Our experience of working with companies to help reduce their carbon emissions has shown the majority of an organisation’s footprint is frequently outside its direct control.
There are a number of steps supply chain managers should take to understand and realise the opportunities for emission reduction within your supply chain.
First you must understand your organisation’s own carbon footprint. This will help develop an increasingly accurate understanding of exactly what quantity of raw materials and key commodities your business is consuming. You should identify whether carbon emissions from production, distribution and other aspects of your supply chain are a major factor in your organisation’s overall carbon footprint.
If supply chain carbon emissions looks like a major contributor to the overall footprint, you should provide a breakdown of the carbon impact of a range of resources including energy, waste, transport and the production of raw materials.
Conduct a highlevel assessment of the carbon and resource-intensity of procured materials and services.
Rank these by materiality and overlay them with key areas of spend to identify cost reduction opportunities. Conducting ‘deep dive’ assessments of high-impact items will help you better understand the breakdown of their value chain (to assess opportunity for reduction). You should also engage with selected suppliers and include carbon and resource impacts within procurement criteria and processes.
Taking these steps will not only help your business reduce its carbon emissions, but it will also help develop an accurate understanding of the quantities of raw materials and key commodities that different product/service mixes of your business consume. Since every pound of inflation in your business’ supply chain is a pound less of profit, the best way to outperform your competitors is to uncover where these inflationary risks are highest and start mitigating them now.
Aleyn Smith-Gillespie is a principal at the Carbon Trust Advisory, which is the Carbon Trust’s consultancy service on carbon emission reduction.