Tackle Scope 3 emissions for supplier sustainability

Sustainability across the value chain: A 5-stage plan to address Scope 3

Scope 1 and 2 emissions are currently the “elephant in the room” of many boardrooms. The “mouse in the corner,” however, is Scope 3 emissions, or those that are an indirect result of the company’s value chain—and that mouse is growing larger. The growing concern over supply chain emissions is reflected in the evolving priorities of chief procurement officers (CPOs). According to Deloitte’s 2023 CPO Survey, environmental, social, and governance (ESG) has become the second-most important objective for CPOs, moving up from sixth place in 2021 (improving operational efficiency remains number one).

Why are Scope 3 emissions important to my organization’s sustainability goals?

Scope 3 emissions are often responsible for the largest proportion of a company’s carbon footprint. However, organizations that have a blueprint to net-zero and establish science-based targets (SBTs) are in need of a methodical, systematic, and impactful way to approach Scope 3 emissions, especially for Category 1, Purchased Goods and Services. This is the largest Scope 3 emissions category for most industries and the most complex, as it entails engaging with the supplier base. Procurement has a unique role in influencing one of the largest contributors of emissions.

While various companies and regulatory bodies have come up with abatement strategies for each category, Category 1, Purchased Goods and Services, still needs attention. Of 15 categories, it generally accounts for most Scope 3 emissions. The emission portion of this category ranges between 35% and 40%, depending on the industry, according to the Carbon Disclosure Project (CDP). This category alone can move the needle on sustainability efforts—but it requires a deliberate approach that accounts for multiple factors.

The 5-stage sustainability journey to reduce Scope 3 emissions for Category 1

Many companies have set net-zero targets using the Science Based Targets initiative (SBTi) that requires the inclusion of Scope 3 emissions but find it a challenge to create and execute a road map. Our approach interweaves the key components necessary to building it out.

As a starting point, assess your baseline emissions. Then, prioritize the emissions and supply categories they will focus on. This sets you up to start setting goals at the overall company level that will then need to be broken down at the emissions category and supplier level.

While establishing goals is a great first step, achieving them cannot be done with the flip of a switch. It is a journey that requires a strategy, a plan, and the ability to execute, including resource bandwidth, internal capabilities, and intercompany alignment. A good strategy takes into consideration how and at what level you will engage with your supplier base and the best carbon abatement programs given the finite resources available and suppliers’ context. When building the strategy, take a look at your own capabilities, too. Do you have the right knowledge within your organization to not only build out the strategy but connect the dots that will allow you to execute and manage the plan? Last but not least, you will have to manage and monitor both your suppliers’ performance against commitments and internal performance against strategy targets.