Could procurement be the key to net-zero supply chains?

We explore procurement’s role as a driving force for the supply chain industry to achieve its net-zero ambitions

Traditionally, challenges in the supply chain industry ranged from volatile supply and demand to rising costs and visibility. Today, supply chains have the added pressures of high prioritisation of environmental, social and governance (ESG) efforts, regulations and ratings. The driving force behind this transition comes in a variety of forms but includes consumers, society, banks and investors, the corporate sector, and auditing and service providers. 

One crucial priority for those in the industry is meeting net zero initiatives and goals. Despite the urgency to reduce emissions, the road to net zero is “flanked by multiple laws and regulations,” as Jasmin Pennicke, Senior Manager at PwC, explains. To tackle this minefield, “it is clear that you need transparency and reduction measures to achieve carbon neutrality”. 
Despite more than 90% of an organisation’s greenhouse gas emissions (GHG) coming from the supply chain, many struggle to make a meaningful dent in them. “One of the biggest challenges now for companies is to deep dive assess how many emissions they can reduce depending on a certain measure, product, or material,” explains Pennicke, while they continue to battle the usual cost targets. “The comparison of cost to product carbon footprint will become a decisive criterion in future award decisions,” she adds.

The value in quality data and collaboration

For most organisations, carbon accounting practices are by and large at the same level that it was more than 30 years ago. This data immaturity is most noticeable in Scope 3  emissions, which is often spread across multiple spreadsheets or systems, with processing done inconsistently and often relying on secondary data. Though this approach could fly under the radar when used solely for annual sustainability reports, future-ready businesses will need much more accurate, granular, timely and transparent emissions data to maintain their positions in the industry and meet their ESG goals. 

To tackle this data gap, collaboration with value-chain partners and alliances that matter will be crucial to build out emission data sharing networks and new supply ecosystems in order to generate a real impact. 

“Building, nurturing, growing, and creating impact from alliances can require significant effort, especially in new territory, such as setting industry standards for carbon accounting or defining decarbonisation best practices in specific raw materials. To avoid spreading themselves too thin, a company can keep a map of its relevant alliances, ecosystems, and partners, regularly assessing their impact potential against effort, and doubling down on a few,” highlights McKinsey.

Early preparation and engagement

“You can’t start your sustainability journey unless you know where you are, and where you want to go,” states the Crown Commercial Service. It is important to consider sustainability as early as possible in procurement. Identify the pain points, priorities and risks within the organisation that can then be outlined as the core themes for suppliers to focus on.

However, it’s well-known that 70% of transformations fail despite best efforts, so sustaining engagement with net zero will also be vital in achieving initiatives and goals. Education, maintaining momentum, and keeping up with innovations, technologies and new alliances will be top priorities for those leading the charge. Being clear from the outset on the desired sustainability outcomes and internal policies will also help to drive engagement. 

As a result, Scope 3 – of which procurement is responsible for the largest proportion of — will be vital for supply chains going forward if they are to become net zero. The key will be for organisations to tackle the missing link between corporate and operational levels in procurement by working together holistically. Pennicke concludes that connecting the corporate and operative carbon footprint by deriving and prioritising mitigation strategies along the value chain, procurement and the wider supply chain can realise results according to ESG targets. 

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