**London**: Companies worldwide are increasingly focused on managing supply chain emissions as they transition to a low-carbon economy. Engaging suppliers and enhancing data quality are essential for effective decarbonisation efforts, with regulations and consumer preferences driving this urgent shift.
The transition towards a low-carbon economy is becoming a central focus for companies across the globe, with a particular emphasis on managing emissions from supply chains. According to “Industry Today,” the burgeoning energy transition is prompting companies to scrutinise their supply chains comprehensively, given that the shift away from fossil fuels is influencing operational practices across various sectors.
As manufacturers brace for heightened pressure to accelerate their decarbonisation efforts, particularly by 2025, the importance of addressing scope 3 emissions — the emissions associated with their value chains — becomes increasingly apparent. Current data reveals that the value chain contributes 11.4 times more greenhouse gas emissions than direct emissions from manufacturing operations (scope 1 and scope 2). This reality indicates that tackling emissions is not feasible without engaging suppliers in a collaborative effort. An Optera report indicates that nearly 70% of organisations are actively working alongside their suppliers to reduce carbon output.
The rationale behind pursuing decarbonisation encompasses a mix of regulatory compliance and business advantages. A growing number of regulations mandate that companies disclose emissions and assess climate-related risks spanning their value chains, impacting nearly all major businesses worldwide. Furthermore, market dynamics show that renewable energy options are increasingly cost-effective compared to fossil fuels, with consumers in the U.S. demonstrating a willingness to pay a 10% premium for sustainable products. The pressure exerted by investors for enhanced supply chain sustainability and consumer preferences for environmentally friendly goods further solidifies the case for action.
The Optera survey has categorised brand differentiation and commitment to sustainability as major motivators for companies aiming to tackle emissions. More than 90% of these organisations disclose their emissions metrics publicly or to regulatory bodies as part of their broader climate strategies, with approximately 73% establishing science-based targets that include scope 3 emissions.
Despite the majority of businesses progressing towards comprehensive carbon reporting, the path to achieving these targets is fraught with challenges. Quality data and collaborative relationships with suppliers will be critical to navigating these complexities. In particular, the survey highlights that 82% of companies prioritise efficiency initiatives for their decarbonisation strategies, yet only 62% actively engage with value chain partners.
Critical to the enhancement of sustainability efforts is the improvement of data quality and management as highlighted by the findings. Approximately 70% of participants in the Optera survey mentioned a reliance on product-level emissions data to guide supplier interactions and procurement choices. However, the collection of this granular data remains a significant obstacle for many manufacturing entities due to issues related to data inconsistency, quality, and the manual collection processes involved.
To address these challenges, manufacturers are encouraged to adopt standardized tracking methods and centralise data reporting efforts, utilising tailored sustainability and emissions management platforms as necessary. As regulatory requirements evolve — with the European Union’s Corporate Sustainability Reporting Directive (CSRD) set to impose its first climate impact reports this year and California’s upcoming emissions disclosure mandate — the urgency of mastering these practices intensifies. Most organisations see merit in developing comprehensive emissions inventories, even where third-party verification may not be legally obliged.
The aspect of supplier engagement emerges as a pivotal focus in the context of decarbonisation strategies. Businesses that prioritise formal supplier engagement programmes are better positioned to obtain accurate emissions data, which is crucial for informed decision-making. Such initiatives encompass not only data collection but also educational support and incentives. By equipping suppliers with the requisite knowledge and resources to manage emissions effectively, manufacturers can foster a collaborative environment for impactful initiatives.
Moreover, manufacturers may offer incentives such as preferential contracts or recognition for suppliers demonstrating successful sustainability practices, while also implementing measures for accountability towards underperforming partners. Establishing industry-wide standards can further catalyse adherence to sustainable practices across the supply chain.
Continuous enhancement of carbon reduction strategies will be vital. This process will involve the ongoing collection of detailed supplier-specific data, benchmarking against industry standards, and adapting reduction targets in line with the latest scientific insights. In this evolving landscape, collaborative partnerships emerge as a crucial component for achieving significant outcomes in the drive toward net-zero emissions.
Tim Weiss, Co-Founder and CEO of Optera, emphasises that the future success of businesses hinges not solely on individual initiatives but also on the strength of partnerships formed within the supply chain. Achieving net-zero will require years of persistent effort and strategy adjustments, where even incremental steps are instrumental in collectively pushing towards significant environmental goals.
Source: Noah Wire Services
Subscribe to Industry Updates
