First, let’s start with procurement and how it plays a significant role in reducing the carbon footprint with 3 key areas of impact:
In the “cascade” logic of environmental requirements, procurement is on the front line, managing suppliers (scope 3 upstream and part downstream) and getting them to reduce their own emissions. Below, we outline 3 levers.
Lever 1: Engage the suppliers with the highest emissions.
First of all, we must identify the suppliers with the highest emissions either by physical quantity or amounts spent. For suppliers to reduce their own carbon footprint, they’ll first need to calculate it!
They must measure their scope 1 and 2, and ideally their scope 3 and for greatest impact, they will cascade these requirements to their own suppliers. Demand measurement and reductions of CO2 emissions from your suppliers, and you run the risk of becoming the customer no-one wants.
Given the maturity levels in many sectors, a more productive approach is to provide support. This can take the form of workshops, training, technical advice, provision of tools (software, calculation files, etc.), knowledge-sharing, etc.
Lever 2: Coordinate between Clients
As all customers will be asking their suppliers for their CO2 measurements and reduction targets (in addition to all the other CSR requirements), suppliers are likely to be overloaded. The fact that methods are not standardized will exacerbate the impact. This means a significant risk of low commitment rates and low-quality (and therefore unreliable) data.
At a minimum, customers who share the same suppliers must coordinate efforts within their ecosystem. Coordination between major customers and their suppliers, such as “1.5°C Supply Chain Leaders” and digital platforms such as “CDP Supply Chain”, for example, are proving helpful in reducing supplier overwhelm and advancing efforts to achieve emission targets (see box on the right).
Lever 3: Use the Appropriate Digital Tools
Decarbonization will generate a significant increase in the amount of data buyers must manage. It will also require a different approach to supplier strategies. To improve efficiency, quality, and data capitalization, the buyer must have digitized tools at their disposal.
The ideal is a procurement platform that incorporates the elements of supplier decarbonization into each stage of the procurement process. This means having an integrated decision-making tool to avoid having to compile multiple new data sources, new Excel files, new software, etc.
At the supplier level, the platform should enable a company to do the following:
Just because a supplier is committed to a climate approach, that doesn’t necessarily mean its products or services are systematically decarbonized. It is essential to deepen the analysis at the level of the goods purchased.
Having a carbon simulator for procurement means having a carbon footprint per product.
In fact, a procurement carbon simulator is decision-making tool that allows a company to make decisions that will optimize the carbon impact/cost ratio.
One of the main obstacles to decarbonizing the economy is the availability of technology. According to the latest study by the International Energy Agency, 46% of the emissions reductions to achieve carbon neutrality by 2050 will be enabled by technologies still at the demonstration or prototype stage.
It will be difficult for a company to solve these challenges by relying purely on internal R&D. Only collaboration with suppliers and participation in sharing networks will enable companies to meet the challenge.
The Procurement function has a key role to play in:
For more sustainability content, please check our other ESG-related blogs!
Contributing writers from inside and outside Ivalua occasionally add items and information to this blog. We are a team who share an interest and curiosity about procurement and spend management.