Working Group
If businesses are to make progress on their Scope 3 targets, they must adopt a coordinated approach to managing supplier emissions with their industry peers
If businesses are to make progress on their Scope 3 targets, they must adopt a coordinated approach to managing supplier emissions with their industry peers
In October 2023, Sustainability Leaders is reconvening this working group to discuss how companies’ Scope 3 collaboration plans are developing, how successful they have been in reducing emissions, and to share best practices that will help accelerate progress. Participants can expect to share and learn on a number of different points:
Making progress on Scope 3 requires collaboration. This entails partnerships between buying companies and their suppliers, as well as other kinds of collaborative relationships with competing businesses, local governments, and a host of other stakeholders that form an essential part of modern-day supply chains.
This was one conclusion from Sustainability Leaders’ Working Group on what Scope 3 collaboration means in practice. While companies’ current efforts are focused predominantly on obtaining accurate Scope 3 emissions data and better visibility of their supply chains, the actual work of reduction and abatement can largely only be achieved by working hand-in-hand with suppliers and other external stakeholders.
The working group agreed on three steps that are needed to enable this type of collaboration:
With modern day supply chains comprising thousands of suppliers across numerous tiers, the first step for companies is to understand which suppliers they need to collaborate with and identify other external stakeholders with whom a partnership could impact their Scope 3 footprint.
At Schneider Electric, the company selected 1,015 suppliers to include in its “Zero Carbon Project” programme, all of whom are eligible for a host of collaborative activities. These suppliers comprise a mixture of strategic as well as nonstrategic suppliers, and were selected using individual category emissions and the spend with each supplier within that category. This was then used to initially estimate their emissions.
Dutch brewer Heineken has taken a slightly different approach, instead establishing five dedicated workstreams to focus purely on its key purchasing categories that collectively account for the bulk of Scope 3 emissions: raw materials, packaging, cooling, agriculture, and logistics. The suppliers included in these workstreams are regularly contacted for collaborative work.
“We can’t work with thousands of suppliers, so the question is how do we work with the right people from the right sections of the supplier base at each stage of the decarbonisation process?”
CSO, pharmaceutical company
Additionally, several companies are working collaboratively with industry competitors to share best practices. Bayer, for example, is leveraging the chemical industry’s Together for Sustainability initiative to collaboratively set consistent standards, send a joint message about the importance of sustainability, and avoid suppliers having to double-report their emissions.
Elsewhere, Heineken is engaging in similar collaborative work with its competitors across its five workstreams – especially packaging, which cuts across a number of industry spaces.
With Scope 3 representing the majority of most companies’ footprint (typically between 60% to 90%, depending on the industry, according to Sustainability Leaders research), most buying companies will have to replicate their carbon-reduction targets throughout the supply chain to have any hope of achieving these aims.
This has proven true for most working group participants. For Heineken, this means tracking the proportion of its suppliers in its five workstreams that have had a Science-Based Target approved and validated, reflecting the brewer’s commitment to the Science-Based Targets initiative. The proportion of suppliers that have done so varies by category, with some more mature than others. Improving this proportionality is a key metric for Heineken’s team.
“While we may have an SBT commitment, if our suppliers are not on the same journey as us, we’re not going to reach the same end point on net-zero, so we have to do it together”
Director of procurement enablement, Heineken
Schneider Electric’s ambition to operate a net-zero carbon supply chain by 2050 has had a similar cascading effect. The target has resulted in the company’s Zero Carbon Project mentioned above, which requires that the 1,015 suppliers involved reduce their operational carbon footprint (that is, their Scope 1 and 2 footprints) by 50% by 2025.
For some suppliers, having the buying company cascade its carbon targets will be enough to bring about improvements. Already having some capability in decarbonisation, these suppliers will be able to make reductions without any hands-on support from the buyer. They can be termed as “leaders” or “advanced” suppliers on decarbonisation (see Figure 2, below).
However, evidence from the working group suggests that these suppliers are in the minority, with most instead being at the “beginner” stage of maturity. Of the 1,015 suppliers included in Schneider Electric’s Zero Carbon Project, for example, just 30% were deemed to have any capability on decarbonisation. Similarly, of Heineken’s five workstreams, only one category has a majority of suppliers that have set an SBT. The figure for remainder stands at less than 25% of having set one, with one category at 0%.
It is these suppliers with which businesses must collaborate. For Heineken, what is termed “deliberate training” is provided to these suppliers. This entails the use of Guidehouse – a consulting and managed services provider – and its Supplier Leadership on Climate Transition (SLoCT) platform, which provides resources, tools, and knowledge to support suppliers in increasing their carbon maturity and setting SBTs.
Schneider has a similar, in-house, approach to collaboration. For the 70% of suppliers in its Zero Carbon Project that lack carbon capability, the company offers training and capacity building, including:
CBRE’s approach to collaboration is to provide a tool that helps its key suppliers determine emissions at little cost to them. It does so through a project called “Carbon Trace” with Emitwise, a carbon accounting platform that supports companies with complex supply chains. CBRE’s suppliers can use the platform to establish a baseline – something that many of its suppliers are currently unable to do. “It provides a place for them to start and take stock of what they have ahead of them,” the company’s VP of supplier sustainability said.
