What actually works when decarbonising your supply chain?

The tragic events of the last few months – floods in Spain and central Europe, wildfires in Portugal – remind us why corporate sustainability is important, and why climate rules will only get tougher. Companies have an urgent need to decarbonise. It isn’t something to do in future, but now.

This goes beyond turning off the computers when staff leave for home in the evening – though that matters. It means grappling with the supply chain. The supply chain, which forms the bulk of the Scope 3 emissions category, is responsible for the lion’s share of any company’s emissions (in some cases, 90 percent or more). But this is difficult. We live in a highly globalised, highly complex, highly interconnected world. Supply chains can snake all around the globe, running through dozens of different jurisdictions and places with radically different cultures, customs and conventions.

It isn’t helpful that the road to full supply chain decarbonisation is obscured by so much unclear advice. Keen to play their part in the climate fight, and/or mindful of the need to comply with stringent climate regulation, C.F.O.s and C.S.O.s are asking, what works? If I want to decarbonise my supply chain, what will actually reduce emissions?

It can be done

No doubt that cutting Scope 3 emissions is overwhelming. But it can be achieved. For 25 years, I’ve worked with big companies to do just that – companies in sectors like telecommunications, which has an especially difficult path to net zero. As with everything, what you shouldn’t do is as important as what you should. Over my career, I’ve seen failure as well as success. Since no one wants to waste time or money, it’s vital that companies make a decarbonisation plan, secure buy-in from all the relevant parties, and make a commitment to follow the plan through to completion. From there, the key to success is to be concrete and practical, to gather data and feedback, and work in partnership with your suppliers to make improvements.

Identify the hotspots

We have been working with a number of global brands since 2012. Each programme has a common foundation, the first step is to scrutinise the supply chain, find the high-risk / high impact suppliers, and then work with those suppliers to tackle problem areas and take action to boost sustainability and working practices. All of the work that follows, flows from this crucial first step: find out where the risks are and the highest impacts. Specificity is the name of the game. If a company takes the time to figure out where it can get the most bang from its buck in terms of decarbonisation and risk reduction, then it will get the greatest results and for the lowest investment in resources.

The results are impressive. If we look at CSR factors, suppliers cut overtime by 20 percent. Workplace accidents fell by 25 percent. Productivity jumped by 10 percent. Money was saved, morale was increased and risk eliminated. If we look at carbon, in the telco sector, we see emissions reduction commitments, at a product level of an average of 49% for infrastructure suppliers and 29% for consumer products suppliers. And within a typical timeframe of just two years.

Dig into the details

On the topic of specificity and carbon reduction – you really can’t know enough about what is happening along the supply chain. The devil is very much in the details. That makes life-cycle assessments (L.C.A.s) your best friend. An L.C.A. is an exercise that entails breaking down the life of a product into distinct stages: extraction, production, transport or disposal, for instance. By doing this, you can see where there’s waste and what’s causing emissions.

Our telco clients follow this approach. They use L.C.A.s to guide suppliers, helping them to target those high-emission areas, make adjustments and then track the results. The outcome, as detailed above are significant carbon reduction commitments, at a product level, and results are tracking ahead of the commitments.

Join hands

The climate crisis is a uniquely all-encompassing problem, since we all happen to live on the same planet. If that’s a good enough reason to collaborate with others, then sharing a supply chain is. Supply chains are networks or ecosystems. ‘Chain’ is a misnomer. Consequently, working with other companies, even rivals, is a good idea. You can pool resources and work under a shared framework that brings accountability – and results.

Trade bodies such as JAC - the Joint Alliance for CSR, a body of big telecoms companies, have done this brilliantly. They deliver approaches which share the carbon reduction burden amongst members, massively lightened the supplier engagement burden, and raising the topic up the agenda of suppliers as they can communicate a common requirement with one voice.

Embrace circular economies

No one likes waste, but we all produce a lot of it. And it’s the enemy of efficiency. The solution is to go circular: circular economies fight waste by reusing resources instead of discarding them. It sounds simple – in fact, it is simple. But it hasn’t been adopted with the enthusiasm it deserves.

Not by everyone, anyway. Vodafone launched an Asset Marketplace, powered by Shields, which rests on the logic of the circular economy. Over three years, it transformed used assets into actual value, cutting waste, reducing emissions, and increasing efficiency. The central principle is straightforward: reuse what you can so you only replace what you need to.

Smartphones, for instance, can account for 10 percent of a telecom firm’s Scope 3 emissions. Moving to a circular model can have a huge impact.

Don’t get distracted

The nature of commitments is that they’re immune to changing circumstances. Still, as corporate climb-downs on ESG and corporate sustainability show, many of us break our commitments. Of course, adaptability is important, and it would be foolish to stick with a broken model when it clearly wasn’t working. But sometimes, we really do need to stay the course, and that’s the case with Scope 3.

I say this with full awareness of how tough the last few years have been for businesses. Wars, energy shortages, economic uncertainty … It’s tested some of the most experienced business leaders out there. But it’s worth noting that many firms with robust, long-term sustainability plans have stayed on track through that period, and are now enjoying higher profits, guaranteed compliance with climate rules, and the brand boost that comes from being a genuinely climate-conscious company.

The best way to do sustainability is to bake it into the model itself. It can’t be a nice-to-have. Put it at the heart of your business model, and you won’t go astray.

What does success look like?

To succeed is to bring down those tricky Scope 3 emissions. But you’ll enjoy some other successes as by-products. Better working conditions. Lower costs. Higher productivity. Less turnover. Better morale. And a far richer, more vivid understanding of what actually is going on in your supply chain. That’s invaluable.

So make a plan. Make the commitment. Identify your hotspots. Get into the details. Work with suppliers. Embrace circular economies. And stay committed.