Managing carbon across the value chain: We are all in this together

When organisations first start to look at reducing their carbon footprint, they usually look close to home by making their own operations and infrastructure more sustainable. They might decide to power their offices with renewable energy, for example, or to use recycled stationery, or upgrade their petrol and diesel vehicle fleet by going electric. These are all steps in the right direction, but most businesses are likely to create an even bigger positive impact by reducing carbon from their supply chains.

A recent study by the Carbon Disclosure Project (CDP)[1] suggests that supply chain emissions are, on average, 5.5 times greater than a company’s own direct emissions. As organisations are increasingly being asked by regulators, customers and investors to report the carbon footprint of their product or services, the carbon scrutiny of the supply chain is set to become more important, and the lack of carbon reporting or emissions reduction targets can act as a barrier to new clients or markets.

This supply chain scrutiny is not limited to one sector, and the carbon management challenge is recognised in supply chains as diverse as stocking supermarket shelves to building houses, roads or railways. Whether at the apex of a large and complicated supply chain or a simple primary producer, the move to a low carbon economy will affect all organisations.

So how do companies start to make a difference in areas of business beyond their direct control? The first thing required is information so that, through measurable data and transparent reporting, the full extent of supply chain emissions is clear. Companies need to start calculating the carbon emissions associated with their supply chains and then make this information public. We need to make the right data available so that we can understand the full impact of purchasing decisions on our own emission footprints.

Transportation of goods and materials, which have potentially been imported from distant centers of production, represents one of the biggest challenges for decarbonization, accounting for a significant percentage of global greenhouse gas emissions related to air freight, road transportation and shipping. Businesses need to start to look for alternatives closer to home or choose suppliers that can demonstrate they are using the lowest carbon intensive mode of product distribution. The COVID-19 pandemic showed us that we need to create resilience in our supply chains when we can’t import certain goods from thousands of miles away, and we need to be thinking about sourcing them locally.

What about the cost of introducing carbon management into supply chains? Clearly we are in a challenging time with respect to costs and many of our clients are looking to cut costs. Encouragingly, it is thought that around 40 %[2] of all supply chain emissions could be abated using available and relatively affordable methods such as increasing efficiency, recycling and the use of renewable energy sources. What’s more, if zero supply chain emissions are achieved in the future, costs to consumers would only go up by around 1-4% in the medium term.

Therefore, we need to focus on a value chain that considers carbon at every stage and businesses need to innovate and develop services and products with a lower carbon intensity than their competitors in order to capture market opportunities. ??

Given that the UK has legislated for Net Zero by 2050, clients and consumers are becoming more willing to seek low carbon opportunities, especially if they have their own obligations to reduce their footprint. Similarly, if carbon taxation becomes a reality, businesses will look to reduce liabilities as much as possible.

Many businesses with a stated ambition of achieving net-zero by 2050 do not yet cover the full scope of their value chain emissions. An enormous amount of work still needs to be done to understand and quantify supply chain emissions. However, by sharing data with suppliers and customers, designing sourcing and procurement strategies around low carbon, engaging with sector initiatives for best practice, developing low carbon or zero carbon certification for products and services, and amplifying demand-side commitments to decarbonization, we can support progress towards a Net Zero future together.

As part of our own commitment to climate action and leading the transition to the Net Zero Economy, Waterman has pledged to reduce our carbon emissions and reach Net Zero in line with the requirements for keeping global temperature rise under 1.5°C. To achieve this, we have set an interim target of a 50% reduction based on a 2019 baseline across our entire value chain (Scope 1,2 and 3) by 2030.

For more information on managing carbon emissions across value chains, contact Dave Allen, [email protected].

[1] Carbon Disclosure Project - CDP Supply Chain: Changing the Chain Making environmental action in procurement the new normal - 2019

[2] World Economic Forum - Net Zero Challenge: The Supply Chain Opportunity - Insight Report - 2021?