The Impact of Suppliers on Scope 3 Emissions

PSA for anyone doing EPDs: Measuring emissions you can’t control is frustrating, but it actually gives you leverage 👇 Manufacturers know the struggle: regulations require reporting on environmental impact, but much of that impact lies deep in their supply chain. It can feel like being held accountable for something you don’t even control. But that might be the wrong way to look at it. Quick story time. One of our customers, a fabricator, only controls 5% of their product's total emissions. The other 95%? That comes from their suppliers. Most would say "Why bother measuring?" or "We can't control what our supplies do." But here's what they discovered: Having detailed emissions data gave them power they never expected. The could now make purchasing decisions based on environmental impact. They could, for example, reduce their product's total emissions just by switching suppliers. That, in turn, creates market pressure for suppliers, and so on. The data became a tool for change. You measure BECAUSE you can't control it directly. Take ready-mix concrete producers. While they might only control their mixing and transportation emissions, having detailed EPDs lets them optimize their cement content. Environmental Product Declarations (EPDs) aren't just report cards. They're leverage points: • They let you communicate real numbers to customers • They help you choose better suppliers • They reveal optimization opportunities, even in that small % you control The companies making the biggest impact aren't waiting until they have perfect control. They're measuring everything - especially the parts they can't control. Because you can't improve what you don't measure. // Anyone seen this first-hand? #manufacturing #sustainability #innovation #climate

Are you decarbonizing your corporate supply chain? Here's how to start supplier outreach effectively: Common Mistakes: 🚫 Data Collection Overload: Spending months collecting incomplete data from all suppliers through surveys and long, rescheduled meetings. This often results in answers to less than 30% of your questions. 🚫 Data Overwhelm: Wasting time trying to interpret mountains of data, leading to more data requests and ultimately getting overwhelmed. 🚫 Postponement: Many companies give up and postpone solving the problem, focusing on easier tasks like scope 1 and 2 emissions. Better Approach: 🔍 Prioritize with Outside-In Data: Use estimations to identify the top 10-20 suppliers contributing to over 50% of your footprint. 💬 Targeted Engagement: Engage these suppliers with focused discussions on solutions, not just data requests. Encourage them to critique your data and provide insights. 🤝 Collaborative Initiatives: Agree on specific decarbonization initiatives and implementation mechanisms. 📊 Track Progress: Monitor and reconcile progress in your corporate scope 3.1 baseline. 🔄 Expand Gradually: Repeat the process with the next set of suppliers, gradually covering your entire supply chain. Getting Started: 1. Initial Assessment: Create a preliminary emissions profile for your top suppliers. This doesn’t need to be perfect but should help prioritize your efforts. 2. Supplier Engagement: Engage selected suppliers to refine your data and identify actionable steps. Your models should be robust enough to interpret any data they provide and estimate the cost of potential initiatives. 3. Negotiation and Implementation: Negotiate decarbonization initiatives and discuss implementation strategies like green premiums, off-take agreements, or joint ventures. Prioritization Tips (see also screenshot from our Terralytiq product dev): 📈 Footprint Share: Assess each supplier's contribution to your supply chain emissions using consumption-based emission factors. 📊 Variance Analysis: Identify significant variances between suppliers for critical materials. Focus on collecting primary data where differences are substantial. 📉 Supplier Importance: Consider how critical you are to each supplier. Suppliers for whom you are a major customer are more likely to engage with you. 🏭 Decarbonization Feasibility: Evaluate how challenging it would be for each supplier to decarbonize. Sectors with readily available and affordable decarbonization technologies are more likely to engage. 🌍 Existing Commitments: Check if suppliers are already on a decarbonization pathway through databases like SBTi or CDP filings. Prioritizing and engaging effectively will save you time, money, and frustration. Share your thoughts in the comments or PM me!

Scope 3 is broken... and other things you're afraid to tell your CEO Scope 3 emissions account for 75%-99% of corporate carbon footprints, mostly from upstream supply chains. Our current Scope 3 EIO methods were built for check-the-box compliance reporting, not driving reductions. EIO models are calculated by multiplying your supplier spend times a global or regional industry-wide average emission factor. That cannot account for any actual decarbonization action your supplier takes, not even in theory. Put another way, if a large chunk of your suppliers lowered their corporate emissions by 10% this year, your Scope 3 emissions _would not decrease_. At all. Let that sink in. Deep down, we all know this, that's just the part we never say out loud, and we carry on in collective cognitive dissonance, with vague murmurings about "data challenges". We need to flip Scope 3 on its head. Embodied carbon at the product level should be treated as an objectively measured product specification; so that carbon performance is treated just like other critical product specs; like weight, size, delivery volumes, speed, cost, etc. Imagine if we treated any other performance spec like this... you go to buy a laptop, and when you ask how much storage the laptop has, the seller advises you to build your own science team to _estimate_ the laptop's storage based on global industry averages. Does this sound bonkers to you? It is. But we've all been doing this for so long that we’ve managed to persuade ourselves that it’s completely normal. And we wonder why we've made virtually no global progress reducing the Scope of emissions that dwarfs all others. OK, so how do we change this? How about we start treating embodied carbon as a performance spec that the _seller_ is responsible for calculating and eliminating? That's exactly how every other performance spec works. We have a data standard in ISO 14067, and an emergent standardized methodology in the WBCSD – World Business Council for Sustainable Development PACT framework. And there are a wide and growing variety of Product Carbon Footprint (PCF) providers that use #AI and process-based input data for manufacturing and transportation, to calculate PCFs rapidly, cost-effectively, and at scale. This approach eliminates the need for theoretical abatement cost curves, because now your suppliers can price carbon for you directly when they quote you $X change in price for Y-kg carbon reduction per unit. Procurement can do what it does best, negotiate based on objective performance criteria; and suppliers can do what they do best, engineer products and services objectively optimized to what their buyers want. We all know it's time to fix Scope 3. What specific actions can we take today to ensure our Scope 3 emissions reduction efforts lead to actual decarbonization? Image credit: DeepAI . . . #SustainabilityLeader #Scope3 #GHGemissions #supplychain #energytransition

