It’s no secret that decarbonization strategies are essential to avoid catastrophic global average temperatures. In the past, decarbonization methods for businesses stopped at internal operations. However, because of the vigorous targets that need to be achieved in order to avoid a climate disaster, supply chain decarbonization is now placed in high regard. Companies that are serious about reducing their carbon footprint need to include their supply chains in their efforts.
Carbon emissions associated with a company’s supply chain are called Scope 3 emissions, and they’re notoriously difficult to reduce. There are many factors outside of the company’s control, and it’s difficult to engage suppliers in multiyear strategies to reduce their footprint. While it can be difficult to get suppliers on board with your company’s decarbonization goals, it’s not impossible.
Let’s take a look at several strategies your company can implement to begin the process of decarbonizing your supply chain.
What is supply chain decarbonization?
Supply chain decarbonization refers to the reduction (and ideally elimination) of the carbon footprint of a company’s suppliers. This can be done by reducing the carbon footprint associated with transportation and delivery, helping suppliers transition to renewable energy sources, redesigning products so that the carbon footprint associated with their manufacturing can be reduced, and otherwise reducing the supply chain carbon footprint.
Understanding the carbon footprint of supply chains
Everything has a carbon footprint. Your suppliers will have carbon emissions associated with the sourcing, manufacturing, and transport of your products and/or materials. Even though their operations are outside of your company’s control, their carbon footprint is still associated with your product. If your company is able to reduce its carbon footprint to net zero, but the production of your product still carries a significant carbon footprint, you can’t exactly claim sustainability, can you?
Because you have little control over your suppliers, supply chain decarbonization is largely achieved through collaboration, incentivization, and product redesign. You will need to work to get your suppliers on board with your decarbonization strategies, and you may need to rework your product so that it uses low-impact materials and/or requires fewer transport miles. If your supply chains are unwilling to join you on your decarbonization journey, shop for a new supplier who aligns with your goals.
What are supply chain emissions?
Perhaps obviously, supply chain emissions are carbon emissions originating from your supply chains. Historically, when companies pledged net zero targets, they were only referring to internal operations. However, as the carbon issue has become clearer, we are realizing that additional steps need to be made in order to reduce our carbon footprints and reach the targets set forth by the Paris Agreement. Now, businesses with ambitious carbon emission goals are working on their supply chain decarbonization, too.
The business case for decarbonization
To get your supplier to align with your decarbonization goals, you can impress upon them the benefits of reducing their carbon footprint. Here are some key ways that businesses have benefited from seeking carbon neutrality.
- They save money. Renewable energy sources and energy-efficient lightbulbs save costs in the long run. Both are key pieces of decarbonization strategies. Besides this, decarbonization can result in tax cuts and avoiding regulatory fines.
- They enjoy an improved brand reputation. Multiple studies show that consumers demand sustainability from the companies that they support. A small carbon footprint is a huge consideration in terms of sustainability. Because of this, companies are seeking suppliers who are also sustainable. By reducing their carbon footprint, suppliers can potentially gain more business.
- It’s future-proof. Regulatory trends show that ESG reporting, sustainable practices, and carbon reduction will become mandatory. By developing strategies to reduce their carbon footprint now, companies and their suppliers can ensure that they stay ahead of regulations.
Starting with data: carbon accounting and auditing
In order to determine strategies for supply chain decarbonization, you must first establish a baseline to ascertain your suppliers’ current emissions. Unfortunately, this is not as straightforward as it first seems.
In lieu of standardization, carbon accounting methodology is a bit behind. Many entities gather data via multiple spreadsheets, making it difficult to analyze. While there are some carbon accounting platforms available, the ongoing development of carbon accounting means that it’s not always comprehensive for certain industries, and some companies might need to take a customized approach.
To establish your supplier’s baseline, it’s a good idea to invest in a third-party auditor. Ideally, your suppliers will work with you at this stage so that you can gain a full picture of carbon emissions. While it is possible to gain an idea of their baseline emissions through external means, a more accurate picture will be painted if you can gain a full view of internal operations.
