Managing your supply chain and Scope 3 emissions
Managing your supply chain and Scope 3 emissions
In our recent Sustainability Networking Forum event, held in collaboration with the CA ANZ Sustainability Group, we explored how businesses are revolutionising the way they manage complex supply chains and how to begin the path to measuring Scope 3 emissions. The panel discussion was moderated by Dr. Lyndie Bayne (CA ANZ, Senior Lecturer, UWA Business School), who was joined by speakers Hannah Stonehill (Senior Analyst, Sustainability, BDO), Marc Allen (Co-Founder and Chief Sustainability Officer, Unravel Carbon), Frances Carter (Projects Director, Conservation Capital), and Frances Atkins (CEO and Director of Givvable).
Identifying and managing sustainability risks in your supply networks
Sustainable supply chain management, a cornerstone in the contemporary business landscape, encompasses the integration of environmental, social, and governance (ESG) considerations throughout your supply network.
As businesses embark on their sustainability journey, it's crucial to recognise that sustainability isn't just about reducing environmental impact—it's also about identifying and managing risks in your supply networks.
So, what is it all about? Sustainable supply chain management involves creating a responsible, resilient, and environmentally conscious supply network that minimises negative environmental and social impacts and maximises positive contributions. Overall, it promotes long-term sustainable and ethical business practices.
Our panellists delved into what effective sustainability risk management looks like across supply networks and settled on a vital starting point; a comprehensive risk assessment is paramount in identifying sustainability vulnerabilities.
Supply networks are complex and interconnected; beginning this process is a journey. In starting out, you might examine tier-one suppliers, your primary direct partners, by evaluating their ESG performance, regulatory compliance, and alignment with your sustainability objectives. Over time, you might extend this assessment to encompass your tier two and even tier three suppliers, recognising that concealed risks may lurk further down the supply network. Risks include environmental concerns such as carbon emissions and resource depletion, social issues including labour rights and diversity, and governance matters such as corruption and ethical business practices.
Mitigating these risks requires a multifaceted and cohesive approach versus an outdated coercive approach with suppliers, such as:
- Establishing robust supplier due diligence protocols
- Fostering continuous dialogue, collaboration, and education with suppliers to drive sustainable practices, rather than introducing strict controls
- Implementing transparent reporting mechanisms, encouraging suppliers to disclose their ESG efforts
- Developing contingency plans, diversifying your supplier base, and harnessing technology and data analytics for real-time risk assessment and monitoring
- Considering a phased rollout encouraging suppliers to achieve ESG certifications or targets by offering incentives for meeting sustainability standards to motivate suppliers across all tiers to improve their practices.
Starting your journey to measuring Scope 3 emissions
Embarking on your journey to address Scope 3 emissions, as highlighted in Dr. Lyndie Bayne's 'BBB' (burn, buy, beyond) framework, marks a crucial starting point for companies looking to improve their sustainability efforts. Scope 3 emissions, which encompass all indirect emissions along a company's value chain, are often the most substantial and influential when it comes to greenhouse gas (GHG) reduction and environmental impact management.
During the panel discussion, we identified six essential steps to approaching the measurement of Scope 3 emissions:
- Assessment: Begin with a comprehensive evaluation of your value chain to identify the primary sources of emissions
- Prioritisation: Prioritise emission sources based on their significance and potential for influence
- Stakeholder engagement: Engage stakeholders across your supply chain, from suppliers to customers, to collect data and insights regarding their emissions
- Goal setting: Establish clear emissions reduction goals and a strategic roadmap aligned with your sustainability objectives. This roadmap should include specific actions to address emissions hotspots, such as optimising the supply chain, adopting sustainable sourcing practices, and improving transportation efficiency
- Collaboration: Working with suppliers and partners is crucial, as many Scope 3 emissions categories are beyond your direct control
- Monitoring: Implementing a robust monitoring and reporting system is the final piece of the puzzle, allowing you to track progress, hold stakeholders accountable, and transparently communicate your sustainability efforts.
Even for businesses new to Scope 3 emissions management, taking these steps can lead to significant progress toward a more sustainable and responsible future. Understanding the full scope of emissions, from Scope 1 (emissions you burn) and Scope 2 (emissions you buy) to the broader Scope 3 (emissions beyond your control), enables companies to identify the most substantial opportunities for GHG reduction and environmental improvement within their value chain.
Differentiating the scopes
Scope 1, 2, and 3 emissions categorise a company’s GHG impacts.
- Scope 1: Direct emissions from operating assets owned or controlled by a company, for example, on-site fuel combustion in boilers, furnaces, or vehicles
- Scope 2: Indirect emissions associated with the generation of purchased energy such as electricity, steam, heat, or cooling
- Scope 3: All indirect emissions (excluding those counted in Scope 2) that occur in the value chain, both upstream and downstream.
What is sustainable procurement and how do we achieve this?
Sustainable procurement is the process of integrating environmental, social, and governance credentials into the purchasing decisions of a business. It involves sourcing products and services in a manner that not only meets immediate needs but also minimises negative impacts on the environment, society, and economy throughout the supply chain, often referred to as the triple bottom line.
Sustainable procurement is crucial for businesses because it helps mitigate risks associated with resource scarcity, climate change, and regulatory compliance while also enhancing brand reputation, attracting socially conscious customers, and fostering innovation.
To start implementing sustainable procurement, a business can take several steps:
- First, it is essential to establish clear sustainability goals and criteria, outlining what sustainability means for your organisation and what you expect from your supply chain
- Assess and select suppliers based on their environmental and social performance and seek partnerships with those that align with your values
- Implement robust monitoring and reporting systems to track the sustainability of your procurement practices. Encourage suppliers to adhere to sustainability standards, certifications, and codes of conduct
- Engage in open communication and collaboration with suppliers to promote continuous improvement in sustainability performance
- Finally, consider introducing product lifecycle assessments and sustainable procurement policies to guide your purchasing decisions.
Sustainable procurement prioritises environmentally friendly materials, ethical labour practices, energy efficiency, and reduced carbon emissions. It also means seeking suppliers that share your commitment to sustainability and encouraging them to adopt responsible practices. Sustainable procurement is an ongoing process that requires dedication, collaboration, and a clear commitment to creating a more responsible and transparent supply chain.