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The active decarbonization of your business’ supply-chain is changing from an encouraged improvement to a critical necessity. Companies are aiming to be pioneers in climate action rather than following the trends, but paving the way comes with many challenges.
As the backbone of business operations, the supply chain encompasses the process of delivering goods or services from manufacturing to final customers. This model is in many ways under scrutiny, and there is a mounting number of incentives to mitigate its negative environmental impact.
Being a significant source of GHG (greenhouse gas) emissions, supply chains make a major driver of climate change. Thus, their decarbonization becomes essential to reach certain targets, such as the ones set by Paris Agreement.
The process of reducing carbon emissions, replacing energy sources with renewable alternatives or improving efficiency is what is referred to as decarbonization.
Several strategies can be employed to achieve this, such as reducing energy consumption of company facilities. Another option would be reducing the carbon footprint of transport, with lower carbon alternatives such as public transport, electric vehicles, etc.
Overall, the decarbonization of supply chains is a complex and challenging task, but it is essential for mitigating the impact on the environment. Businesses must take a proactive approach to decarbonization by implementing sustainable practices and technologies across their entire supply chain.
With the Paris Agreement well into maturity, the landscape has already notably changed. From regulating bodies to investors and customers, the demand for businesses to do their part in the fight against global warming is increasing rapidly. Companies are not only expected to reduce their emissions, but to do so effectively and communicate these efforts properly.
A large number of organisations are moving on from just acknowledging their Scopes 1 & 2 emissions, to looking into reducing their Scope 3 as well. This is a significant step forward since, for most companies, Scope 3 usually accounts for the majority of their overall impact.
As businesses become more ambitious with their sustainability goals, their actions must also match. Net zero in Scopes 1 & 2 is already a massive achievement. Adding 3 into this mix makes it significantly more challenging, and requires collaboration with partners, suppliers and industry players. Keeping stakeholders and customers satisfied in this already complicated environment is no easy task.
It is important to consider all potential targets to properly assess emissions. Some companies may have a solid grasp of their Scope 1 and 2 emissions, but lack a more precise comprehension of their Scope 3. When they look closer into it, it may show to be significant, many times being more than half of their total emissions. It’s therefore crucial to utilise science-based targets, proper tools and empirical data to avoid issues of this nature.
Firstly, the actual GHG (greenhouse gas) baseline emissions within a business’ supply chain must be determined. Scopes 1 and 2 are usually fairly easy to quantify, through sensor data, calculation models and specific emission factors. However, depending on factors like industry type or the scale of operations, this process can still present significant challenges.
Scope 3 emissions, on the other hand, represent the entire chain, including external elements beyond the company’s direct control. This makes the process far more complex. Defined by the GHG Protocol, there are 15 categories to consider, and compiling and analysing this data can be particularly demanding.
One of the advantages of having these baseline emissions properly established is gaining clarity on the opportunities at stake. Offset costs, regulatory compliance, and customer perception are some of the key areas that could benefit from a well-established decarbonization strategy.
Now that the emissions have been properly assessed, the next step is defining clear and attainable goals, as well as planning how to achieve them. Usually, Scope 1 emissions require operational changes, and Scope 2 is within the company’s control through decisions on energy procurement. On the other hand, Scope 3 emissions require collaboration with external parties, such as suppliers and customers. Then, specific targets should be set and later disclosed to investors and the wider public.
The decarbonization of a company’s value chain is a complex process. Therefore, it is usually organised in a larger structure plan, and subsequent programs. As internal and external processes start adopting new mechanisms for decarbonizing, which cascade into suppliers and other external parties, research and development will be engineering new low-carbon product operations. Other departments will be in charge of communicating these efforts to customers and stakeholders. Progress will be closely monitored throughout the whole process to make sure everything is going as planned.
OTC Flow plays a crucial role in helping businesses navigate the complexities of decarbonizing their supply chain. With our expertise, we guide companies through measuring, reducing, and offsetting their carbon footprints effectively. To learn more about how we can support your sustainability journey and to get in touch with our team, visit our contact page.