Before 2021, most people probably didn’t give much thought to supply chains and how products arrived where they needed them to be. After a turbulent year, we’re much more aware of where things are coming from, and the process required to get them from A to B. However, what is much less discussed is the environmental impact of the supply chain and the steps that are being taken to reduce its carbon footprint from end-to-end.
Here, Martyn Bromley, Director of Carbon Lens, an environmental consultancy specialising in environmental management systems, carbon footprint analysis and carbon reduction planning, looks at the increasing requirements for business in Wales’ supply chain to understand and reduce carbon emissions.
Fundamental to any discussion of supply chain CO2 emissions is an understanding of the way in which greenhouse gas emissions are categorised into three groups or 'Scopes' by the international accounting tool, the Greenhouse Gas (GHG) Protocol. Scope 1 covers direct emissions from owned or controlled sources, Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company, and Scope 3 includes all other indirect emissions that occur in a company’s value chain.
Supply chain CO2 emissions are by nature Scope 3 emissions which makes finding and collating the data more complex than Scope 1 and 2 emissions.
From October 2021, Welsh Government procurement policy requires bidders for public sector contracts to declare Scope 1, 2 and 3 emissions, submit a carbon reduction plan, and commit to net-zero by 2050.
This will mean fundamental changes to the way companies operate and the materials and processes they currently use. The implications for businesses in the supply chain are significant as prime contractors will need to apply the conditions imposed by public sector bodies down the chain to subcontractors, who may also need to commit to net-zero.
Whilst the requirement is a step toward decarbonisation, help on how to go about the analysis of emissions and preparation of the plan is less obvious. Our experience at Carbon Lens is that whilst an increasing number of companies are recognising the need to measure and reduce carbon, not all have reached that point, and the requirement to plan for net zero is new and a significant extra burden.
We are hearing from Welsh businesses that it is very difficult to understand how to comply with the new requirements and help is needed.
Challenges include the availability of data throughout the chain, the credibility of the declarations, the consistency of approach within the supply chain, and the contractual limitations within existing supplier agreements.
To understand supply chain emissions, it is necessary to measure the carbon intensity of each category of spend at every level of the supply. This can initially be done based on spending per category using the Greenhouse Gas Protocol methodology and the Carbon Conversion Factors. Once done this can be used as a baseline and a more detailed analysis can take place. However, obtaining more detail will require cooperation with suppliers.
Reduction of emissions requires a combination of collaboration with existing and new suppliers to define joint targets and goals, an auditable measurement trail, making sustainability a selection criterion at all levels and the selection of low carbon technologies, supplies and processes.
Achieving a zero-carbon supply chain requires long-term collaboration involving government, public sector bodies and businesses at all levels of the chain. Net zero considerations will need to be embedded in the original specifications in tender documents and flow right down the chain.
The Welsh Government is setting targets; however, much more central advice and support will be required to help businesses at all levels comply with the requirements in a creditable, auditable way. That is clearly not in place or widely available yet. There will also be a need for an increased level of sustainability skills and expertise in Wales as more and more businesses are compelled to declare their emission and plans.