Your Guide to Supply Chain Decarbonization

In today's climate-conscious world, businesses are coming under increasing scrutiny, from government regulators, investors and consumers, for their environmental impact.

This scrutiny extends beyond a company's own operations to encompass its entire supply chain as stakeholders begin to weigh the impact of climate-related risks from a company’s entire value chain on its business. With the increased attention on supply chain emissions, the goal of supply chain decarbonization is coming to the forefront.

The good news? A more sustainable supply chain isn't just good for the planet, it's good for business too. This blog post will serve as your guide to navigating the world of supply chain decarbonization.

What Is Supply Chain Decarbonization?

Simply put, supply chain decarbonization is the process of reducing and ultimately eliminating greenhouse gas (GHG) emissions throughout a company's value chain. This includes emissions from raw material extraction, manufacturing, transportation and product use.

The Road to Carbon Neutrality

The ultimate goal of supply chain decarbonization is to achieve carbon neutrality, wherein a company's net release of GHG emissions is zero. Achieving complete supply chain decarbonization is a complex challenge, and it's unlikely for every company in every industry to achieve it in the near future.

While complete decarbonization might not be achievable for all companies in the short term, they can still make significant progress and derive benefits from reducing emissions.

Here are some key strategies to help get you there:

1. Map Your Carbon Footprint

The first step is complete transparency. You need to understand your baseline emissions across your entire supply chain. Partner with suppliers to gather data on their energy consumption, transportation modes and waste generation. Tools such as life cycle assessments (LCAs) or materiality assessments can help quantify these emissions.

2. Optimize Operations

There is often a low-hanging fruit within your own operations and those of your suppliers. Look for ways to improve energy efficiency through upgrades to equipment and facilities. Explore opportunities for switching to renewable energy sources.

3. Sustainable Sourcing

Rethink your sourcing practices. Prioritize suppliers who share your commitment to sustainability. Look for materials with lower embodied carbon footprints (the emissions associated with their production). Explore local sourcing opportunities to reduce transportation emissions.

4. Improve Logistics Efficiency

Transportation is a major source of emissions. Consolidate shipments, optimize delivery routes, and explore more sustainable modes of transport such as rail or electric vehicles.

5. Collaborate With Suppliers

Supply chain decarbonization requires deep collaboration with suppliers. Work strategically with suppliers to identify and implement emission reduction strategies. Share best practices and jointly invest in sustainable solutions.

Tracking and Measuring Progress

Measurement is key to successful supply chain decarbonization. Establish clear metrics to track your progress towards decarbonization goals. These metrics could include:

• Total CO2 emissions reduction year-over-year
• Percentage of suppliers with set emissions reduction targets
• Increase in the use of renewable energy sources
• Reduction in transportation emissions

The Business Case for Supply Chain Decarbonization

There are numerous benefits for companies that embrace supply chain decarbonization:

Cost Savings

Reducing energy consumption and optimizing logistics can lead to significant cost savings.

Enhanced Brand Reputation

Consumers are increasingly looking to support sustainable businesses. A decarbonized supply chain strengthens your brand image.

Improved Risk Management

Climate change poses major risks to businesses. Decarbonization helps future-proof companies by uncovering those risks and emissions sources and providing a platform for taking action to mitigate them.

Regulatory Compliance

As environmental regulations become more stringent, the efforts companies make to baseline emissions, set reduction targets and track and measure progress in the pursuit of a decarbonized supply chain will position them for compliance.

A Proactive Approach

Decarbonizing supply chains by reducing and eliminating Scope 3 emissions is difficult, yet increasingly necessary. By taking a proactive approach, companies can not only reduce their environmental impact but also unlock a range of business benefits. Companies and their suppliers will need to embrace collaboration, innovation and a commitment to sustainability to get there.