April 26, 2021
Getting to grips with your company’s value chain carbon emissions can seem like a daunting task and one that some corporations have struggled to do in a meaningful and precise way. On the other hand, the most significant room for efficiencies for companies looking to tackle their greenhouse gas (GHG) emissions and meet ambitious sustainability goals is by addressing your value chain’s carbon footprint.
Research by McKinsey explains the standard consumer corporation’s value chain creates far greater environmental and social costs than its own operations, making up more than 80% of GHG emissions and over 90% of the impact on land, water, air, biodiversity, and geological resources:
With so much room for improvement, how can companies enhance how they manage their value chain carbon emissions so that their efforts have the greatest, positive environmental impact and their carbon reduction claims are meaningful and robust?
In this article, the GHG emissions management experts at SINAI provide three ways to improve your value chain carbon emissions management in 2021. From developing a comprehensive carbon baseline to harnessing the power of AI, gain an understanding of the most effective ways to improve your company’s value chain emissions management.
As value chain emissions - also referred to as Scope 3 emissions - represent the largest portion of several corporation’s GHG emissions inventories, it’s vital that companies zero in on reducing carbon emissions in this area of their business to help prevent the worst impacts of climate change. Adopting an emissions inventory that engages suppliers and value-chain contributors to input data is the best way to ensure you have auditable data that contributes to identifying decarbonization opportunity areas.
Best practice when it comes to setting and defining Scope 3 Standard goals includes developing targets that align with the percentage reduction of absolute greenhouse gas emissions required at a global level within the target timeframe.
If your organization is struggling to engage value-chain contributors, it can also benefit from applying and adopting sector-specific methods to decarbonize. Though sector-specific methods, such as those identified in the Sectoral Decarbonization Approach, are meant for scopes 1 and 2, there are general applications for scope 3 where the scope 3 categories and sectors align, for example, using transport industry pathways for a corporation’s transport and distribution carbon emissions.
By exploring historical activity data to project emissions as their business grows and changes, corporations can create robust forecast baselines as a basis for understanding progress towards net-zero within their value chain.
Developing a comprehensive emissions baseline for your company is essential to understanding your value chain carbon emissions management and risk. Once your organization has built baselines that accurately reflect business trajectory, you can compare how emissions reductions projects will track against those baselines. Automated baselines can also leverage predictive analytics about resource consumption and GHG emissions trends to develop dynamic business intelligence and insight.
If your organization is using an inventory that can support scope 3 tracking, it can explore the granular data available to review and identify suppliers or processes that contribute the most significant emissions. and develop a plan to influence the poor performers, or optimize inefficient operations. However, without a comprehensive carbon baseline, it will be difficult to understand how a mitigation or adaptation process contributes to decarbonization or emissions in the long run.
Lack of good data remains a key challenge in the management of value change carbon emissions. Many organizations are publicly struggling to understand and track the full scope of their value-chain emissions. Whether the cause is lack of engagement from suppliers to provide or track data, or incorrectly an incorrectly scoped value chain, tracking scope 3 emissions and understanding value chain risk cannot not be done in spreadsheets or tracked statically.
Industry-leading companies can struggle to enforce standards among their subcontracted suppliers and receive the necessary environmental data from their value chain beyond tier 1. And the companies who do obtain the correct data can struggle to make sense of it. Promising progress continues into 2021 to create a universal sustainability reporting standard that could help corporations better monitor their supplier’s sustainability efforts.
Companies can go the extra mile by taking advantage of next-generation technology that utilizes artificial intelligence (AI) and machine learning. A digital approach to value chain sustainability can provide the necessary tools for providing data-driven insights that help a company move towards realizing its carbon emissions reduction goals.
Getting a handle on your value chain’s carbon emissions is no easy feat. Still, by bringing your carbon strategy directly into your company’s business model, you can foster a collaborative environment where data sharing is as seamless and effortless as possible.
Corporations looking to gain an edge over the competition are building intelligent Scope 3 inventories with the help of their value chains, developing comprehensive bases to measure, analyze, and reduce value chain emissions. They are also harnessing the power of AI and machine learning to automate and facilitate data sharing and collection with ease.
SINAI’s software solution can help your company achieve value-chain wide carbon emissions reduction targets and execute competitive transition plans. Contact us today for a demo.