Accuracy in this step is essential. It’s from this data that you will develop your strategies and targets to see how much your supply chain emissions have improved and whether you are hitting your goals. If your estimated baseline is off, your entire strategy could be compromised.
Sustainable sourcing: Choose your partners wisely
Hopefully, your current suppliers are willing to engage in a decarbonization strategy. In this case, it will be much easier to encourage carbon reduction and convince them to make essential changes. Some examples of decarbonization strategies include transitioning to renewable energy sources, investing in carbon credits to take responsibility for carbon emissions that they can’t yet remove from operations, and reducing their use of fossil fuels by improving transportation methods.
If your current suppliers aren’t as involved in carbon reduction strategies as your company is, then you might find supply chain decarbonization to be more complicated. However, you don’t necessarily need to change your supplier quite yet. You can encourage them to collaborate by incentivizing changes (you could offer a long-term contract if certain carbon reduction targets are met, for example) and by providing financial support to make certain changes.
Unfortunately, it may come to pass that you will need to switch to a more eco-friendly supplier if your current suppliers are unwilling to make changes. When choosing a sustainable partner, look for the following.
- Are they willing to collaborate with your company to reach certain goals?
- What sustainability goals and strategies do they currently have?
- Where do they source their materials? Do they have decarbonization goals with their suppliers?
- Are they transparent? You must choose a supplier you trust. Make sure that they have plenty of data to support their sustainability claims.
- Do they have third-party certification? Green business certifications offer a great way to substantiate eco-friendly claims.
When it comes to supply chains, the shorter the chain, the easier it is to trace. Choose suppliers that have a direct-as-possible line to their material sources.
Redesigning for sustainability
The easiest way that you can control the carbon footprint of your suppliers is through an eco-friendly product design. By choosing materials with a low carbon impact as well as certain design choices that will minimize carbon emissions through production, you can minimize your supplier’s carbon footprint without requiring too much change on their end.
Here are some ways that you can encourage low impact through product design.
- Incorporate circular economy principles. For example, if your product requires plastic components, opt to use recycled PET plastic.
- Eliminate plastic packaging by requesting that your supplier send your products using only sustainable packaging materials. Offer to offset this cost in order to remove any obstacles.
- Re-design your products to consider end-life disposal. Although this isn’t directly linked to supply chain emissions, it will have an impact on the carbon footprint of your product. Products should be able to withstand long-term use, and once they reach the end of their life, they will ideally be recycled, upcycled, or otherwise responsibly managed.
Green transportation and logistics
The second simplest way to address the carbon footprint associated with your suppliers is through transportation. In ecommerce, transportation is one of the greatest areas of impact. You and your suppliers can greatly reduce your carbon footprint by adjusting your transport methods. Here are some ways to do that.
- Slow transport. Faster shipping leads to higher emissions. By slowing down transport, you and your suppliers can reduce your carbon footprint.
- When possible, switch to electric or hybrid transport systems over those using fossil fuels.
- Use technology to map out the most efficient routes and consolidate deliveries as much as possible.
- Strategically place warehouses for the shortest routes between suppliers and customers.
Monitoring, reporting, and continuous improvement
As you develop strategies with your partners to decarbonize your supply chains, consistent monitoring and reporting will be key. Because much of supply chain decarbonization is outside of your control, you need to trust that your suppliers are making the changes that they promise to. That’s why is so important to align with partners who share your sustainability goals and can offer transparency in their reporting.
Ideally, your suppliers will be willing to participate in third-party audits, like those by the CDP. This will take any guesswork out of their sustainability reports and help you know exactly where your suppliers stand. When you know their baseline, you can better support them in their decarbonization efforts.
But, auditing isn’t just about establishing a baseline. You need to ensure that your suppliers consistently report their progress so that you can monitor their carbon emissions and make sure that they are on track to achieve their goals. If not, work with them to see how you might be able to support their endeavors.
Constant improvement is key. Always encourage your suppliers to do more. Sustainability is a road without end. As a global community, we need to work together to seek a greener future.
While supply chain decarbonization can be a daunting task for most businesses our checkout solution and overview dashboard makes can help you quickly quantity and start to improve the sustainability of your business for customers.