Reducing emissions in global supply chains by improving climate performance of suppliers

Summary

Business leaders invest in climate management in supply chains, in order to reduce carbon emissions through the improvement of supplier's climate performance. Over 75% of a company's total greenhouse gas (GHG) emissions come from Scope 3, including indirect upstream and downstream processes. However, only 6% of companies with science-based climate targets work with specific supplier data. Holistic primarily supplier data is however essential, to create a complete GHG inventory, assess climate risks and track reduction efforts. Without it, procurement decisions are limited. Scope 3 decarbonization faces therefore three major challenges: missing supplier data, missing comparability, and missing collaboration.

The climate intelligence platform of THE CLIMATE CHOICE supports driving supply chain decarbonization. It provides climate-relevant data from over 10,000 companies, provides benchmarks with industry leaders and concrete steps to engage supplier to improve their climate performance.

Create your free Basic Account, access your climate maturity, compare with peers and start your own supply chain engagement program to drive decarbonization. 

We need value chain actions to reach net zero!

International targets and upcoming regulation is clear: We’re on a global mission to rapidly cut GHG emissions in line with the latest climate science half by 2030, creating a more sustainable future. However, it is also evident that we are lacking behind. So what can we do about it? 

Only 6% of companies work with specific supplier data

Did you know? Today only 6% of companies with science-based climate targets work in their Supply-Chain-Baselining approach with specific data from suppliers (SBTi). Why is that one of the biggest challenge for decarbonization? Let’s look into it.

The overlooked long tail of Scope 3 emissions

On average >75% of a company’s total GHG emissions come from the supply chain (CDP). These so-called Scope 3 emissions, refer to all indirect upstream and downstream emissions that occur in a company’s value chain, excluding indirect emissions associated with power generation (Scope 2). These emissions add up globally. Worldwide, about 50% of global GHG emissions are related to just 8 supply chains (World Economic Forum). 

Why scope 3 actions are a requirement to drive decarbonization 

Over the last years, science-based target setting has become one of the most critical “must-have-tools” in standardizing scope 3 actions. Under the SBTi Net-Zero Standard all companies that submit a climate target need to complete a scope 3 inventory. Moreover, the guideline states that if a company’s scope 3 emissions are 40% or above (almost all companies), a scope 3 target is required - emphasizing the need to engage suppliers insetting climate targets and implementing actions, tracking efforts to ensure 1,5°C alignment along the value chain and report specific CO2 emissions of individual suppliers. 

3 biggest challenges in decarbonizing supply chains

The following barriers can be summarized (according to SBTi Stakeholder Engagement Survey).

1. Baselining: Missing supplier data leads to incomplete and incomparable data

Having an understanding of a company’s own scope 3 emissions, requires an overview of the emissions created by suppliers, during upstream and downstream processes. Those are heavily locked in the purchased products and services, but not exclusively. 70% of scope 3 emissions reported to CDP originated in two emissions categories: 

• Category 1, purchased goods and services

• Category 11, use of sold products

Creating a complete GHG inventory, therefore requires primarily supplier data. However, today only 6% of respondents (SBT survey) use those. Instead they often utilize average emissions data, which limits comparability of suppliers and procurement decisions, and does not allow to track the impact of specific decarbonization actions.

2. Target setting: Missing visibility limits ambition to implement best practices

Most companies find the transformation towards a net zero economy challenging. They have low confidence in their ability to reach ambitious climate targets. This is due to missing comparability with peers, low visibility of decarbonization roadmaps and limited time as well as resources. 

3. Delivery on results: Missing collaboration prohibits supply chain decarbonization

The missing ability to influence suppliers in their value chain, is a major  barrier to deliver on decarbonization targets. Reasons for the lack of collaboration are supplier fragmentation, unclear mutual benefits and low support in implementation processes.

Value chain decarbonization represents the most significant opportunity to play a significant part in the global upcoming net-zero economy

Beside the challenges, it is without question that companies positioning themselves today as climate pioneers gain strong competitive advantages: securing customer relationships, reducing capital risks and creating new market opportunities (BCG). 

Conclusion: The most essential step is to drive decarbonization

A company’s  transition to a low carbon economy needs more than climate pledges. It requires collaboration along supply chains and clear efforts to reduce emissions where they are created. Easier said than done. How do we get there?

3 steps to drive CO2 reduction in supply chains

1. Emission Targets

It all starts withs corporate climate targets that need to be transferred into actions. Breaking these goals down into measurable KPIs is best practice, in order to make sure the targets can be tracked and effort is held accountable against impact. 

2. Forward thinking 

The baselining process for a supply chain decarbonization strategy, needs in first place a transparent data framework that does not only focus on gathering CO2 data, but measures the actual climate maturity of suppliers and their individual risk profiles.

3. Supplier improvement

Having set up such a holistic approach allows sharing insights on best practices with suppliers and provides concrete benefits in providing benchmarks with peers as well as concrete steps to improve the identified climate performance. 

Conclusion: Taking climate compatible business decisions is key

While we globally have a long way to collectively drive decarbonization, companies are starting to activate their own impact by taking climate compatible business decisions. Setting up climate intelligence tools to enable their suppliers to take climate actions, track the implementation of decarbonization measures to meet ambitious climate targets and leading significant risk reduction across their value chains. 

10.000 company profiles available in climate intelligence platform

There are now more than 10.000 companies listed in the Climate intelligence platform of THE CLIMATE CHOICE. These companies are driving their own climate transformation and become part of the global transition towards achieving 1.5°C. Create your free Basic Account, access your climate maturity, compare with peers and start your own supply chain engagement program to drive decarbonization. 

Reach out to learn more about how to benefit from climate intelligence platform best

The Climate Choice provides a supplier climate intelligence and engagement platform, trusted by leading brands to save costs and automate time intensive processes for supply chain decarbonization. Everything you need to set up, test, manage and achieve your supplier climate targets – from data acquisition to tracking and engagement. With the climate intelligence platform you can access and acquire a wide range of audit-ready company risk as well as emission data and support your suppliers in their decarbonization journey. Reach out to learn more.