This is the second in a series of three articles covering the questions we tackled with business leaders at our climate action fringe event at COP26 in Glasgow. The event heard perspectives from organisations as diverse as food and beverage manufacturing, construction and engineering services, broadcasting and entertainment, healthcare, defence and consultancies for the environment and government policy. This second article examines why and how businesses should engage their supply chains in climate action, particularly amid such recent disruption to supply chain operations.
One unanimous view was that businesses would not be able to truly claim that they were tackling climate action unless they were also engaging their supply chain in that journey. Estimates suggest that Scope 3 carbon in the supply chain can be up to 11 times greater than the carbon in directly managed operations. Bringing together an authentic engagement plan, and mapping out practical actions, were essential precursors to setting and achieving science-based or true net-zero targets. Organisations that didn't do this were at risk of turning a ‘blind eye’ to half or more of their carbon footprint.
An equally united view was that this was one of the most complex areas to address in climate change action – labelled the ‘Wild West’ by one leader. The inexorable development of international supply chains brought with it different carbon comprehension in every country; indeed, COP26 itself showed that not everyone was at the same point of commitment. Different carbon conversion factors alone (per territory) further complicated the calculation of total carbon footprint. However, that complexity was not an excuse for inaction – underlining the importance of awareness campaigns, consistent messaging and effort to create a ‘One Global Village’ culture that brought organisations along on the journey.
As pressure grew on client companies to release authentic net-zero plans – including proposed Treasury rules requiring UK-listed organisations to publish such plans by 2023 – there would be an inevitable cascade effect. To have any credibility, those plans must account for supply chain carbon too, so it's key to simplify the journey now and make it as frictionless as possible. Key suppliers should be encouraged to align their ambitions ‘back-to-back’ with client commitments – at least meeting minimum criteria. Whilst those at our session didn't want government mandates for supply chain carbon management – preferring to work independently with suppliers – there was a sense that governments could play a role in creating supply chain standards and frameworks.
So – how could organisations make a start in tackling this crucial area of climate action?
Echoing our comments in the first article in this series, it's key not to wait to find the ‘perfect’ answer to supply chain engagement. One initial approach would be to segment the supply chain according to a Pareto 80/20 categorisation – targeting the most significant areas of spend and those suppliers which have the biggest impact on operational delivery, brand impact and reputation.
Focusing on those prioritised suppliers, organisations should move away from short-termism and towards the identification of joint benefits – cost control, co-investment, publicity use cases and combined strategies. Progress and commitments should be mapped through a programme of Quarterly Business Reviews (QBRs) – two-way updates should cover joint climate action, share successes and problems, look ahead for the next two quarters and then build a rolling ‘story’ of achievements and lessons. This systematic approach could then back up the benefits of being, and working with, only pre-verified ‘climate-committed’ contractors and suppliers.
Finally, there should be a commitment to raise skill levels and understanding across all sectors, like the approach embraced by the Supply Chain Sustainability School (SCSS). Formed in 2012, the School exists to support suppliers of all sizes to undertake assessments, access free learning resources and tackle not only climate action but wider areas of sustainability too. Alcumus are one of many partners who help to fund the development of free resources, available for all – if you haven't seen the School already, just visit the link above, sign up for free and check out the wide range of multi-channel learning on offer.
Five key points on engaging supply chains in climate change action:
- Engage the supply chain to avoid turning a blind eye to the full carbon picture
- Commit to awareness campaigns, consistent messaging and effort to address the complexity of supply chain carbon management – working together with suppliers
- Build on the cascade effect, encouraging suppliers to align their ambitions ‘back-to-back’ with client commitments
- Adopt a strategic programme with the 80/20 key suppliers who have the biggest impact on spend and delivery
- Check out the Supply Chain Sustainability School and start your learning journey
For more practical advice and suggestions, download our brand-new Carbon Zero whitepaper.