Supply chain activity generates around 60 per cent of all global carbon emissions and can represent 98 per cent of an organization’s CO2 emissions when taking into account overall climate impacts, writes Nick Gibson.
With supply chain emissions being on average over 11 times higher than operational emissions, tackling the climate crisis requires a transition to both carbon-neutral production and carbon-neutral value chains. But obtaining a complete and accurate product carbon footprint can be challenging due to complexity of global supply chains and the lack of transparency in data.
Research by The Sustainability Consortium found that less than one-fifth of 1,700 respondents had a comprehensive view of their supply chains’ sustainability performance. More than half were unable to determine sustainability issues in their supply chains and of those that report CO2 emissions to CDP only 25 per cent said they engaged their suppliers in efforts to reduce emissions.
Many companies face a herculean task of reaching net zero targets due to complexity of Scope 3 reporting. “It’s going to be incredibly hard to ensure large global organisations are aligned and working collaboratively with suppliers to drive down emissions,” says Pam Barbato, Founder of Action Net Zero. “Knowing how they’re going to credibly address scope three is a much bigger problem and something that most organisations, especially large corporates, are struggling with. Some major retailers and manufacturers can have 5000 different suppliers.
“The good news is that smaller organisations with smaller supply chains are better able to collaborate with suppliers to measure and manage emissions as they are more visibly interconnected. This connected approach is where we see the real opportunity to change supply chains and reduce environmental impact.”
Supply chain control and influence
Tackling supply chain eco-impact has been challenging because it’s an area that a business has had little direct control over. “Scope three is where, traditionally, you only have influence,” says Mandi McReynolds, head of ESG at Workiva. “A company may do a range of things to help progress supplier sustainability but it may not mean that those changes are going to happen and costs involved might outweigh the benefit for some suppliers.
“First, you have to look at industry specific Scope 3 and see what’s most relevant that you have influenced control over. Second, it’s important to recognise that data accuracy is dependent upon other people so you need technology to help you to report it. It’s vital to footnote and define and tell stakeholders where you all are in the process then you need to report with accuracy. Thirdly, everyone needs to accept that we are in a transition. It’ll take time to build data confidence and make transitional change across your whole supply chain.”
Sustainability issues around supply chains are too complex to generalise as every business and industry has different supply demands.
For many businesses, freight is the largest source of emissions in their supply chains and action is this area can make a significant contribution to reducing emissions. Research by Forbes found that shipping containers sailing from Asia are 24 per cent empty and every year 61 million TEUs of containers are shipped unnecessarily, emitting around 122 million tons of CO2. Air transport is less common than ocean freight but produces a much higher carbon footprint. Heavy goods vehicles represent 18 per cent of road transport emissions (19.5 MtCO2e) and vans 17 per cent of emissions (19 MtCO2e). Transport lifecycle analysis has seen some companies reduce emissions by over 90 per cent.
Consumer-packaged goods (CPG) companies are responsible for roughly 33 gigatons of CO2. The industry must remove about half of those emissions by 2050 to meet worldwide sustainability targets such as the Paris Agreement. By 2050, CPG companies will have to reduce their greenhouse gas emissions by 92 per cent relative to revenues. According to CDP’s 2020 Supply Chain: Changing the Chain environmental report one gigaton of emissions could potentially be saved if suppliers to just 125 multinationals were to increase their renewables purchasing by 20 per cent.
Emissions from plastics production and incineration alone could account to 56 gigatons of carbon between now and 2050, according to Carroll Muffett, head of the Centre for International Environmental Law. Reducing plastic packaging and waste would have a major impact on environmental targets.
Bower Collective sells natural household products in reusable packaging. “We are B-Corp carbon neutral, most by what we do in our supply chain to reduce carbon and some by investing in offsetting programmes,” says Nick Torday CEO of Bower Collective. “95 per cent our products are manufactured in UK so we have we have a localised supply system. We also have a rigorous supplier onboarding process where they must sign up to and share transparent data on a number of key criteria. Our main manufacturer is shipped liquid product to our refill centre in IBC containers that when empty are taken back on the same delivery to the manufacturer to be washed and reused. So we’ve got a closed loop, going back into our supply chain and going out to our customers.
“We’ve had an independent lifecycle analysis of our packaging which proves it’s 90 per cent more carbon efficient than single use packaging. Recycling globally is a dysfunctional system and we can no longer rely on it to solve the problem. We must stop consumer waste at source, stop plastic packaging ending up in landfill incineration or the natural environment.”
Supply chain sustainability affects the majority of businesses to a greater or lesser extent and while challenges remain major companies are taking the lead, says Mauro Cozzi, ceo of EmitWise. “The science based targets initiative estimates that 27 per cent of the world’s largest companies have already committed to supply chain targets. Practical steps such as supplier collaboration, reporting alignment and carbon budgets for individual business units responsible for procurement, transportation and manufacture, etc, can have a significant impact on reducing carbon emissions.
“Two important steps can be taken to help decarbonise supply chains,” Cozzi adds. “One is across supply chain collaboration. You need to help your suppliers understand the issue, help them figure out what they can do about it and help them finance the solutions. And then everybody needs to be sharing data as productively as possible. Data needs to be credible and comparable to understand an organisation’s total environmental impact.”
Practical steps to supply chain sustainability
The fashion industry is responsible for 5-8 per cent of annual climate emissions and has some of the world’s most eco-damaging supply chains. At COP26 in 2021 the UN Fashion Industry Charter for Climate Action saw 100 leading companies pledged to reduce emissions to keep climate change below 1.5 degrees C and reduce emissions by half across their entire value chain (scopes 1, 2 and 3) by 2030, and to phase out thermal coal from their supply chains within the same time frame.
Fashion brand River Island has been working to a new corporate net zero strategy since 2020 and has introduced a range of supply chain initiatives. “We use a system called Segura that gives us transparency and visibility in our supply chain to measure the real impact our products are having,” says Jose Cuevas, head of corporate responsibility and sustainability at River Island.
“By understanding where our products come from we’re able to use the right emission factors and we’re able to use the right data to calculate our footprint and understand what measures we can take to help reduce that footprint. We also measure impact of transport and this helps us maximise use of our suppliers and find alternatives with less emissions. It’s important to consolidate measurements and analysis to gain an overall picture of your footprint and so find ways to reduce it.
“Our first step was to understand the complexities of our supply chain and to start measuring and tracking the product journey. We’ve broken that journey into three key components; one is materials that go into a product, two is the process and the transaction of making and selling those products. And then it’s the consumer and end of product life.
“Using our data system we analyse materials sourcing from suppliers, find efficiencies and incorporate more sustainable materials to reduce our footprint. We’re trying to incorporate greener chemistry and the use of water so manufacturing becomes less resource intensive. We’ve addressed our packaging to maximise space and reduced mileage involved in transporting goods.
“We’re introducing green energy and recycled elements in our stores along with takeback and repair of clothing and we’re now incorporating a more circular design process. Next year we’re introducing our first fully circular line involving single material components that are able to be reprocessed. Like many concerned companies we are embracing regulation and best practice in seeking to reduce our footprint across our entire value chain.”
Manufacturing and production sectors represent 16 per cent of global GDP, consume 54 per cent of worldwide energy sources and are responsible for one-fifth of global carbon emissions. Their supply chains create an even bigger environmental problem and industry professionals agree that direct action is needed now.