Engaging Supply Chains to Reduce Environmental Impact
UK businesses have much to be proud of regarding the net zero transition. As well as operating in alignment with the world’s first nationally legislated net zero goal, almost 12,000 UK-based companies currently disclose their carbon emissions and efficiency measures to reduce them under the Streamlined Energy and Carbon Reporting standard, with over 1,000 making even more detailed disclosures.
Many countries have followed the UK’s lead, and 76% of global greenhouse gas emissions are now theoretically covered by a net zero target and represent 68% of the global Gross Domestic Product (GDP). Progress towards these targets will be measured and managed via businesses disclosing not only their own direct Greenhouse Gas (GHG) emissions; but also their scope 3 or value chain emissions. This is where the real challenge arises; scope 3 encompasses the emissions from both upstream and downstream activities, meaning those embodied in the products and services that businesses buy as well as the emissions associated with the use and disposal of the products and services that the company provides. The direct emissions of one business from their energy use or raw material consumption are thus embodied in the products or services they offer, contributing to the scope 3 emissions of the companies they buy from or sell to. In this way, the logistical network of a large business can account for 5.5 times more emissions than its direct operational chain, so to understand and reduce supply chain emissions, it’s first necessary to get accurate data from suppliers.
Less reporting requirements for smaller companies
Smaller companies face fewer of the reporting requirements that larger firms do and usually operate on tight margins that make little resources available for such disclosure, so getting data on value chain emissions will not be easy. To understand the extent of this data grey zone, consider that Britain alone has over six million registered businesses, of which 99% employ fewer than 250 people. Yet, collectively, the SME sector makes up 99.3% of private sector businesses, accounting for 45% of business energy use and almost 20% of total GHG emissions.
Business in the Community (BITC) has previously worked with our members to produce a toolkit for procuring companies, outlining how to tackle suppliers’ emissions. Several member companies such as NatWest Group, Lloyds and Fujitsu have already implemented programmes leveraging their influence as a procurer to support the companies in their value chain in transitioning to net zero.
BITC teams in Scotland and Northern Ireland have led pilot projects with our members, supporting them to work with their supply chain companies in undergoing a series of training and carbon foot-printing workshops. Some conclusions were that:
- Tailored support is more useful than broader unspecific advice. Large businesses can use their experience by signposting available resources, being clear on their own requirements, and providing mentoring or training for companies in their supply chain.
- SMEs are not homogenous and may be at different stages towards net zero. Language, appropriate communication channels, and relevant resources should all be chosen with this in mind.
The UK and the businesses that drive its economy have led the way in setting ambitious net zero targets and working to achieve them, but there is more to do. BITC’s 2022 cost-of-living survey found that although more than half of businesses had a contract management provision to reduce their own energy and resource consumption, only 39% supported their suppliers with the knowledge of how to do the same. The economy of SMEs and smaller producers represent the next frontier in working towards net zero. To progress, we need to provide support rather than make demands, ensuring that smaller businesses are also prepared for a thriving greener future.
How you can take action:
- Download our report Driving Sustainability Through Procurement, produced with Deloitte and highlighting what procurement and supply chain professionals can do to embed sustainable purchasing practices in supply chains.
- If you are a BITC member, speak to your Relationship Manager about an environmental advisory services package to get bespoke support for your business or email BITC’s Environment Team to find out more about how we might be able to support you.
- If you are in Northern Ireland, commit to action by signing the Climate Action Pledge and setting and striving to achieve ambitious GHG reduction targets.
CLIMATE ACTION: THE TIME IS NOW
Climate Action Routemaps
Three routemaps designed to assist with building green skills, involving diverse stakeholders with climate action and embracing circular economy practices.
Seven Steps for Climate Action
Ensure your business model is climate proof and contributes to a future where people can thrive.
How to Tackle Suppliers’ Emissions: a guide for procurers
This guide, produced by BITC and CDP, for sustainability and procurement professionals discusses approaches for managing Scope 3 emissions in supply chains.