINABILITY AND PROCUREMENT

Before engaging with your supply chain, ensure that your internal stakeholders are on the same page. Align your sustainability and procurement teams regarding data, processes, and next steps.
This collaborative effort ensures that everyone is working towards the same goals and expectations. Clear communication is essential.

STEP 6 – SET UP THE PROCESS IN PROCUREMENT AND SUSTAINABILITY TEAM

Establishing the supplier engagement program is often organized by the procurement team. However, the sustainability team’s involvement is crucial in providing insights and publishing a clear message regarding your supply chain climate targets. This collaboration strengthens the credibility of your program and enables effective engagement with suppliers.

STEP 7 – START ENGAGING SUPPLIERS BY STRESSING THE “WHY”

Now it’s time to reach out and communicate with your suppliers. Make it a two-way conversation by inviting collaboration, sharing knowledge and resources, and guiding them through the journey. Highlight the benefits for suppliers supporting your climate initiative and provide incentives to get them on board. Build relationships and emphasize the collective effort needed to make a difference.

STEP 8 – DON’T OVERWHELM, STAY SIMPLE!

Understand that managing climate issues can be overwhelming for both you and your suppliers. Be open to feedback and improvement. Remember that we are all on this climate journey together, transitioning toward a low-carbon economy will take time. Motivate and engage your business partners, support them along the way.

STEP 9 – DARE TO TAKE DECISIONS

With information, feedback, and data in hand, it’s time to make decisions. Data should be utilized to gain insights and inform decision-making processes. Define a baseline from which you started and plan the next steps that bring you and your suppliers closer to achieving Net Zero. Address crucial questions such as how to provide climate knowledge to suppliers, share best practices, define quirements, and collaborate on taking action.

STEP 10-REPORT AND REPEAT

You took the first 9 steps, talk about it and share your learnings. This leads to your final step: report and repeat. You will repeat the process next year, so it’s the best time to get into the improvements and actions – together with your suppliers.

Let’s take action together!

This is why at THE CLIMATE CHOICE we empower every single company to become a climate champion in order to implement its climate targets and reduce emissions.

How? We start with the most impactful part: the supply chain. Which typically consists of hundreds and thousands of small and medium sized suppliers. They have the power to drive climate actions at scale. To do so, they need to understand where they stand in terms of climate transformation and work transparently together with their business partners to implement meaningful measures.

Our software-based Climate Intelligence Platform collects climate-focused data from companies, represents them in CLIMATE Scorecards and provides business insides into risks, potentials and best practices to reduce emissions.

Get more information in the Climate Playbook 2023, which provides a comprehensive overview of key insights from the CLIMATE TRANSFORMATION Summit 2023 (#CTS2023) and serves as a guide for companies to transition from incremental internal to exponential climate action across the supply chain.

10 Steps to put Supplier Engagement into Climate Action for 1.5°C target

To achieve the 1.5°C ambition of the Paris Climate Agreement, business action across the full value chain is crucial. More and more leading brands are joining forces in action groups to tackle this challenge, such as the “1.5 Supply Chain Leaders” founded by the Exponential Roadmap Initiative.

The NGO brings together innovators, transformers and disruptors taking action in line with the 1.5°C ambition. Their common mission is to halve global greenhouse gas emissions before 2030 through exponential climate action and solutions.

In CHOICE Event #56 we learned from Laure Pérez Casado, Project Lead at Exponential Roadmap Initiative, how to engage suppliers for climate actions. Find here the most important 10 steps.

1. Set your foundation

It all starts with a strong foundation. Starting a supplier engagement program for decarbonization, needs to have a clear set up first. Therefore, companies need to start with their own journey before they can reach out to their business partners. As first step: Make your climate commitment public, set a target and include your supply chain, assess your emissions and be clear about your priorities about actions and solutions you want to implement in your own transition. Aim high: Cutting emissions halve until 2023 is inline with the Paris-1,5°-target.

2. Accept the ambiguous status quo

Even within the own company, targets, strategies, incentives and requirements can differ quite a lot. Typically, sustainability and procurement office need to align first to assure a successful program outcome. Form your #TeamClimate and ask yourself: Why do we need a program – for reporting, buying decisions or actions? What can be done? Which outcome is anticipated? Who needs to be involved? When can we start?

3. Be simple!

Often company leaders want to get everything done in one step. That is us humans, we like simple solutions. But honestly, simplicity needs to stay simple. If you start with a too complex system right from the beginning, frustration levels can be very high – on all sides. Do yourself a favour by asking simple questions first. Such as: Have you set climate targets? Did you calculate your emissions and which kind of climate actions are you planning to implement?

