Sustainability Isn't A Compromise, And Neither Is Scope 3 Emissions Data

November 7, 2022

author:
Adam Callaby

With the International Maritime Organization’s revised global strategy and the LKSG Supply Chain Act in Germany both kicking in next year, and Race to Zero talks at the COP27 in Sharm El-Sheikh kicking off today, sustainability is back at the top of agenda.

In procurement, the smartest will get ahead of the game, on top of their supplier-related Scope 3 emissions, and treat sustainability as a value that can’t be compromised.

The environmental case for change

The environmental demand for transforming supply chains to drive sustainability is without doubt the strongest. Unprecedented heatwaves, droughts, food shortages, and floods, and devastating humanitarian crises, such as the heavy monsoons that took the lives of thousands of people and destroyed the homes of millions more in Pakistan, should make us do more than just take note.

Climate change is real, and supply chain emissions are a significant contributory factor. A WEF and BCG report released in 2021 found that eight supply chains, including automotive, food, and freight, contribute to 50% of global greenhouse gasses.

With over 5,000 of these pledging to the 2023 Race to Zero initiative, businesses are readily taking steps to address climate change, and we’ve seen innovations, such as circularity and a move to renewables, to address Scope 1 and Scope 2 emissions (which emit from one’s own operations.) But so much more can be done to reduce the biggest contributor to that figure - Scope 3.

Scope 3 emissions are those elusive, upstream emissions hidden in the manufacturing process, the fuel consumption of carriers and can often represent up to 70% of a company’s total GHG emissions. That's more than two-thirds of your carbon footprint tied up in your supplier base.

With figures like these, procurement and sourcing need to start treating sustainability as an uncompromisable value, because consumers already do. Take for example, that two thirds of Gen Z (among others) demand their coffee to be sustainably sourced, and almost half of general consumers will pay a premium on sustainable or socially responsible products.

This is taken from a recent post from IBM, who in turn reference how global non-profit, Heifer International, has worked with CATIE, an international organization focused on sustainable and inclusive human well-being in Latin America, to use artificial intelligence to improve crop yield and value, alongside food safety, responsible land use, water stewardship, and ethical sourcing.

In doing so, they're engaging with the consumer sustainability requirement, while increasing value throughout the supply chain. IBM similarly reports in their CEO: Own Your Impact study that more than half (58%) of innovative CSCOs are seeing greater opportunities to improve customer engagement through sustainability imperatives.

But what about Scope 3 emissions? Well, news of the partnership between Independent Commodity Information Services (ICIS) and Carbon Minds, which will offer visibility into Scope 3 carbon footprints for scores of chemicals and polymers, such as polypropylene and polyethylene, is a major step in the right direction. As is global technology firms such as Lenovo announcing that they will make emissions data available for customers to see the impact of their shipments.

This type of data is crucial to realizing GHG targets, such as the IMOs to reduce shipping emissions by at least 40% by 2030, and 70% by 2050. It’s also crucial to making corporate ESGs that champion sustainability worth their salt and giving people a product they can believe in while still making business viable.

"With figures like these, procurement and sourcing need to start treating sustainability as an uncompromisable value"

The tricky part is first getting Scope 3 data, and then figuring out how to integrate it.

During DPW 2022 , McKinsey’s Jan Wüllenweber gave an interesting talk about ‘new currencies’ in sourcing. About the transition from net savings as the once only currency that mattered, to gross savings, multicultures, use of resources, and SC flexibility now included in the mix.

Among the values mentioned were CO2 reduction, and the difficulty in collecting and integrating such values into a traditional spend cube.

Wüllenweber concludes that a more dynamic supply model is needed, among other things, including predictive tools to cope with volatility in the supply chain and help measure the true value of these currencies. 

Here's where Keelvar comes in.

We built our platform to optimize sourcing decisions, helping you save cost and reduce risk in your supply chain by giving you access to increased bidding data beyond just price, driving competition and automating a lot of the manual tasks that consume your team’s valuable time. We can also make sustainability goals and Scope 3 targets an attainable metric for your business.

How, you ask? Our Sourcing Optimizer can take your supplier’s emissions data, run real-time models against price and services, and present those scenarios back to your people so they can more easily make Scope 3 a part of their award decisions.

Then, for sourcing best practice, and the furthering of your ESG, it enables you to establish a data-driven emissions baseline into your criteria, and incentivize those suppliers who don’t currently provide such data to hurry up and start doing so.

This way, you'll be showing your suppliers and your customers, that sustainability is not a value that should be compromised on.

Learn more about Scope 3 emissions by downloading our Buyer’s Book, How To Enact Sustainable Sourcing Today.

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