It’s time to move from rhetoric to action on carbon emissions, says international sustainability and information security specialist at EcoVadis, Lazar Armianov, who tells SmartProcurement how to go about it.
Typical corporate greenhouse gas (GHG) reduction strategies often focus on emissions from direct operations (Scopes 1 and 2), which are clearly visible under the company’s directive and often show immediate results. However, to achieve the substantive carbon reductions our planet desperately needs, companies must start tackling emissions embedded within their supply chain, which may account for up to 95% of their total carbon footprint.
To meet growing expectations and deliver on carbon action, corporate leaders must take a closer look at setting up their organisation, structure and stakeholder relationships by placing carbon governance at the heart of their operations. Through concrete carbon governance, companies can achieve their reduction targets while collaborating with others to motivate, enable and inspire carbon action within broader networks and communities.
Integrating carbon action into corporate strategies comes with its own set of challenges and limitations. Two key factors, in particular, can jeopardise carbon reduction initiatives: a lack of internal alignment and problems processing Scope 3 data.
In a recent survey of 700 businesses conducted by CSR consultancy 2degrees, 65% of respondents said convincing senior leadership and management to stand behind sustainable practices was the most significant challenge facing carbon action. Furthermore, 47% of respondents also mentioned engaging colleagues and employees to execute sustainable practices as a substantial hurdle to initiating a carbon strategy.
Scope 3 Data Collection
The absence of transparency in companies’ calculations of indirect emissions data (Scope 3), which require different management approaches compared to those of direct emissions (Scopes 1 and 2), is another pressing problem facing carbon procurement strategies. Scope 3 data collection involves interaction with various departments and external suppliers to gather activity data and find suitable emission factors, and thus, presents a great variety of obstacles. A high-visibility barrier to Scope 3 reporting and action is the limited leverage companies have over upstream suppliers and their emissions data. Individual upstream suppliers may be responsible for carbon-intensive products and services or have the influence to connect high-impact suppliers through a cascading approach. If a company does not have strong value chain/supplier relationships, data collection on GHG emissions is not possible.
Standards such as the GHG Protocol and SBTi may provide calculation guidance, support and orientation, yet implementation capability may vary per user. Thus, some companies lack the know-how and resources to engage in GHG accounting processes, especially through complex tools such as comparative life cycle analysis. With rapidly changing industry expectations and best practices, training staff on the skills needed to keep pace with these ever-evolving tools presents a true challenge.
Even though challenges exist in enacting carbon action procedures, companies will need to create internal structures and oversight to ensure these organisational challenges are recognized and rectified. Investors, lenders, insurance underwriters and other stakeholders of climate-related disclosures are increasingly interested in understanding the role an organisation plays in overseeing climate-related issues, as well as management’s role in assessing those issues. Carbon governance is crucial to a company’s success and must structurally evaluate the current and potential impacts of climate-related risks and opportunities, operationally move from rhetoric to action, and organisationally ensure C-suite level buy-in and management accountability.
Getting Up To Speed
Corporate carbon governance can also get up to speed by creating engagement structures and carbon action targets across the organisation and supply chain. It is imperative to discover which set of tools works best for an organisation today and in its future operations. To tailor their approach, companies can set goals and targets in various areas, including:
Supplier engagement: Obliging suppliers to set carbon reduction targets. Such targets allow companies to shift responsibility for direct emissions reductions to actors along their supply chain. However, this carbon reduction strategy requires solid supply chain management and structures for monitoring compliance.
Product/material substitution: Substituting purchased products or materials with lower-emission alternatives is an effective strategy to decrease GHG emissions.
Primary data availability and quality: This option includes coupling data requests to supply chain partners (via programs like EcoVadis).
Supply chain and emission hotspots: Rather than improving data quality across the entire supply chain, a focus on significant hotspots may be much more manageable and effective.
Internal Carbon Pricing: Develop guidelines to standardise the pricing methodology and define minimum pricing levels for achieving the required carbon reductions
By Lazar Armianov, Regional Sales Director – Northern Europe, Middle East & Africa at EcoVadis