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Supply chain management Article | 6-minute read

Why your supply chain choices are vital for reducing your business’s carbon footprint

Reducing supply chain emissions will make your business more profitable and resilient.
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One of the most impactful—and also most overlooked—ways to reduce a business’s greenhouse gas emissions (GHGs) is to decrease its supply chain’s carbon footprint.

Supply chain emissions are, on average, 11.4 times higher than operational emissions and account for more than 90% of a business’s total GHG emissions. This means that tracking, measuring and making changes throughout your supply chain can go a long way in helping you achieve your sustainability goals.

Many entrepreneurs focus exclusively on cutting their direct emissions that result from day-to-day activities as they are perceived to be more controllable. Yet, businesses can achieve so much more by having a broader look at the impact of their entire supply chain, says Florent Bouguin, Chief Technology Officer for Optel Group, a Quebec-based software company that has been helping businesses track the carbon footprint of their supply chains for more than 30 years.

Understand your supply chain

To decide whether you should make changes to your supply chain and where to start making those changes, you need to first understand your supply chain’s carbon footprint.

Various standards exist to measure and report a business’s carbon footprint, such the GHG Protocol Corporate Standard and ISO 140001. Under these two standards, emissions are broken down into three categories, known as “scopes”:

  • Scope 1: This covers any direct emissions created by your physical operations, including any GHGs emitted from your manufacturing plant, the machines that you use, or the vehicles in your fleet.
  • Scope 2: These emissions occur through the generation of the purchased energy that you use to operate your business, such as the energy needed for office lighting or heating during the winter.
  • Scope 3: This covers all the other emissions within your supply chain: those created by the materials you source, by transporting your products to customers, even those created by your employees commuting to work.

Scope 1 is the easiest place to start the journey to reduce your company’s footprint, says Bouguin. That’s because, as part of your core operations, you’re in control of the elements Scope 1 covers.

“If you want to change your fleet to electrical vehicles instead of combustion engines that use fossil fuels, they are your cars and you can do that,” explains Bouguin.

Identify the GHG “hotspots” in your supply chain

But easy is one thing, impactful is another. “It depends on the type of goods and on the industry, but usually the overwhelming majority of our greenhouse gases are coming from Scope 3,” says Bouguin. “But the problem with Scope 3 emissions is that they are the hardest to see, to measure and—of course—to reduce.”

“First you need to do an inventory of your Scope 3 emissions to understand where your GHG hotspots are. Typically, these are with your suppliers.

Addressing Scope 3 emissions is challenging because it means not just changing your own practices, but also looking to where you procure the source materials you need to make a product. Each of your suppliers produces their own GHGs—and these are included as part of your Scope 3 emissions, meaning that their Scope 1 is important to your Scope 3.

Reducing your GHG emissions through your supply chain involves communicating with your suppliers. Over time, help them understand and implement more efficient practices, technologies, or strategies that will create a mutually beneficial result.

Analyze your supply chain from start to finish

How much you can realistically reduce your supply chain’s carbon emissions depends on the type and size of your business. An industrial manufacturer, for example, will need to factor in raw materials, processing energy and product distribution. But even an office-based business has a supply chain to examine: paper products, energy use, and cleaning and maintenance equipment all factor in to a supply chain’s carbon footprint.

To determine how much of your carbon footprint comes from your supply chain, you need to look at the entire journey of your products—from sourcing the materials to manufacturing and transporting final goods, all the way down the line to examine how they are consumed and disposed of by customers and business partners. It sounds daunting, but there are tools and frameworks to help.

When we talk about the supply chain, we need to have what we call a ‘lifecycle approach.’ You can’t just look at one segment.

Only by looking at your entire supply chain, from start to finish, can you identify the best ways to get your business on the path to reducing the most impactful emissions and in turn realizing the true benefit of sustainable practices.

Decarbonizing your supply chain: 5 key benefits for your business

Though it can seem intimidating, doing a deep-dive to understand which areas of your supply chain to decarbonize is well worth it, says Marianne Pemberton, a senior corporate sustainability advisor with BDC. In fact, Pemberton says businesses are actually taking on risks if they ignore their Scope 3 emissions. Here’s how cutting your supply chain’s carbon footprint can help:

  1. Positively impactful for all types and sizes—Since your supply chain may account for most of your GHG emissions, it is virtually impossible to make your business more sustainable without looking at this part of your operations, whether you’re a manufacturer or an office-based business. Improving the efficiency of your business is not only something you can take pride in; it will also help you cut costs in the short and long-term through resource efficiency and building resiliency to evolving regulations.
  2. Attract customers—Large businesses and customers alike are increasingly considering their environmental footprint when deciding who to partner with and where to spend their hard-earned money. According to recent BDC research, 61% of consumers think companies should put more emphasis on the environment and sustainability—and many are even ready to pay more for an eco-friendly product.
  3. Reduce your operational costs—Making your supply chain as efficient and sustainable as possible also makes good business sense. For instance, improving your logistics won’t just cut carbon emissions, it will also reduce costs and make your business less susceptible to fuel price volatility. Creating less waste, using less packaging, and reusing materials also saves your business money in the short and long run.
  4. Meet changing regulations and procurement expectations—The Canadian government is introducing regulations regarding emissions disclosures, particularly for larger companies, to help the country meet its net-zero targets. As a result, larger corporations are increasingly choosing suppliers who are decarbonizing their own supply chains. Public tenders are also increasingly asking companies to produce an Environmental Product Declaration (EPD) to show the environmental impact of their products and services—and that they are decarbonizing their supply chains.
  5. Reduce risk and make your supply chain more resilient—The COVID-19 pandemic demonstrated what happens when supply chains aren’t resilient. By moving to more reliable and lower carbon emitting forms of shipping, you can reduce risk. For instance, buying from suppliers who are ‘local’ can diversify and mitigate the risk of supply chain disruptions. As carbon taxes are introduced, having a sustainable supply chain can also make your business more resilient.

Besides the clear benefits for your business, it is important to also keep in mind that supply chains are responsible for about 60% of the world’s carbon emissions. Making supply chains more sustainable is key to fighting climate change and achieving global net-zero targets, says Bouguin.

We need to accelerate our business transformation to be greener, because we are not going in the right direction.

Get started today

From government and communities to industries and individuals, we all have a part to play when it comes to reducing GHGs. The world’s rush towards a net-zero future means more and more companies of all sizes are looking at what they can do to become sustainable and reduce their carbon footprints. Along the way, they’re finding that helping the planet pays off.

Decarbonizing your supply chain takes time and effort. But just a little bit of work now can go a long way in ensuring your business is more sustainable, resilient and profitable in the future.

If you’re looking to decarbonize your business’s supply chain, BDC can provide the support and the advice you need to make it happen.

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