Decarbonizing the Supply Chain: Strategies for Business to Achieve Net-Zero Emissions and Climate targets

In June, I had the opportunity to participate in Innovation Forum that focused on Scope 3 emissions and supplier engagement. Here some essential points to consider.

Addressing Scope 3 emissions and supplier engagement is a marathon that requires sustained effort and commitment. It's crucial to move beyond analysis paralysis and take tangible actions. Solutions need to be endorsed by the public sector to be effective. Despite political delays, companies need to make decisions and drive change now.

Onboarding suppliers

Collecting data from suppliers is a challenge and a compelling narrative is needed to bring them onboard. Incentives are essential especially for early adopters as suppliers cannot be expected to bear all the risks.

Corporates

• Focus on implementing impactful actions. Utilize digital tools and services to manage a large volume of insights, acknowledging imperfections.
• Promote collaboration and carefully consider trade-offs to make bold decisions. Engage in cross-industry organizations and strive for standardization within the same industry.
• Recognize the significance of leadership in fostering a culture of sustainability within the organization.
• Incentivizing executives based on key performance indicators such as emissions and water usage are crucial and should be cascaded down through the organization. Communicating with the board about performance and long-term vision is essential, ensuring their understanding of roadmaps, tracking targets, and the costs of inaction.
• Proactively engage with subject matter experts (SMESs) before the regulatory process .
• Prepare for Corporate Sustainability Reporting Directive (CSRD) by building skills, resources, and budgets with a cross-functional team. Ensure organizational efficiency.
• Expand nature-focused requirements within the supply chain, not just limited to greenhouse gas considerations.
• Prioritize fundamental decarbonization projects over marketing efforts, using capital expenditures for impactful initiatives.
• Address the challenge of data hierarchy, especially regarding energy considerations.

Procurement

• The value chain is extensive, and the entire process should be designed to generate profit. The responsibility for sustainable procurement lies with the entire company, not just the procurement department.
• Good governance, budgetary control, a streamlined procurement process, and internal engagement are critical factors.
• Understanding supplier’s needs, offering free training, and incorporating carbon disclosure in supply contracts and plans are essential. Request for Proposal (RFP) processes could allocate a carbon fee if carbon information is not disclosed. Utilizing tech surveys to connect data and display it in an intuitive dashboard is also important.
• Embedding sustainability into procurement is effective for change management. It requires a focus on engaging stakeholders positively rather than using punitive measures. It emphasizes that procurement is more than a role; it is a responsibility. Embracing sustainability is crucial as it will ensure the company’s longevity and leadership in the industry.

Regulation

Regulations and reporting coming from the public sector can help decision-makers. The transformation of legislation should be geared towards positive energy. However, regulation has had an adverse effect, preventing companies from openly communicating as they are under scrutiny. There is a need for data verification and reassurance.

Role of AI

There is ample opportunity for AI to extrapolate and predict. Foresight analysis and predictive modelling are critical as they can help organizations get closer to the truth.

Establishing a Supplier Carbon Reduction Plan for Year 1,2,3, and Beyond

When clients request carbon reduction plans from suppliers, it’s often challenging to obtain the necessary information. Here’s a step-by-step approach to establishing a supplier carbon reduction plan:

• Prioritization and Engagement Start by prioritizing impactful areas and engaging with suppliers. Recognize and award prizes to the best-performing suppliers.
• Enablement and Supplier Assistance Offer preferential terms to suppliers that meet sustainable criteria. Implement supplier assistance programs to educate and support suppliers in building sustainable practices. Adopt a common definition for sustainable practices.
• Collaboration and Digital Integration Collaborate with competitors to address audit fatigue among small suppliers. Work towards harmonizing data models for better efficiency. Embrace the upcoming necessity of digital product passports for clarity across the supply chain.
• Addressing Challenges Understand that no one has fully solved the supply chain data challenge. Seek to understand why customers need specific data and how it can be provided.

Challenges related to EU Regulation (EUDR) Recognize that regulations can help to some extent, but they can also have unintended consequences. Smallholders may struggle to meet the data quality required by regulations, leading to social and economic challenges. Work towards a more nuanced approach to avoid cutting off smallholders and risking turnover for big corporates. Address the IT readiness and GDPR issues associated with EUDR.

To sum it up:

• Emphasize the need for continuous improvement.
• Use a pragmatic approach and leverage mutual resources
• Develop soft skills to convince leadership and stakeholders.
• Understand that there's no one-size-fits-all solution.
• Don't let the pursuit of perfection hinder progress and anticipate future regulations.
• Focus on resilience, digitalization, and sustainability, and prioritize transparency, learning, and engagement.

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