June 16, 2023 4 Steps to Reduce Supply Chain Emissions

Use data to quantify supply chain emissions and map a decarbonization strategy.

Manufacturers must build a more sustainable future for their business and the planet. While many companies are working diligently to curb Scope 1 and 2 emissions (emissions from a company’s own operations), those efforts alone will not be enough to reach decarbonization goals and remain competitive in a low-carbon economy. Scope 3 emissions (indirect emissions generated by a company’s value chain) account for an average of 75% of an organization’s greenhouse gas output. While these emissions are more difficult to quantify and control, manufacturers must prioritize them.

A Task Force on Climate-related Financial Disclosures (TCFD) survey found more than 80% of respondents face challenges in Scope 3 reporting, yet 90% expressed support for disclosing that information. The biggest obstacle: data. The task of gathering every piece of emissions data across your products’ lifecycle can seem insurmountable and, therefore, paralyzing. Yet companies don’t need every fact and figure to begin tackling Scope 3. Start with what you have and build from there.

These steps can put you on the path to creating a comprehensive and effective supply chain decarbonization plan.

Step 1: Gather the data you can

To understand Scope 3 emissions, most companies will end up using a mix of modeled and primary data. Primary data is the most actionable and comes directly from you and your suppliers, enabling you to more concretely distinguish which suppliers or products impede your decarbonization goals and prioritize action more confidently.

Alongside suppliers’ emissions data, internal procurement and accounting data can identify your top suppliers by spend. If you’re just starting to gather emissions data, begin with the suppliers that make up the biggest portions of your spend — they hold the most significant reduction opportunities. You can collect the necessary emissions information by directly requesting it or using existing public datasets.

Especially at the beginning, you won’t be able to gather data from every entity in your supply chain. Where you lack primary data, you can estimate emissions using modeled data derived from industry or product averages. However, keep in mind that modeled data only shows where risks might exist — it doesn’t pinpoint specific reduction opportunities. Recognizing these areas of concern guides your future primary data collection efforts to refine reduction strategies further.

Step 2: Focus on your biggest reduction opportunities

To identify your primary focus areas for supply chain emissions reduction, analyze your organization’s level of reliance and spend with your most emission-intensive suppliers. This insight helps determine where revamping relationships and processes will make the most significant emissions impact.

Manufacturers often rely on partners with significant chemical processes that generate large volumes of greenhouse gases. Prioritize collaborating with these suppliers to reduce emissions while also considering how to make your products and manufacturing processes more efficient.

You won’t have primary data for every supplier, but you don’t need it to find your hotspots. Using what you have and modeling the rest will still reveal the highest emitting suppliers.

Step 3: Map your reduction strategy

When creating a carbon reduction plan, consider your influence and leverage over your Scope 3 emission sources and how to use that influence strategically.

Manufacturers may use vertical integration (rather than relying on external partners) to gain more control over parts of their supply chain.

Companies could also nearshore aspects of their supply chain. Moving operations closer to the company’s home market or primary location enables manufacturers to reduce transportation emissions.

If you cannot vertically integrate, define the long-term role of each supplier and commodity in your business. Depending on the situation, you may collaborate with your partners, find a new supplier or adjust business models to phase out a particular supply chain step.

Establish a supplier engagement program to set clear expectations based on accurate and timely emissions data. You cannot directly engage with every supply chain entity, so prioritize suppliers based on your data and the supplier’s specific challenges.  These target suppliers might play an outsized role in your supply chain or emit the most greenhouse gases.

Step 4: Take action

To gauge the best place to start implementing your strategy, consider:

• Your data’s granularity.
• The level of action required to make an impact.
• The significance of the impact.
• Your ability to influence change.

The answers help identify the most impactful first steps and areas requiring more actionable data or further evaluation.

Companies are finding success with this data-driven approach. For example, Optera worked with one manufacturing company that discovered purchased goods and services generated 65% of its Scope 3 emissions. With this information, they set a goal and enlisted their supply chain’s help to meet their target. Now the company’s purchasers are evaluating suppliers, building programs to support partners in setting and achieving their targets and contracting with more sustainable suppliers.

Decarbonization has no quick fix. It requires a series of intentional, incremental changes that add up over time. Action the data you have and strategize to gather what you don’t. Every little bit helps your business and the planet. 

About the Author
Tim Weiss is co-founder & CEO of Optera. Tim has spearheaded thought-leading work on corporate climate action with the World Economic Forum and Fortune 500 companies across many industries. Prior to Optera, Tim worked for AES Distributed Energy and Uncharted.

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