The carbon footprint of a company’s supply chain is notoriously hard to monitor. The carbon from a company’s supply chain, what’s known as Scope 3 emissions, are the greenhouse gas (GHG) emissions that come from indirect activities like the trucks you use for transport and the electricity usage from your subcontractor’s warehouses.
Alarmingly, supply chain emissions make up 90% of a company’s total emissions, according to the EPA. This means that the overall climate impact of a company’s supply chain operations are disproportionate compared to its other business operations. What’s more troubling, however, is that so far there have been very few effective ways to monitor Scope 3 emissions.
Attitudes among consumers are changing fast, which means that failure to fully address carbon emissions can have a negative impact on business growth. According to a 2022 IBM survey, 51 percent of consumers revealed that environmental sustainability was more important to them today than it was a year earlier. A large proportion of those consumers were willing to pay extra to support more sustainable businesses, or even change their consumption patterns altogether to support lower carbon emitters.
Indeed, companies can no longer delay monitoring their carbon emissions, nor take customer support for granted. Given the sheer scale of Scope 3 emissions, the carbon footprint of your supply chain should be top of mind when you’re addressing your company’s sustainability.
According to the Carbon Disclosure Project, the cost of failing to effectively manage supply chain emissions could come with a $120 billion price tag within just five years’ time. What’s more, climate change is predicted to have a huge impact on over 90% of big businesses. Many companies, however, are unaware of how much their supply chain is actually contributing to the problem.
Incentivizing carbon accounting action
The World Economic Forum has revealed that just eight companies’ global supply chains account for a whopping 50% of global emissions. This shouldn’t deter smaller companies from taking ownership of their own carbon emissions. Even the smallest of changes can trigger an increased wave of awareness and action. Taking control of supply chain carbon emissions can be broken down into three general stages:
1. Establishing awareness
Businesses can only take action once they know the scale of the problem at hand. In order to grasp the size of your supply chain emissions, you need a system of comprehensive carbon accounting. Carbon accounting refers to the process of calculating your carbon footprint as well as condensing these findings into a list of action items.
In order for these efforts to be effective, business leaders need to clearly define all the emissions in their supply chain, as per GHG-Emission protocol guidance. Such accounting has traditionally omitted Scope 3 emissions, but new technology that directly addresses Scope 3 emissions is making the entire process easier.
2. Planning Action
Once you’ve identified the scale of the problem, you can plan how to address it. This will involve establishing a new framework that will guide your company through the many stages of carbon emission reduction. Set achievable targets that can help you edge closer towards a net-zero future. Also, plan for a budget that allows for clear oversight of how effective your changes are in practice…
3. Decarbonization
When it comes to your supply chain, small steps can actually go a long way. For instance, optimizing packaging by switching to made-to-fit packages can help to reduce the amount of space used in transit.
You also need to work with suppliers to ensure they adopt the most efficient practices. Supply chain processes can be optimized even further through smart IoT systems that monitor lighting and heating. Consider collaborating with suppliers in order to introduce such systems.
Several major companies have already demonstrated the benefits of working with suppliers to enhance sustainability. For example, Unilever launched the Unilever Climate Programme to provide suppliers with resources to help measure and reduce their carbon emissions. The telecom company BT launched a similar program in 2012 called the Better Future Suppliers Forum which aimed for a 29% reduction in supply chain emissions by working with supply chain operators.
Taking on corporate greenwashing
There’s simply no doubt that a massive amount of greenwashing exists and will likely remain a problem. For example, Microsoft was accused of greenwashing earlier this year when it revealed that, despite the company’s public claims that it was addressing its supply chain emissions, its Scope 3 emissions actually increased by 22.7% year-on-year. With such big players failing to address supply chain emissions effectively, one may wonder whether SMBs should have any incentive to either.
One way to actually tackle corporate greenwashing is by being transparent with your customers and showing them exactly how much you’ve been able to take control of your own emissions, and show them the numbers that prove it. Given that there’s growing public concern for business sustainability, taking the lead and showing other business leaders what is achievable can hopefully trigger more action.
The next few years will likely give rise to an increase in carbon emission regulations, which will force companies to reckon with their supply chain issues. For those willing to take ownership of supply chain emissions ahead of time, it starts with collaboration, communication, and a determination to lead and deliver on much-needed change.