4. Focus on your hotspots in the supply chain

Great! You have set climate targets, aligned with your company internal action team – and know which data points you want to collect and how you want to roll out the program. Now is the time to find a simple way, to pre-screen your supply chain. Many companies work with third party data, databases and / or a spend-based approach to have a first understanding of the status quo of their value chain. This way, you can cluster suppliers into areas of strategic importance and find hotspot, on which you can should focus. The Climate Intelligence Platform offers a fast and simple way to start screening your supplier base and kick-off your Supplier Climate Engagement Program – start today and create a free account.

5. Clarify data needs for sustainability and procurement

Foundation for supplier engagement model on decarbonization

Last, but not least, before you reach out to your supply chain: Get on the same page. Make sure (again) that your internal stakeholders are all aligned. Is everyone onboarded in your #TeamClimate? Your sustainability and procurement team will mostly likely work with the collected data and have certain expectations of the results you are aiming for. As you very likely have already iterated the process, align on the data, processes and next steps. Just to be sure.

6. Set up the process: procurement or sustainability team?

Now, it is time to get started. Most companies have the supplier engagement program organized by the procurement team, but need the sustainability team to provide insights and a clear message that is published regarding your supply chain climate target. This allows procurement to address suppliers in collaboration with your #TeamClimate and supports the credibility of the program.

7. Start engaging supplier by stressing the “why”!

Your moment to shine! You go out and communicate with your suppliers. This is not a one-way conversation. Invite for collaboration, share knowledge and resources and provide guidance through your anticipated journey. Most important: Provide incentives to get suppliers on board. Take away the fear of being rated top-down and instead share benefits for suppliers that are supporting your climate initiative. Find out more in the CHOICE Event “How to Qualify, Assess and Develop Suppliers for Scope 3 Decarbonization“.

8. Don’t overwhelm, stay simple!

Be aware that climate management can be frustrating. You might have suffered along the way, too. Just because you are now further ahead, does not mean your suppliers are there yet. Get them onboard and be open for feedback, together you can improve. We are all in this journey together and face a transition to a low carbon economy that will take until at least 2050. Many opportunities will come along the way. Get your business partners engaged and motivated.

9. Dare to take decisions

Nevertheless, the goal is clear. Cutting emissions, building up skills for a structured transformation and gaining insights on the climate maturity of your suppliers. This means, the moment you have gathered information, received feedback and have finalised your data integration, you have to take decisions. Data is there to be used! Not to be gathered only. Make sure you gain insights for decision making from it. You need to define a baseline from which you started and plan next steps that bring you and your suppliers closer towards Net Zero. Decisions that need to be taken: How do you provide climate knowledge to suppliers? How do you share best practices and benchmarks? How do you define supplier requirements and collaborate on taking action? Find out “How to generate Value from Supplier Climate Data” in this CHOICE Event.

10. Report and repeat

Finally, you also need to celebrate your success! It is great that you tackle the biggest challenge of the corporate world today: the climate transformation and decrabonization of your supply chain. Acknowledge that this is the only valid way to decrease emissions in a meaningful way – in Scope 3, where up to 90% and more of the total corporate emissions come from. Companies cannot reach Net Zero emissions over night. And focusing only on Scope 1 and 2 emissions, does not at all support the full requirements and climate targets. You and your #TeamClimate started an awesome journey that is highly influencing the financial, social and environmental impact of your company. Now, be transparent about what you achieved (and what not). Share within your company and externally. You took the first step, talk about it and share your learnings. You will repeat the process next year, so it’s the best time to get into the improvements and actions with suppliers.

Climate Intelligence platform from THE CLIMATE CHOICE

You want to start you simple and scalable supply chain deacarbonization journey?

You can now start your own supplier screening and evaluation process by creating a free account on the Climate Intelligence Platform, which streamlines and automates the workflows to save your company time and money. Within the free basic account you can invite an unlimited number of your suppliers and start your supply chain transformation journey towards Net Zero. Get started today with a free account!

Measuring and Understanding your Scope 3 Emissions

For most companies, the majority of their greenhouse gas emissions (up to 90 %) lie in their supply chains – so-called Scope 3. Reducing those Scope 3 emissions provides the biggest lever for corporate climate transformation, but it is also by far the most difficult. The first step and basic requirement is to measure and holistically understand the company’s Scope 3 emissions.

You need primary Scope 3 data of your suppliers? Our AI Supplier Screening provides you with climate relevant data to assess the climate maturity of your supply chain, unlocking potentials for improvement.

