4 Steps to Reducing Emissions in the Supply Chain
Businesses around the world have increased efforts to manage and reduce their carbon footprint. These companies also realize that carbon management in the supply chain is an essential capability—the next great step in reducing greenhouse gas (GHG) emissions.
By collaboratively engaging with their supplier networks, companies can mitigate GHG emissions and improve supplier relationships, while boosting efficiency and reducing costs.
Here are four essential steps for achieving this goal:
- Build on communications to deliver performance. Communications are important to convey a company's intentions, as well as its commitment to sustainability. Companies that openly and transparently report significant emissions reductions and quantifiable savings are far more likely to not only meet their sustainability targets, but also get credit from stakeholders for doing so.
- Set the right targets. Companies and their suppliers should distinguish between absolute emission reduction targets—those based on a year-over-year decline in overall emissions—and intensity reduction targets—those reflecting emissions per unit of product or sales.
Absolute emission reduction targets may initially appear to be more desirable because climate change will continue even if emissions per unit of product sold declines and a company just manufactures more product. But companies can meet absolute targets by selling emissions-intensive operations or through outsourcing. Intensity targets, on the other hand, factor in real growth and emissions performance.
- Integrate information management into sustainability initiatives. Companies should link existing IT systems to carbon management and other sustainability initiatives—not only to monitor their own progress, but also to help suppliers meet stated objectives. Integrated information management guides risk assessment, and helps ensure sustainability performance within required tolerance levels.
This becomes especially important as the level of knowledge about GHG emissions—and the opportunities for improvement—increase each year.
- Focus on performance improvement, not compliance. Companies that move beyond compliance and risk mitigation to identify opportunities for improvement are far more likely to engage and collaborate with suppliers. Companies that succeed in this area will invest in partnerships with suppliers; explore new business models with them, including the important and growing eco-friendly consumer niche; and work in concert with suppliers to build a business case centered on sustainability.
Steps in the Right Direction
By using the right metrics for carbon management, making better use of information, and improving communications with suppliers, companies can help make carbon emission reductions a key element of competitive differentiation for themselves and their suppliers.
Companies are under tremendous pressure to improve the effectiveness of carbon management in the supply chain, and those that move forward with a comprehensive plan can seize a valuable opportunity for leadership and profitable growth.