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Supply chain management Article | 10-minute read

7 steps to decarbonize your supply chain

It's easier than you think, and the benefits are well worth the effort.
women with green shirt working, doing paperwork nest to a mac

Curbing carbon dioxide (CO2) and other greenhouse gas (GHG) emissions is critical for addressing climate change and meeting federal and provincial carbon reduction goals. Many small, medium and large companies are already doing their part by creating short (one year), medium (3+ years) and long (5+ years) goals to track their efforts and meet their carbon-neutral commitments.

A critical element to reducing emissions is through tackling your company’s supply chain, as supply chains are responsible for approximately 60% of the world's GHG emissions and as much as 90% of a business’s total GHG emissions. As a result, companies need to look beyond decarbonizing just their day-to-day operations. Decarbonizing your entire supply chain may seem like a daunting task, but it isn’t as complicated as you’d think—and the payoff is well worth it.

Here are key steps to help you reduce your supply chain’s carbon footprint.

1. Do a quick mapping exercise

You can’t make cuts to your supply chain’s carbon footprint if you don’t know how big it really is. Your first step towards net-zero should be to identify all the emitting areas of your supply chain. Without this information, it’s impossible to set realistic targets and share those targets with your suppliers.

According to Marianne Pemberton, a senior corporate sustainability advisor with BDC, mapping your supply chain doesn’t need to be complicated—and you can do it in as little as an hour.

It doesn’t matter how you do it—whether it’s with pen and paper or a spreadsheet—but the first step is to create a list of all the areas where your business uses energy.

“Start with where you work physically and then look at how you move things, including yourself, your employees and your goods,” she explains.

Once you have created as exhaustive a list as possible, circle or highlight where you are purchasing fossil fuels and what you are using them for—to heat your building or power your fleet of vehicles, for example. These are Scope 1 and Scope 2 emissions, and they are the easiest for you to reduce because you have direct control over them.

After you have identified opportunities to make reductions in these areas, it’s time to look at Scope 3 emissions, which means turning your attention to your suppliers. Looking upstream at suppliers is an invaluable way to identify more efficient processes that result in cost savings, and lower shared emissions.

What are Scope 3 emissions?

Scope 3 emissions are all the emissions that are not produced by your company itself, and are not the result of activities from assets owned or controlled by your company. They include the emissions from the extraction and/or processiong of raw materials (upstream) or the emissions from a customer's use (downstream).

For exemple, if you are a car manufacture, you have

  • Upstream emissionsfrom extracting the steel used to make the car frame
  • Downstream emissions—from your customes who drive the car

When you’re looking to decarbonize your supply chain, you want to start with those aspects that are the most important to your business, as well as your customers and stakeholders.

2. Follow the money by evaluating key suppliers

During your supply chain mapping exercise, you can typically identify the key suppliers and areas where you could make the most significant cuts to your carbon footprint.

This process gets more complex for businesses with more intricate supply chains. For example, a coffee roasting company spends 90% on one thing—coffee. But the supply chain of cosmetic company is much more complex. There might be a dozen or more ingredients that you need to source from suppliers to produce a single product. With a business like that, Pemberton says you need to prioritize decarbonizing the costliest ingredients in your supply chain first.

If you’re spending most of your budget on one or two ingredients, then you want to focus on where that money is going to achieve the most significant GHG reductions.

3. Identify the most carbon-intensive areas

Once you have identified which areas or suppliers you are spending the most money on, then you need to go deeper and ask whether you are being as carbon-efficient as possible.

For the coffee roaster example in Vancouver, Pemberton says you need to ask yourself: “Where am I sourcing my beans from and how am I getting them?” Choosing to have them transported by ship from a farm in Guatemala will produce far fewer emissions than having them shipped by air from Indonesia or Ethiopia.

Or maybe it’s the transportation methods used by you and your employees that are contributing the most to your carbon footprint—because this factors into your supply chain, too. If you or your employees travel a lot for business, it’s essential to consider how you are travelling. By train, or more carbon-intensive means such as air or road travel? If you have employees who commute each day, is your building located centrally, close to public transit, or is it in a remote area that means people need to drive cars to get there?

For many businesses, it is worth considering whether their employees need to travel to a physical workplace each day or if a flex model would work. Decisions like these could have a big impact on your emissions.

4. Collect data and set realistic targets

One of the best ways to identify the most carbon-intensive parts of your supply chain is to use an emissions tracking tool, such as one of those developed by GHG Protocol. Whichever tool you choose to use, it should cover your supply chain from start to finish—all the way from resource extraction to the factory, and then from the point of sale in stores to disposal.

You can also work with firms like Optel Group. Optel collects the data and calculates GHG emissions across different organizational tiers, allowing businesses to better understand where their supply chain is creating emissions—and where the opportunities are to reduce them.

When you have a clear sense of your business’s carbon footprint, and have pinpointed the areas that are responsible for the majority of emissions in your supply chain, it is time to set realistic targets—for both your business’s and your suppliers’ emissions.

To do this, you can tap into the Science Based Targets initiative. It helps companies set realistic emissions reduction targets. Once you have committed to your carbon reduction targets, you need to follow through on them—which means collaborating closely with your suppliers to get them onboard.

5. Work closely with your suppliers

Businesses need to work with their suppliers and support them in reducing their GHG emissions. This is the only way to successfully decarbonize your supply chain. You need to engage your suppliers in the process and make sure they understand why decarbonizing is important to your business—and to theirs.

“Don't start with a supplier from China. Start with a supplier who is around the corner, because chances are you know that supplier,” explains Florent Bouguin, Chief Technology Officer for Optel Group.

Bouguin says that businesses also need to talk about digitization with their suppliers to ensure they can track and provide the necessary data to show they are meeting your targets. Collecting verified emissions data from your suppliers is the only way to be certain that you are working with suppliers that are serious about climate action.

6. Find ‘green’ suppliers

Gathering emissions data from your suppliers will also help insulate you against falling for greenwashing. Use caution if suppliers make sustainability claims but don’t have the numbers to back them up.

The best way is to go with certified companies, such as those with B Corp certification.

But B Corp isn’t the only option. Certifications such as ISO 14001, Cradle to Cradle or Rainforest Alliance Certification demonstrate a supplier’s commitment to environmental and emissions management. You can also ask suppliers to provide an Environmental Product Declaration (EPD), which provides a clear sense of the environmental impact of their products and services.

The benefits of buying local

Although buying local is a good sustainability practice, it isn’t necessarily going to lower your supply chain’s carbon emissions. That’s because you can’t assume that a local supplier will automatically produce less emissions compared to a company in China or India, for instance.

Still, buying closer to home can help a business be more resilient. It reduces the risks associated with supply chain interruptions from things like natural disasters and extreme weather events as well as global economic disruptions. It also reduces emissions and costs associated with transportation.

7. Get help

Decarbonizing supply chains is essential to mitigate climate change and achieve global net-zero targets. But reducing supply chain emissions won’t just help protect the planet, it can set your business apart and help ensure it will be more sustainable and resilient.

And you don’t have to do it alone. BDC can provide the support and advice you need to help you on the path to a more sustainable and greener supply chain.

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