That’s what we learned at the CHOICE Event #55 from Richard Scholz from the WifOR Institute and Yasha Tarani from The Climate Choice. Here you will find the most important insights from their joint presentation.

Scope 3 Reporting Becomes Mandatory under CSRD

Companies worldwide are facing increasing pressure from stakeholders and regulations to meet their climate targets. Of particular importance is Scope 3, as defined by the GHG Protocol, which, in contrast to Scopes 1 and 2, includes all upstream and downstream emissions along a company’s supply chain. This new importance of Scope 3 is, among other things, becoming apparent in the fact that Scope 3 reporting becomes mandatory under the upcoming EU wide Corporate Sustainability Reporting Directive (CSRD).

From 2025 onwards, companies in Europe meeting two of the following three conditions will have to comply with the CSRD and thus report scope 3 emissions:

€40 million in net turnover
€20 million in assets
250 or more employees

In addition, non-EU companies that have a turnover of above €150 million in the EU will also have to comply.

Different methods of measuring Scope 3

With this in mind, we are going to have a look at how exactly companies can go about to tackle their Scope 3 emissions. The first step is definitely to measure the emissions from their supply chain. For this, the GHG Protocol suggests to use different calculation methods, depending on the availability of data.

As shown in this graphic, you can use either supplier-specific data or secondary data (i.e., industry average data). The different methods are sorted according to their specificity. The best calculation method is by far the supplier specific method on top. However, if you have not done a calculation yet, starting at the bottom of the method sorting is the recommended approach. The so-called spend-based method uses average data points.

The spend-based method of measuring Scope 3 emissions

The starting point of a spend-based method is the purchase list, also referred to as your spend file or order placements. It should include all goods and services purchased by your company. Three information are of particular importance here:

Which kind of products/services are bought?
Where are those products/services produced?
How much of those products is bought?

To understand this better, let’s have a look at a concrete example. We assume that our chemical products purchased from the USA are worth 300,000 €. So we know the type of product, the country of origin and the amount of products purchased. After those basic observations, we now look at model data. In the model data, we find out how much revenue the chemical industry in the USA has and also how much CO2 emissions the chemical industry in the USA is emitting. With this information, we can now attribute a certain certain of CO2 emissions to the revenue of the chemical products that our company bought.

Adding Tier 2 and 3 emissions of suppliers of suppliers

However, with this first step, the process of measuring Scope 3 emissions is not concluded yet, as the results only represent the Scope 1 emissions of the suppliers. In order to also calculate the tier 2 and 3 emissions of suppliers of your suppliers and so on, you will need an additional purchase list from the chemical industry of the US – so-called model data.

Now we look at each and every purchase item that the chemical industrie of the US is buying. And we attribute a certain amount of CO2 emissions from those other industries across the whole world that the US chemical industry is buying from. That for example also includes the Scope 2 emissions of the US chemical industry, because they are buying electricity. You need to repeat this process with a list of the tier 3 suppliers, so the emissions caused by suppliers of tier 2 suppliers.

Moving the ladder all the way up to the supplier-specific method

The spend-based method is a good starting point to get a first impression of the emissions of your supply chain. However, the goal should always be to move up the ladder as quickly as possible from average data to deeper and more specific climate information of your suppliers. This is where specialized software tools like the Climate Intelligence Platform come into play.

The Climate Choice - Free Climate Readiness Check

The Climate Intelligence Platform provides a way to efficiently automate the various steps of the supplier-specific method for Scope 3 decarbonization. Companies receive everything they need to set up, test, manage and achieve their supplier climate engagement targets – from data acquisition to tracking and engagement. Via the platform they can access and acquire a wide range of audit-ready company risk as well as emission data and support their suppliers in their decarbonization journey.

Start with the AI Supplier Screening

Through the use of AI, you can now quickly access data from public sources about your suppliers on a large scale, allowing you to better collaborate on decarbonization efforts. On top of that, you gain essential strategic insights about the climate maturity of your business partners and competitors.

Embark on your Scope 3 climate journey today! Together, we’ll pave the way for informed climate choices and a sustainable transformation that makes a real difference.

Get more information about our AI Supplier Screening.

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:

Act for a climate positive world
Be efficient with resources
Live up to our Principles of trust
Create equal opportunities
Harness the power of all generations
Empower local communities

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.

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.

One such tool is our AI Supplier Screening. Through the use of AI, you can now quickly access data from public sources about your suppliers on a large scale, allowing you to better collaborate on decarbonization efforts. On top of that, you gain essential strategic insights about the climate maturity of your business partners and competitors.