Today's sharing is "Towards a Net Zero Future: The Role of the Procurement Department in Driving Emission Reduction (2023)" Report Producer: Deloitte.
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i.Reducing emissions across the value chain: a five-step strategy to address Scope 3 emissions
Realizing the urgency of tackling Scope 3 emissions in order to achieve a net-zero strategy, companies are also starting to ask some key questions: Why are Scope 3 emissions important to us?How can I reduce it?Where to start?
The answers vary as companies are at different stages of maturity for their environmental, social and governance (ESG) goals and initiatives。Some companies are already actively implementing a full set of frameworks and measures to proactively address Scope 3 emissions, while others are just passively waiting for instructions from regulators. Many companies have set net-zero commitments in line with global agreements such as the Paris Agreement;However, reducing Scope 1 and 2 emissions is only part of a company's net-zero ambition.
ii.Why are Scope 3 emissions important for businesses?
Scope 3 emissions tend to account for the largest proportion of overall corporate carbon emissions. Some companies have developed net-zero blueprints and science-based targets (SBTs), but there is still a need to establish an orderly, systematic and efficient approach to Scope 3 emissions, especially for Category 1 "purchased goods and services". For many industries, Category 1 accounts for the largest proportion of Scope 3 emissions, and the calculation logic is the most complex because it involves interaction with a large number of vendors. The Chief Procurement Officer and the Chief Chain Officer have a unique role to play in tackling this largest source of carbon emissions.
While companies and regulators have developed emission reduction strategies for each category, Category 1 emissions from "purchased goods and services" remain a concern. Of the 15 categories of Scope 3 emissions, Category 1 typically accounts for the largest proportion. According to the Carbon Disclosure Project (CDP), Category 1 accounts for 35% to 40% of Scope 3 emissions, depending on the sector. Reducing Scope 1 emissions alone can deliver significant sustainability benefits, but achieving it requires careful planning and a combination of factors.
iii.An overview of a five-step approach to reducing Scope 3 and Scope 1 emissions
Many companies have included Scope 3 emissions in their net-zero targets as required by the Science Based Targets initiative (SBTI), but face challenges in developing and implementing roadmaps. Our approach lies in integrating the key elements needed and establishing a strategic framework.
While the first step towards setting a goal is welcome, achieving it doesn't happen overnight。It is an ongoing management process that requires the identification of available resources, the definition of internal capabilities, and the coordination between the organizations. A good strategy needs to consider how and at what level to interact with the best carbon reduction projects, and determine the best carbon reduction projects based on the specific resources available to the company and the realities of the business. When formulating a strategy, it is also necessary to look at the capabilities of the enterprise. Does the organization have the right in-house knowledge to develop strategies and connect the dots that underpin program implementation and management?Last but not least, companies will be required to monitor and manage business performance against set commitments, as well as internal performance in line with strategic objectives.
iv.Category 1 Emission Reduction Strategy: How can companies motivate business to take action?
Procurement has an important role to play in helping companies reduce Scope 3 and Scope 1 emissions, including business emissions, and in empowering and engaging with the business community.
First, consider your own situation, such as market positioning, influence on the company, and internal capabilities, to determine the best way to achieve your emissions reduction goals. Some companies choose to work with companies to reduce emissions, while others shift this responsibility to companies. Secondly, consider whether to motivate the best business to achieve the goal or punish the best business who fails to achieve the goal.
v. Determine the linkage mode with the best businessman
Enterprises may only have a very small number of "cooperation and incentives" type of business. This type of quotient is usually indispensable at the enterprise level and is of interest to the executives. Relationships with such business leaders are strategic for the growth, risk and financial well-being of the business. The "cooperation and incentive" method is more suitable for the best business with the enterprise risk and return sharing. This partnership can generate value and innovation, and play a significant role in driving the sustainability goals together. The means involved in this model include the provision of funds, joint business planning, and the transfer of demand costs to such vendors.
Empowerment and incentives are critical to business operations and specific departments, but may not be critical to the enterprise as a whole. Replacing such a vendor may entail significant operational and financial risks. For such enterprises, enterprises usually pay more attention to such quality and reliability, rather than **. This type of business has a high inherent risk, so it is suitable to adopt the "authorization and incentive" approach. Both parties benefit from the added value creation of the business side, such as an innovative strategy aimed at achieving or even exceeding the SDGs. Instruments such as increasing spending allocations or providing more funding facilities are provided if the business meets specific emission reduction targets or ESG rating requirements.
This article is for informational purposes only and does not represent any investment advice from us. To use the information, please refer to the original report. ）
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