by John Spear, Managing Director at epi Consulting
Reducing greenhouse gas emissions involves tackling three categories: Scope 1, Scope 2, and Scope 3 emissions. Scope 1 emissions come from sources that a company directly owns or controls, such as the fuel burned in company vehicles.
Scope 2 emissions relate to the energy that a company purchases and consumes, like the electricity that powers its offices. Scope 3 emissions encompass all other indirect emissions associated with the company’s activities, both upstream and downstream along its value chain.
This means that if a building company buys tools from a supplier, those tools contribute to its upstream Scope 3 emissions.
The Scope 3 challenge
While companies can manage Scope 1 and 2 emissions relatively directly, Scope 3 emissions present a far greater challenge. These emissions are often beyond the direct control of the company, yet they represent the largest portion of most firms’ carbon footprints.
In the telecommunications industry, where we at epi Consulting work to help companies adopt greener practices, Scope 3 emissions can account for up to 98% of a company’s total emissions. This staggering figure underscores the critical importance of addressing Scope 3 emissions for any business serious about sustainability.
Supplier engagement
Despite the challenges, reducing Scope 3 emissions is far from impossible. It simply requires engaging with suppliers throughout the value chain. But that’s not to say it’s easy. Motivating suppliers to adopt more sustainable practices can be particularly difficult.
Companies cannot simply dictate sustainability requirements to their suppliers, as the latter may not even be fully visible within what are often complex and opaque supply chains. Identifying the sources of emissions can be a daunting task when the supply chain stretches across multiple countries and jurisdictions.
Moreover, even when suppliers are identified, they may lack the knowledge or resources to implement sustainable practices.
Relevant: EXCLUSIVE: The Climate Registry And EcoEngineers To Unveil Scope 3 Emissions Policy Framework
Educate, collaborate
So what’s to be done? More than ask suppliers to make minor adjustments; that’s clear. Profound changes could be necessary. Companies therefore need to engage with their suppliers with a view to increasing their knowledge and starting up a lasting process of collaboration.
This engagement is crucial because expecting suppliers to independently possess the expertise and skills necessary to enact such changes is unrealistic. But, by working closely with suppliers, companies can help them acquire that expertise and those skills, and begin to adopt greener practices. That’s motivating for the suppliers: they don’t feel alone.
Say why it matters
Equally important is giving suppliers a north star – a real understanding why sustainability matters and a vision for becoming more sustainable. It is essential to align their goals with the broader sustainability objectives of your company, because if suppliers come to see sustainability as a mere box-ticking exercise, the outcome will almost certainly be suboptimal, or even a complete failure.
Companies must communicate the importance of sustainability therefore, and in a way that resonates deeply with their suppliers. They must make clear that these efforts are not just beneficial for the environment but also for the business.
Infrastructural challenges
Recognising that the world is a diverse place and suppliers face distinct challenges demonstrates empathy and a desire to understand the world your suppliers inhabit. Suppliers in developing countries can, for instance, face infrastructure challenges that hinder their decarbonisation efforts.
They may be reliant on local energy sources, such as coal-based electricity, that are not easily replaceable. Additionally, many factories use heavy, energy-intensive infrastructure that is difficult and costly to upgrade. Suppliers are also constrained by the level of technological innovation available in their country and the limitations of local transportation routes.
These challenges must be addressed if companies are to successfully reduce Scope 3 emissions, but the simple act of acknowledging them and the problems they cause for suppliers can build trust, and that’s essential for maintaining motivation over time.
Supplier development
One effective approach to overcoming these challenges is to implement specific supplier development programs that extend beyond Tier 1 suppliers. These programs should not only provide the necessary knowledge and skills but also the tools and incentives to help suppliers go green.
By establishing robust and fair assessment systems, offering support, and setting clear sustainability goals, companies can drive meaningful and rapid improvements across the supply chain. Highlighting the business case for sustainability, such as the cost savings associated with adopting solar power, can be particularly persuasive in encouraging suppliers to take action.
Be patient and flexible
Companies must recognise that change takes time, and that they can’t simply impose their standards on suppliers. Nothing kills motivation like the feeling that you’re being disrespected or cajoled into doing something you’d rather not be doing.
Mutual respect and clear communication, always keeping the shared goal of sustainability in mind, is key. So is acknowledging that there will be mishaps, hurdles, frustrations, new challenges and unforeseen consequences that threaten to derail the undertaking.
Recognising this early on ensures that when problems do arise, they aren’t treated as a shock but dealt with appropriately.
Relevant: VCMI Launches Public Consultation On Beta Version Of Scope 3 Claim
The good news
Of course, dangling a big carrot in front of someone can be highly motivating. And the rewards for suppliers who improve their environmental practices through energy-saving technologies, reduced resource consumption, and adherence to sustainability standards can be substantial.
They’ll certainly see a decrease in costs. Improved working conditions, fewer accidents, and increased productivity will further enhance efficiency and profitability all the way across the supply chain.
A worthwhile undertaking
Becoming more sustainable can be hard, but it’s a valuable objective in its own right. The benefits are significant and far-reaching: a cleaner, greener planet, a happier, more productive workforce, a stronger brand and a healthy balance sheet.
But perhaps more valuable than any of these are the rewards that come from developing the kind of business culture that can adapt to the demands placed on it by a changing world. The ability to stand up to shocks and keep moving forward is one of the hallmarks of a genuinely strong and successful company.
