S03E10 - Planet - Scope 3 - Emission Impossible: Getting your suppliers to work on GHG Emission Reduction
Engaging Suppliers for GHG Emission Reductions
Main Themes:
Addressing Scope 3 emissions, which often constitute over 70% of a company's carbon footprint and originate from its supply chain, is urgent.
The need for collaborative approaches between companies and suppliers to effectively reduce emissions, moving beyond simple directives and towards partnerships.
The importance of incentivizing sustainable practices for suppliers demonstrates that sustainability is not just ethical but also economically beneficial.
Key Ideas and Facts:
The Hidden Monster: Scope 3 emissions represent the "elephant in the room" for many companies. Tackling these requires a shift in focus from internal operations to the often-overlooked environmental impact of the supply chain. "We tend to focus on what's happening within our own companies... But the real emissions elephant in the room often lurks in the supply chain... We're talking over 70 per cent of a company's carbon footprint."
Setting Science-Based Targets: Establishing clear, ambitious, and science-based targets (SBTI) provides a shared roadmap for companies and suppliers. This demonstrates a genuine commitment to climate action and incentivizes suppliers to invest in long-term solutions. Companies like Unilever exemplify this by aiming for net-zero emissions across their entire value chain by 2039.
Integrating Sustainability into Procurement: Utilizing purchasing power to drive change by incorporating sustainability criteria into supplier selection processes. Walmart’s detailed supplier questionnaire on environmental practices influencing buying decisions is a prime example.
Capacity Building and Support: Recognizing that not all suppliers have the resources or expertise to meet higher sustainability standards, companies must provide targeted training and capacity-building initiatives. P&G's Supply Chain Environmental Sustainability Scorecard, offering tailored resources and training programs alongside performance evaluation, serves as a successful model.
Transparency and Accountability: Data disclosure ensures progress tracking and accountability. Nike's requirement for suppliers to disclose emissions data via platforms like CDP enhances transparency and enables targeted improvement efforts. "It's not just about trusting people... It's about having verifiable data."
Leveraging Technology and Innovation: Ford is embracing innovative solutions for sustainable design, manufacturing, and transportation. Its exploration of lighter materials, including carbon fiber, magnesium, and plant-based plastics, showcases a commitment to reducing vehicle weight and, consequently, fuel consumption and emissions.
Incentivizing Change: Creating reward systems that acknowledge and incentivize suppliers who achieve emissions reduction milestones. General Motors' program, offering preferential contract terms, business opportunities, and even financial bonuses, demonstrates the economic benefits of sustainable practices.
Collaborative Solutions: Fostering partnerships and knowledge sharing between companies and suppliers to develop more effective and holistic solutions. IKEA's joint projects with suppliers on renewable energy and energy efficiency demonstrate the power of shared ownership and collaboration.
Encouraging Renewable Energy Adoption: Apple's Supplier Clean Energy Program actively supports suppliers in transitioning to cleaner energy sources. It offers technical expertise, connections with renewable energy providers, and procurement assistance and exemplifies a commitment to facilitating this transition.
Continuous Improvement Culture: Integrating sustainability into the core values and operational practices of the company and its supply chain. PepsiCo's positive agriculture approach, encouraging sustainable farming practices among suppliers, highlights the importance of continuous improvement and a holistic sustainability mindset.
Aligning with Global Standards: Nestle utilizes frameworks like the UN Global Compact to ensure alignment with universally recognized sustainability principles and best practices. Its commitment to aligning its entire supply chain with these principles demonstrates a dedication to global sustainability standards.
Conclusion:
Engaging suppliers in emissions reduction is not simply a box-ticking exercise but a strategic imperative for building resilient, future-proof businesses. By collaborating with suppliers, setting ambitious targets, providing support, and incentivizing change, companies can unlock a greener and more sustainable future while simultaneously boosting their competitive edge and appealing to environmentally conscious investors and consumers.