Supply chain decarbonization has become imperative as companies across industries from the developed world are setting ambitious goals for reducing various types of carbon emissions to zero. Customers, investors, regulators, employees and supply chain stakeholders are all focused on the reducing carbon foot print within their sphere of influence.
Carbon reduction: a major performance indicator
To manage this urgent emission reduction process, companies have to build-in carbon reduction processes into their operating model and treat carbon reduction with the same priority as improving efficiency and reducing costs in operations. In this suggested scheme, efficiency, cost, and emissions can be seen as three drivers of excellence, each requiring equal and independent attention.
This method of operational oversight works very well for reducing Scope 1 and 2 emissions, especially when companies treat emissions with the same operational importance as improving efficiency and reducing costs. Essentially, this means integrating sustainability into operations while mitigating costs and increasing resilience.
In most cases, many companies start their de-carbonization journey with Scope 1 and 2 emissions because they are directly under their own control. That doesn’t mean they are easy to address. Scope 1 emissions are generated by company owned and operated assets, the Scope 2 emissions are generated by company purchased electricity and fuel, while Scope 3 emissions are generated by suppliers in the value chain.
Carbon reduction: a major threat within an opportunity
In general, organizations across all industries are struggling to meet their ever-changing carbon reduction ambitious targets. Every company and industry face its own unique carbon reduction challenges and potential opportunities. However, many organisations are able to achieve their Scope 1 and 2 ambitions in the first few years by efficiently streamlining their operations by reducing their energy consumption.
Reducing Scope 3 emissions requires a multifaceted approach, which goes beyond the deploying operational enablers used in the case of reducing Scope1 and Scope 2 emissions. In any case, Scope 3 decarbonization require new ways of thinking about energy production, sourcing, consumption and disposal, as well as the ability to manage complex change.
Experience in the certain industries have shown that meeting this new emission challenges often requires new skills and reasoning patterns by change managers, engineers as well as procurement experts in negotiating contractual terms. In addition, there may be need to scrutinize all participants in the value chain of an organization including suppliers, with a view to identifying greener capabilities in terms of designing products with lower carbon footprints and replacement of virgin materials.
Key requirements for de-carbonizing your organisation
- To accelerate de-carbonization journey in any organisation, the commitment of everybody and business unit is required, from the chief executive to the customer facing employee. They should be properly educated on de-carbonization.
- Organisations should articulate a comprehensive de-carbonization roadmap from the beginning of the project. The roadmap should include a carbon pricing mechanism, new ways of evaluating and rewarding suppliers etc., This tools and capacity building will help put the correct enablers in place to lower emission.
- Designing a customer-centric de-carbonization program facilitates achieving sustainable carbon reductions which may lead to incremental revenue by implementing a green premium regime, that creates good faith for the organization in its industry.