Accounting for over 60% of global emissions, supply chains are a critical focus for firms pursuing net zero goals. But supply chain emission management is not an easy task: sustainability leaders face challenges like competing business priorities, an evolving geopolitical landscape and limited decarbonization options. With the pressure on to mitigate risk, strengthen relationships and enhance long-term resilience, decision-makers should lay the groundwork for effective supply chain decarbonization by:
- Embedding decarbonization KPIs into internal business processes.
Organizations should establish specific supply chain decarbonization KPIs for procurement teams, which often hold the greatest influence over the relevant decisions. Improving stakeholder engagement, these KPIs will incentivize individuals to make choices that lower emissions within the supply chain. Selecting suppliers is one of the simplest and most effective ways to reduce emissions in the supply chain, and many organizations are already taking this step: two in five have discontinued a relationship with a supplier due to its emissions profile. - Utilizing software to forecast decarbonization pathways.
Deploying software to forecast decarbonization pathways enables organizations to develop actionable strategies to achieve net zero emissions by modelling reductions across all stages of the supply chain. This approach helps sustainability leaders allocate resources effectively, while enabling suppliers to align their operations with long-term goals. - Incorporating emission reductions into contract terms.
To ensure suppliers are committed to decarbonization, firms are now including decarbonization clauses in supplier contracts. Salesforce, for example, contractually requires suppliers to disclose their Scope 1, 2 and 3 emissions and set SBTi targets under its ‘Sustainability Exhibit’ initiative. There is an upside for suppliers, too: nearly half of firms are highly likely or already have provided preferential contracting terms to a supplier due to its overall decarbonization performance.
To learn more about the challenges and best practices for supply chain decarbonization, see Verdantix Best Practices: Supply Chain Decarbonization or tune into the Mastering Supply Chain Decarbonization webinar.
