Climate change has been a leading story for the past few years. As countries around the world continue to break climate records, it becomes clearer just what a threat it poses. While some may be under the impression this is an issue that has only begun happening in the past few decades, looking into the history of climate change it was in the late 19th century that scientists first started ringing the alarm bell.
To put it in the simplest of terms, climate change refers to the change in weather patterns and temperatures. The problem is that even the smallest shift in either of these results in chain reactions that are felt globally.
As for what’s fueling climate change, it comes down to greenhouse gas emissions, which humans are responsible for. Greenhouse gas emissions are released into the air and then act like a shield which traps all the heat of the sun in. This in turn starts to heat the planet, both the land and the water. To better understand how we categorise emissions within the supply chain, they are divided into three categories which are scope 1, 2, and 3.
Scope 1 is direct emissions which can be controlled by a company and owned by it.
Scope 2 is indirect emissions that are created by the utilities a company uses such as heating or electricity.
Scope 3 is also indirect emissions and refers to anything that doesn’t fit in one and two and is described as anything that is bought and used by a company, and then disposes of materials and products from its suppliers. This encompasses all emissions from activities up and down the supply chain not owned by the company.
Here we’ll be taking a closer look at Scope 3 emissions, what they are, how they contribute to climate change, and more sustainable options when it comes to the role of procurement in managing Scope 3 emissions.
Getting a Better Understanding Scope 3 Emissions
To better understand the role of procurement in managing Scope 3 emissions, one first has to do a deep dive into the different types of Scope 3 emissions and why they are so significant. Unlike Scope 1 emissions, Scope 3 are not emissions that a specific company has produced. Instead, these emissions are created by companies within its value chain. As alluded to above, it can be when a company buys, then uses and eventually disposes of various products procured from suppliers.
So why is this so significant? Even though a company isn’t directly creating those emissions, they are contributing to the cycle and the overall greenhouse gas emissions. Many industries are known to be causing high scope 3 emissions, with energy (heat, electricity and transport) being the top contributor. From there the industry can be broken down further and statistics show that energy use in buildings, energy use in industry and transport are areas of big concern.
If new climate change goals, regulations and rules only focus on Scope 1 and 2 emissions, you leave a huge part of the puzzle out. These indirect emissions are just as harmful and vast.
Examining the Relationship Between Procurement and Scope 3 Emissions
This begs the question of how procurement practices that companies use can influence Scope 3 emissions. By understanding this deeper, companies can then look for ways to cut down and ideally, end their Scope 3 emissions.
Taking a look at the typical procurement practice is a great place to start, as it gives people an understanding of where the issues begin and where solutions can be found. What’s startling is just how much of a company’s emissions come from Scope 3. It is estimated that 80% can be traced back to Scope 3 emissions, which means unless the procurement system and processes change, achieving net zero is impossible.
Generally speaking, the procurement process consists of several steps. These steps are:
- Figuring out what services and goods are needed
- Making a purchase request
- Identifying and then choosing the vendor/supplier
- Price and term negotiation
- Making a purchase order
- Receiving and then inspecting the products ordered
- Approving and then making payment
You can start to get an idea of just how many areas can be improved upon where Scope 3 emissions are concerned, as the procurement process contains plenty of steps and variables.
Top Strategies for Procurement to Reduce Scope 3 Emissions
So how does a company reduce Scope 3 emissions? It needs to be a multi-pronged approach that has to start from the top down. Companies need to collect better and more complete data when it comes to suppliers and then ensure they verify it; next they need to rely on accurate and in-depth secondary data which is more the “big picture”; and finally they need to identify any hotspots within the procurement process so that solutions can be found.
This is a tall order and one that will take time, energy and the right tools. This is exactly why technology will be so necessary in the process, as software can be used to help find solutions. The software can do a great job at tracking and assessing the entire supply chain for the incoming carbon footprint, provide CO2 analysis for each of the suppliers and even the category level being examined, it is dynamic in that it’s always changing and being updated, and can be used to power conversations and decision-making moving forward.
