How can businesses continue their net-zero efforts whilst weathering the supply chain storm
Over the past decade, the scale of the climate emergency has become clear. Thousands of global companies have formally pledged to reach Net Zero by 2050, with many others expected to follow.
Our Supply Chain Barometer highlights that just over a third of CEOs (34%) have a formal business plan for decarbonization, and 32% have begun strategic collaboration conversations with their suppliers. The challenge of how businesses can address their emissions is one of the hottest topics in the procurement sector right now. Why? Because for most companies, the majority of emissions sit in ‘Scope 3’, which are indirect emissions that occur in the value chain of a company.
As organizations embark on the process of improving the visibility and the reduction of emissions, they are likely to be taking a path that has not been trodden before. Below we’ve outlined the key ways businesses can drive positive change and decarbonize through cross-discipline collaboration, technological innovation, as well as being persistent with progress on data.
Collaboration is key
With many companies having made commitments that may now seem over-ambitious, and numerous reports citing a lack of realistic, science-based intent and tangible progress, it is crucial to assess what progress is really being made and how.
Collaboration, both internally and externally, is key to delivering emission reductions. Procurement professionals can take a central role in driving change; however, this requires cross-functional collaboration bringing together expertise from sustainability experts, finance, and the executive team. This will ensure supplier selection, and measurement of success, such as balancing cost along with sustainability, is embraced by all areas of the business.
Net zero is also not going to be achieved in a silo by one business. If we are going to be successful in tackling this challenge, competitors should work together where possible, collaborating on shared strategic suppliers to ensure positive long-term change.
Identify focus areas
In response to growing pressure from consumers, regulators, and investors, businesses have set lofty ambitions to reach net zero. To turn this vision into a reality, focus is needed.
A strategy to decarbonize the business is now essential. Developing a credible plan to achieve net zero will help businesses navigate upcoming regulatory requirements and prepare them to thrive in a low-carbon economy.
Businesses must take a methodical and considered approach – identifying focus areas where impact can be made. These focus areas must be identified based on the type of business and the sector in which it operates, as this will impact where emissions are being sourced. As such, it is vital that businesses get transparency from all key parts of the supply chain to then develop measurements and metrics.
The data challenge
When investigating what’s holding back supply chain decarbonization efforts, the biggest challenge cited, affecting nearly three in ten (28%), is the complexity of the work involved, and a quarter (25%) state that the costs are prohibitive. Access to the right data was highlighted by 23%, and the same number cited a lack of specialist skills within their company.
Data is the key to accelerating the journey to net zero. A business must have a clear picture of its current state to identify where progress can be made, but the challenge is that the data available is far from robust. There is not one way of resolving this and so it can be difficult to know where to focus efforts – the data will catch up, but we cannot wait around when it comes to taking action.
The important thing is to take that first step and kick-start the process. Identify the data you have, analyze where improvements need to be made, and implement strategies based on those data points. Efficient decarbonization must be built upon solid data, and businesses must navigate regulation and competitiveness, which limit data sharing. Access to data will ultimately democratize decarbonization.
Whilst challenges certainly remain when it comes to emissions data, carbon accounting is progressing. Harnessing technology and ensuring that progress continues on this trajectory is key. There are useful tools beyond a client’s own data set that can support, such as supplier rating scores. These can produce additional information that can tie into a business’s strategy.
A vision for the future
In the future, the term ‘sustainable procurement’ will soon become obsolete, with sustainability being fully embedded as a “must have” or non-negotiable in business practices. To achieve this, organizations need to deliver on both the underlying process and awareness within their own teams as well as engaging their supply chains to be transparent and action-oriented – ensuring that suppliers are working towards net zero in alignment with them.
With many businesses looking at further embedding sustainability in their organization and meeting company-wide sustainability targets, it is apparent that this is an area with further unexplored potential. Procurement operations should be leveraged strategically to effectively address the challenge and drive maximum value across all levers, delivering on the wide range of needs being placed on supply chains.
Through being central to the planning and taking on the challenges above, procurement can be a catalyst to businesses and the broader community forward to a better, more sustainable future.