The Importance of Emissions Tracking & Management in Supply Chains
Table of Contents
There is a particular focus on supply chains due to the amount of electricity used to store and transport goods in warehouses. This has led to an increasing collective belief that organizations should bear significant responsibility for the emissions generated and be held accountable for their carbon footprint and move towards more sustainable procurement.
The Role of Supply Chains in Carbon Emissions
Supply chains significantly contribute to producing carbon emissions throughout all stages of product lifecycles from inception to disposal. During the manufacturing phase, this includes sourcing raw materials, manufacturing processes, storage and distribution and is even extended to the products’ end-of-life-cycle.
The need to reduce carbon emissions is not only essential from an environmental perspective, but with greater awareness of climate change and ESG amongst the global population, organizations that neglect to track and reduce their carbon footprint face the prospect of reputational damage due to negative perceptions within the market.
High-Carbon Emitting Industries in the Context of Supply Chains
In the context of supply chains, various industries are critical contributors to carbon emissions, including manufacturing, transport and logistics, agriculture and food production, retail, construction and the energy sector. Each has a crucial role in monitoring, managing and reducing carbon emissions.
The manufacturing industry is at the center of a significant proportion of supply chains and is one of the key contributors to carbon emissions around the globe. The production of goods requires processes heavily reliant on energy, including the use of fossil fuels. This is especially true for the automotive, construction, fashion and electronics sectors.
Transport & Logistics
The transportation of goods from manufacturers to end consumers is one of the most significant contributors to carbon emissions, especially when the global supply chains involve different transportation methods, including shipping by sea, shipping by air and using trucks rather than opting for railroads.
Agriculture & Food Production
As the global population continues to increase rapidly, farming equipment, fertilizers and deforestation for agriculture are key contributors to carbon emissions. This is even more acute considering the sector relies heavily on transport and logistics.
Organizations involved in the construction industry have long been considered as having significant carbon footprints as a result of the high emissions produced due to the production of materials and the variety of processes involved in construction.
Carbon emissions from the production and distribution of energy, especially in terms of energy derived from fossil fuels, impact most organizations due to their heavy reliance on energy for operations throughout each stage of the supply chain.
The Benefits of Carbon Emissions Tracking & Management
As well as ensuring that they are reducing their carbon footprint and protecting their reputation, implementing carbon emissions tracking and management provides numerous advantages for organizations in addition to ESG practices.
Carbon emissions tracking provides organizations with a wealth of data from sources of the highest quality that offer insights into emissions within their supply chain. As well as being utilized to reduce carbon emissions from an environmental perspective, it also provides insights into where there are inefficiencies within the supply chain and where refinement is required. This could include streamlining processes, reduced energy consumption and overall lower operational costs, providing significant cost savings over an extended period.
Organizations can identify and manage environmental risks that have the potential to disrupt their supply chain. This could include sudden increases in energy and fuel prices which may affect suppliers’ prices. Organizations can use carbon emissions tracking to insulate their supply chains from these risks and increase overall profitability.
Aligned sustainability commitments
When both organizations and their suppliers are committed to transparent tracking and management of carbon emissions, it can lead to improved supplier relationships by providing opportunities for collaboration on profitably reducing emissions. Organizations can initiate this by encouraging open dialogues with suppliers focused on collaboratively working together to solve challenges as they arise.
This presents opportunities for both parties within their relevant markets from an ESG perspective, creates a favorable perception in the market and provides opportunities to increase profitability in the medium and long term by focusing on developing innovative solutions that stand out from the competition.
As businesses and consumers become increasingly conscious of the environmental footprint of companies they engage with or purchase products from, organizations that invest in managing their carbon emissions will gain a competitive advantage.
Demonstrating a genuine commitment to combating their carbon emissions will resonate with end consumers and other businesses within the market who share a similar ethos. This assists in enhancing brand reputation, increasing customer loyalty and increasing the organization’s share within the market.
Overcoming CEM Challenges by Carbon Emissions Tracking & Management
Due to the complex nature of the technological landscape related to supply chains and carbon emissions management, organizations face various challenges that must be considered and overcome.
Each of these can be streamlined through investing in carbon emissions tracking solutions for organizations to accurately track, manage and reduce their overall carbon footprint.
