In this blog, we consider how the procurement industry can make this priority a reality, by getting on top of supplier-related Scope 3 emissions, and treating sustainability as a value that can’t be compromised.
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 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.
Here are three more benefits of incorporating more sustainability into your sourcing processes:
You may have a clear picture of your sustainability strategy when it comes to the greenhouse gas emissions created within the walls of your own operations. But by not tracking emissions created upstream of your suppliers and downstream in the distribution of your products or services, you could be missing opportunities to make substantial improvements to your business’s sustainability targets.
Smart companies are investing in technologies that allow them to operate efficiently but sustainably because they recognize that not being sustainable is an existential threat to the survivability of the business.
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.
And while there are spend categories where costs may increase, there are other areas where you could see opportunities arise because driving sustainability may lead to cost decreases if done well.
Targeting reductions in emissions is an opportunity for businesses with supply chains to think differently, and for procurement to redefine the supplier relationship as a true partnership. As Scope 3 is your suppliers’ emissions, you are almost forced to work far more closely together so people are working hand-in-hand to improve and rethink the way that things are done.
While this sounds all well and good, the tricky part is getting Scope 3 data in the first place, 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.