Frameworks for climate action incentivize companies to reduce their own emissions before they address them in other ways (by, for example, purchasing high-integrity carbon credits). In a previous post (linked in comments), I argued that these frameworks overemphasize internal decarbonization and make our collective job of keeping warming to 1.5 degrees more difficult. Today, I want to talk about one aspect of decarbonization that is particularly difficult: Scope 3 emissions (and in particular scope 3 emissions arising from "activity pools"). Briefly, “Scope 3 emissions” are all those emissions (aside from purchased electricity) that a company does not “own,” but which arise from the company’s value chain. For example, for Apple, Scope 3 emissions would include everything from the emissions associated with mining the lithium for batteries, to the emissions arising from transporting the manufactured phone to its final destination, to even the emissions that come about through consumers using the product. A particularly challenging corner of this already challenging Scope relates to emissions coming from activity pools. What are activity pools? When Starbucks buys coffee (as an illustrative and potentially incorrect example), it buys it from a wholesaler who has aggregated the supply from hundreds or thousands of individual growers. Those beans are mixed together at a central location, and then divvied up to f buyers. In this example, the “coffee bean market” is the activity pool. Individual suppliers are filling the pool, individual buyers are drawing from it. Pools break the chain of custody in ways that make it impossible to get primary data from suppliers. They also make action to reduce emissions difficult. If Starbucks wanted to reduce emissions, how would they do it? They would need to invest in improvements in suppliers throughout the region, but they would be able to claim only a fraction of the benefit – only that portion of the pool they were drawing from. Meanwhile, their competitors would claim the same benefit! There are two solutions to this problem: first, pre-competitive collective action. This is rare because such collective action is difficult and also faces legal perils in the form of anti-trust restrictions. Second, some kind of market-based system in which companies pay for (and can subsequently claim the benefits of) unique interventions in the pool. One example of this latter solution is Verra’s Scope 3 program (which has just released some documents for public comment – link in the comments). Much more to be said on this topic. For now, I urge everyone to simply be aware that when we encourage companies to “address their own emissions first,” in many cases we are asking them to do something for which there literally is no existing tool, setting them (and us) up for failure. We need to either soften this requirement, or quickly build those tools, or (ideally) both!  

I met Devin when he shared on Fortune 500 pharma company, Bristol Myers Squibb's journey measuring & reducing their Scope 3 (value chain) emissions. Here's his 4 pieces of advice.. For context: As of July this year, BMS has received approval for its near-term and long-term Science-Based Targets. Given BMS’s enterprise footprint involves >80% of Scope 3 GHG emissions, one of its near-term goals is to engage 75% of its suppliers to develop SBTs by 2028 From my perspective, this is admirable, provided support is offered to their suppliers, as it will help drive further Net-Zero action throughout their supply chain Here's our summary of his 4 key pieces of advice to sustainability professionals tackling Scope 3 emissions reliant on suppliers 1) Be an influencer to accelerate the sustainability agenda your organization This requires partnering both inside the business, but also with suppliers. Ethical and responsible purchasing needs to be a priority from the beginning, and sustainability questions should be asked to suppliers during any RFP process. Procurement teams should include sustainability in meetings with suppliers on an on-going basis, making it a standing topic on the agenda. 2) Segment your supply chain to prioritize efforts BMS performed a climate maturity assessment to segment its suppliers and prioritize its engagement efforts — knowing the company cannot feasibly engage thousands of suppliers at once. BMS started by looking at its top emitting suppliers and then assessed their maturity — finding one third to be very mature, a third just starting out, and a third somewhere in between. The company then prioritized suppliers with low maturity and/or a higher perceived ESG risk. 3) Partner with industry peers to create a collaborative environment In Pharma in particular, companies have been working collaboratively with their peers, through the Pharmaceutical Supply Chain Initiative, to harmonize resources and offer subsidized programs to suppliers, acknowledging the burden faced by them. One such program is Schneider Electric’s Energize, which offers access to education on renewable energy purchasing, and acts as an entry point for suppliers who can choose to enter buying cohorts and partner with other companies to buy renewable electricity. 4) Take your time and be comprehensive “I would just be a little cautious when you see companies who are sprinting out in front, because of the complexity, particularly in the supply chain — there's just fundamental challenges that folks are not going to be able to solve overnight. And doing the maybe less sexy work of just engaging stakeholders, setting targets, building a language of sustainability — that's the work that may not make the headlines, but that's what's going to change the world in the coming years.” 💬 What responsibilities should larger companies own compared to suppliers (and vice versa) when it comes to their emission impacts?