Supply chain decarbonization is a major challenge for corporates as they look to reach net-zero; D-a-a-S is here to help
Decarbonization-as-a-Service is a service that focuses on helping businesses to reduce greenhouse gas emissions (CO2e) from their suppliers. It combines technology, emissions, commercial and supply chain expertise to diagnose where the impact is, identify supplier solutions, and deliver the gains. For businesses, it’s a kick start and acceleration of supply chain decarbonization.
With COP26 just around the corner, most expect to see a reinvigoration of commitments made in the Paris Agreement whereby world leaders signed up to limit global warming to 1.5°C or well below 2°C above pre-industrial levels by 2050. This means benchmarking global temperatures now (and eventually in 2050) against what they were in 1900 with the desired outcome being stability, within or below that 1.5° – 2°C range. In short, we stop human-induced warming.
World leaders can and will set regulations in play, they can penalize and incentivize, but it is business that is directly or indirectly the source of the majority of emissions being produced today. And so if businesses need to act, why aren’t they? Well, in the absence of regulation, businesses will be governed by what their customers and investors favor. And so many businesses find themselves in the middle of a vice feeling varying degrees of pressure from regulators, investors, customers, and their P+L.
Though it may be complex for many in the US and Europe, the pieces of the puzzle are aligning as all these forces start to point towards net-zero as a destination. A large part of this is purpose-led, but critically decarbonization is also that rare combination of a financial risk to the bottom line but also a top-line opportunity for first movers. Decarbonization has a cost, but it can also be profitable.
So, how do businesses enact this positive change? By committing to net-zero, which means reducing and compensating for Green House Gas emissions (CO2e), both those directly produced through operations and those indirectly produced through products and services. For the average business over 90% of CO2e lies in what’s known as Scope 3 – the value chain, loosely described as how something is made, used and disposed of.
Further, the lion’s share of Scope 3 is typically in the supply chain, often over 80% of total CO2e. Why is this important? Because this means that successful and profitable decarbonization means working with suppliers.
That is where Decarbonization-as-a-Service comes in, combining strategy, technology, and execution to help businesses tackle the emissions in the supply chain.
Diagnosing opportunities and delivering change
Supply chains, as we know, are complex, and that makes it hard to know where to start. The simple answer is to start. Every business looking at decarbonization begins with an imperfect picture of supply chain emissions. In D-a-a-S we use analyst teams and tech to provide an initial view on supplier emissions, key focus areas, and the future risk and cost of inertia.
By working with existing suppliers and stakeholders it’s then possible to refine the picture, understanding where progress has already been made, how supplier plans align to ambition and what data points need to be captured moving forward. It is also possible to begin to create realistic and actionable strategies which balance purpose, pragmatism, and profitability. This will involve thinking about CO2e as part of a broader value equation. Strategies will fall into one of three buckets:
- Intent projects – essentially quick wins where the CO2e gains may not be remarkable, but a company can demonstrate strategy, intent and progress against plan, as well as inspiring buy in and momentum internally.
- Change projects – where perhaps a change of specification, or supplier may lead to a lower carbon alternative. This takes great supply market knowledge, and will be a perpetual process as new solutions come to market, supply market innovation is an infinite game.
- Innovation and collaboration projects – whereby the answer doesn’t exist today. Perhaps a production process will be reengineered, raw materials changed, waste removed or perhaps suppliers and competitors will collaborate for the greater good.
Procurement and commercial teams have traditionally focussed on the £$ bottom line, however, if these teams are going to succeed in being a vehicle towards net-zero then a shift in mindset is required, factoring in carbon (and cost of) and considering the future impact of today’s decisions on top and bottom line. It may mean looking at suppliers and categories, but also product lines and customer journeys.
Making sense of the data and tracking the change
A by-product of getting started is that the data will start rolling in. Emissions data can be easier, or harder to attain, depending on the product or service and it will come in a different format, perhaps consumption data, production data, or even emissions adjusted spend data.
A simple segmentation model helps a business to decide where to go lighter and where to go more granular, where to measure and where to trust the supplier, but all this data has to be captured because it represents the truth behind the decarbonization effort. In time, this truth in data will be required for ESG reporting, sales efforts, and regulatory requirements.
D-a-a-S is underpinned by cutting-edge partner technology that can ingest multiple data types to produce a consolidated Co2e picture. The tech can also continuously learn, improving accuracy over time and providing intelligent visibility of progress towards net-zero. The soon-to-be-launched “next best action” feature will enable forecasting, suggestion, and scenario modeling, so businesses can profile the impact of their strategies and decisions before they make them.
Embedding the change commercially, operationally, and culturally
While working with suppliers and data are part of the D-a-a-S solution, the final piece of the jigsaw is in embedding the change into how the organization thinks and works. Achieving net-zero will mean changing the way a business operates. Sustainable thinking must become part of regular business thinking.
This is achieved through embedding decarbonization (and likely other sustainability and social value factors) into procurement and supply chain operating practices. This might mean cost modeling, model clauses, strategy templates, supplier governance, reporting, audit, and compliance.
How this works best for every business will be different, but the underlying principle is the same. After the initial sprint, decarbonization becomes business as usual, a key business objective to work towards like any other.
Partnership is key
The journey to Scope 3 net-zero is complex, and it is made easier by having the right partnerships in place. Environmental challenges have bought companies and competitors and buyers and suppliers together to collaborate with a common aim in mind. Harnessing that positive intent and energy is achieving remarkable things, but of course, there is more to be done.
At Proxima, we blend our commercial and supply market expertise with science, technology, and some select specialist partners to give our clients the best “service partner” possible. We are able to flex our capacity, capability, or technology around what our clients already have in place. Decarbonization is not easy, but the pain of not starting is worse. D-a-a-S is designed to strike support the optimum balance between profit and purpose as you decarbonize your supply chain.
Are you trying to help your business reach net-zero? Get in touch to discuss how Decarbonization-as-a-Service can work for you.