Evolving CEM Requirements
Organizations face increased risks due to the evolving requirements for tracking, reducing and reporting their Scope 1 and 2 greenhouse gas emissions. This can be overcome using carbon emissions tracking by empowering organizations to take ownership of the supplier data using supplier surveys with conditional logic on the vendor’s carbon footprint size.
Lack of workflow clarity
CEM reporting can pose numerous challenges from a supplier perspective; this includes specific CEM reporting requests, transactions, or workflows. Without a clear understanding of what is required, these tasks can be arduous due to the increased time dedicated to undertaking the reporting.
Through a shared carbon emissions tracking portal, the supplier is provided with a clear understanding of what exactly is required of them and what should be prioritized. Organizations can also provide a list of pending tasks based on the user role, allowing the supplier to clearly understand what is required and complete the most critical tasks within the required timeframe.
This ensures that the supplier experience is enhanced, encouraging completeness and ensuring that the supplier data is accurate. This improved experience also helps increase supplier engagement and ensures that they are engaged in meeting carbon emissions targets.
Increased data & information requests from suppliers
In addition to issues related to a lack of clarity for suppliers, without having a dedicated solution for carbon emissions tracking, organizations can also find themselves inundated with requests from suppliers for information and data to enable them to fulfill their obligations for CEM reporting.
Through investing in a CEM reporting solution, supplier-side users can see requests being made and pending tasks or incomplete initiatives that still require attention in a single location, ensuring a complete understanding of what and when reporting needs to be completed. This is streamlined from the organization’s perspective as it can produce a survey, initiative, or campaign based on supplier segmentation.
The ability for organizations to segment based on suppliers provides the opportunity for organizations to gain more granular and detailed data collection and insights based on the following:
- Targeted mitigation efforts
- Performance monitoring
- Resource allocation
- Policy development
- Compliance monitoring and benchmarking
When afforded the opportunity to gain insights into suppliers’ emissions on such a granular level, critical stakeholders within organizations can make better-informed decisions based on data that will effectively reduce emissions and improve perception within the market.
Internal data isn’t a source of truth
Many organizations face risks associated with a lack of reliable data. This poses numerous problems for companies as unreliable reporting could lead to missed environmental targets that have been committed to.
This has the potential to result in a range of sanctions for the organization, including fines, loss of reputation with the organization’s specific market, and in worst cases, criminal proceedings being taken against the organization that can directly impact the viability of the business in the long term.
Organizations must be aware that higher quality data provided through carbon emissions management and tracking solutions is vital to their own and their suppliers’ compliance. These solutions provide accurate reporting to ensure organizations can embark on collaborative relationships with suppliers that are focused on achieving carbon emissions targets.
Lack of Scope 3 regulations clarity
While organizations have concerns about the emissions content of their products, there is a lack of clarity surrounding the regulatory and business context for Scope 3 emissions to make informed market assessments. This can be avoided using content-specific templates, including supplier surveys with Scope 3 templates.
Relying on legacy emissions solutions
There is an increasing demand from multiple business leaders for Chief Information Officers to provide more trustworthy and auditable gas emissions management as previous methods are no longer viable. Historically, organizations had relied on solutions that did not provide sufficient scope to make informed decisions, such as spreadsheets.
Organizations that invest in CEM tracking and reporting can overcome these legacy issues by accessing a broad scope of data and reporting that provides the foundations of reliably managing auditable gas emissions.
As consumers and wider society become more focused on climate change and the significant contributions that global supply chains make to carbon emissions, organizations that are yet to do so must start to track and manage their carbon emissions as a priority. Failure to do so has the potential to result in reputational damage that could create challenges in securing new customers. In contrast, existing ones may seek out alternative businesses publicly aligned to their ESG standards and committed to more sustainable procurement.
Organizations can achieve this by actively encouraging better participation from suppliers in reaching their sustainability goals as it benefits both parties. This can be achieved by investing in carbon emissions tracking that uses Supplier Experience Management as a starting point to configure internal and external data management, processes and workflows robust enough to provide emissions visibility that can be relied upon despite the wide variety of regulatory and business reporting standards.
Through carbon emissions tacking, organizations have a clear path to operational efficiency, regulatory compliance and enhanced reputation; the time is now for organizations to take crucial steps towards more sustainable procurement. Investing in carbon emissions tracking not only future-proofs supply chains but also publicly reinforces a commitment to reducing carbon emissions and safeguarding a positive long-term perception within the market.