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Tackling Supply Chain Emissions: How to Get Started Now

March 14, 2024

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In light of a climate crisis and a strong emphasis on sustainability, businesses are feeling the weight of a new imperative: mastering the reporting and reduction of supply chain emissions.

This type of carbon emissions — also known as Scope 3 — includes all the indirect emissions of a company, including its value chain reporting, both upstream and downstream. These emissions can account for up to 90% of a company’s carbon footprint.

Our recent webinar, The Time Is Now: How Corporations Can Tackle Supply Chain Emissions, cast light on why this task cannot be sidelined. “The global regulatory environment is in flux, but the direction is very clear that companies really need to be prepared to report on and focus to reduce their supply chain carbon emissions,” said Erika Peters, SVP, ESG Lead and Head of Corporate Markets at Exiger, during the discussion.

The Urgency of Now

Why must companies act now? Legislation is catching up with the climate imperative. The EU’s Carbon Border Adjustment Mechanism (CBAM) and Corporate Sustainability Due Diligence Directive (CSDDD) is just the tip of the iceberg, setting a precedent for global regulations. Businesses are at a crossroads where delaying action could mean risking non-compliance, incurring costs, or, worse, becoming obsolete.

“Whether it’s the EU or California, we’re just at the beginning of the demand for supply chain emissions data,” said Amy Fisher, Director of Sustainability Partnerships at Muir AI, who was also a featured speaker at the webinar. “Companies that don’t address their Scope 3 emissions now are going to see it hit their bottom line, whether it’s through import fees like CBAM or losing business customers who are now requiring and reporting Scope 3 data.”

This isn’t just a matter of regulatory compliance but a strategic pivot to risk mitigation. By identifying suppliers with high emissions and engaging with them to improve their sustainability practices, companies can reduce their exposure to operational, reputational, and other supply chain risks. This proactive approach ensures long-term resilience and sustainability.

Three Steps Toward Making Progress

Both Peters and Fisher outlined some steps that can help move companies toward driving meaningful results in reducing supply chain emissions.

Dive into your data. It’s the first step in understanding and managing emissions. This includes data on procurement orders, suppliers, and details on all product components and raw materials.

“Companies already have a wealth of data on their suppliers and their products at their disposal,” said Fisher. “They can start by leveraging existing data to jumpstart their emissions management and integrate it into their day-to-day operations.”

Look at the big picture. An effective strategy must scale across the entire organization. Fisher said this involves evaluating the entire procurement portfolio and full product line to start making systemic changes that not only reduce your emissions but can improve operational efficiencies across manufacturing, processing, and transportation decisions.

Collaborate with internal stakeholders. Part of leveraging critical data on suppliers and their emissions portfolios, for example, is making sure that all the relevant parties are sharing it so that the business can have a coordinated approach.

“It’s important to take data-gathering on suppliers out of a silo and bring it into a centralized and standardized process to avoid inundating these suppliers with questions from different angles, which is why I think bringing this into procurement management is a great and important step,” Peters said. “This brings efficiency and allows for another aspect of a proactive program: the ongoing monitoring and assessment of carbon emissions.”

“The global regulatory environment is in flux, but the direction is very clear that companies really need to be prepared to report on and focus to reduce their supply chain carbon emissions.”

Erika Peters, SVP, ESG Lead and Head of Corporate Markets at Exiger

Exiger: Transforming Emissions Management

A new module in the 1Exiger platform epitomizes the proactive approach needed. Exiger’s expertise in supply chain risk management, combined with Muir AI’s advanced technology and ISO-certified approach to product carbon footprints, enables companies to accurately measure, report, and reduce their emissions. This partnership empowers companies to make informed data-driven decisions, prioritize sustainability, and stay ahead of regulatory requirements.

The partnership brings carbon emissions data into the 1Exiger platform’s view across supply chain risk factors, including cyber, ESG, operational, foreign ownership, and product risks. It’s a comprehensive solution that combines expertise, technology, and data-driven insights, enabling companies to navigate the complexities of the most impactful part of Scope 3 emissions and build a sustainable future.

“We’re the only company currently that’s converting accurate carbon emission accounting into our full risk-scoring portfolio that allows decisionmakers in the day-to-day to understand how their suppliers are being benchmarked and make decisions and engage with suppliers, on the products of those suppliers, on regional sourcing, and at the different tiers of the supply chain,” Peters said.

The webinar excerpts highlighted in this blog post provide a few starting points for companies to address Scope 3 emissions effectively. Access the webinar on-demand for more insights on how to reduce supply chain emissions.