It’s also worth noting that this same software can then take the current data and compare it to historic tracking and making SECR reporting simple. Of course, software isn’t the only solution, but it’s incredibly powerful and opens the door to possibilities. As more companies turn to software solutions, expect them to grow more advanced.
Outside of software, companies can also take a closer look at the vendors and suppliers they are using. Ask plenty of questions, and ensure that they are doing their best to reduce greenhouse gas emissions. Vendors and suppliers must also be able to back up their data, meaning they can verify the information they are giving companies. Sometimes it may even be necessary for companies to talk to suppliers about their efforts to use more sustainable options, and even provide training when necessary.
Life-cycle assessments are another tool that organisations can use when making procurement decisions. The assessment will identify energy-efficient and eco-friendly products and services. The goal is to promote a circular economy through the use of procurement.
Several Companies Are Leading the Way in Reduction of Scope 3 Emissions Through Procurement
What’s exciting is that there are several companies currently leading the way when it comes to the successful reduction of Scope 3 emissions through procurement. They are providing others with a blueprint they can employ in their procurement chain, showing results are possible.
Notable companies that are acting as trailblazers include:
- General Motors
- Mars, McCormick
- General Mills
These are massive multinational companies, so not only is it exciting to see there are solutions in the procurement process, but these companies are instituting them on a large scale. They may end up being responsible for a waterfall effect that sparks change across all industries.
A common sentiment among the companies is the goal to reduce total emissions by looking at logistics and raw materials providers. It’s all about reducing their footprint in ways that may not have been identified in the past. HP is a great example, as it found that 30 of its “largest partners” were the ones that were responsible for its Scope 3 emissions. This information was discovered through the use of data collection with a focus on the supply chain.
Walmart is another strong leader in the field, as it has taken a look at its supply chain and operations to identify areas it can reduce emissions.
It’s no longer a person-by-person approach to save the plan, as big corporations are acknowledging the role they play and realising they need to take more responsibility and steps to reduce their emissions.
Companies Need to Be Ready to Face the Challenge
And for all the good that can be achieved through the procurement process, there are also hurdles and challenges to overcome. A company needs to be willing to look at every step, service, and material procured under a microscope. If they aren’t using accurate and up-to-date extensive data, then they won’t be able to achieve their goals. Assessment and data collection are the cornerstones of success, and it’s exactly why technology is now front and centre in terms of solutions.
What are the Future Trends in Procurement and Scope 3 Emissions Management?
The good news is that it seems we are only scratching the surface of how procurement processes and strategies can help solve Scope 3 emissions. As the issue becomes better understood and discussed, new policies, best practices and regulatory trends are bound to follow. This sparks the need for technological advancements that will make procurement more efficient, streamlined and of course greener and cleaner.
Companies and organisations are also starting to take note of the fact employees have a growing interest in how green a company is. An organisation that cares about the environment, is striving to meet net zero goals and wants to be a leader in the industry in terms of Scope 3 emissions can boost staff morale. They have pride in their company, and it’s something that can be used in advertising and marketing material. Customers are asking a lot more questions and want to know they are choosing environmentally-conscious products, and services and giving their business to organisations that make it a priority.
It’s a win-win across the board for companies who are looking to better position themselves for the future.
Changes to Procurement Processes and Systems Can Be the Magic Key
It would be great if there was a magic solution to solving the ever-increasing greenhouse gas emission problem, but unfortunately, there’s not. What is promising, however, is that businesses are realising the important role they can play in cutting back on Scope 3 emissions and are now taking a much closer look at their actions from the ground up. This is a change for small, medium and large businesses to shine and take environmentally-responsible steps that spark change and new regulations and policies.
Where to look next
The marketplace is starting to come alive with providers of Carbon Management solutions. Here at Anvil, we’d love to start you off on your journey to a net zero future with a team of Carbon Analytics experts standing by. So often seeing is believing and we’d love to take you through our tool. You can contact us directly via the book demo button, located just below.