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How companies can accelerate value chain decarbonization


Up to 90% of a company’s emissions can come from value chain emissions, also known as Scope 3 emissions.  

Scope 3 emissions are divided into upstream or downstream value chains, with downstream referring to use and end-of-life of a company’s products by a customer, and upstream referring to goods and services a company procures from its suppliers.  

To deliver on their corporate climate targets and align themselves with the 4 A’s of Climate Leadership, companies must tackle Scope 3.  

Scope 3 is an area many companies find challenging, particularly when it comes to getting accurate emissions data.  However, companies do not need to have perfect Scope 3 data to get started on their value chain decarbonization journey. 

To help companies accelerate Scope 3 decarbonization, we have brought together best-in-class tools, approaches and examples from across our network of partners, with case studies demonstrating company action.

Ask your suppliers to commit to net zero

Businesses can act now by asking their suppliers to commit to net zero. They can do this in several ways, from asking on a voluntary basis to providing benefits and incentives, or penalizing suppliers for not committing.

The Supplier Cascade 

The Supplier Cascade approach has been designed to kick start climate action through the value chain.

To participate, businesses ask their Tier 1 suppliers to: 

  • make a credible net zero commitment aligned with science;
  • start a cascade by asking all their own Tier 1 suppliers to do the same; and
  • publicly report progress on their targets and supplier action annually.

This creates a domino effect of climate action as each subsequent tier of the value chain asks its own Tier 1 suppliers to act. 


This approach is:
 

  1. Measurable: prioritizing metrics that can be accurately measured and are within an organization’s control. 
  2. Straightforward: no deep technical knowledge required, enabling implementation by procurement teams. 
  3. Flexible: businesses can engage and incentivize their suppliers however they choose, prioritizing the biggest emissions reduction and business opportunities. 
  4. Cost saving: buyers support a unified ask, saving suppliers time and resources from responding to bespoke requests. 
  5. Scalable: the approach generates climate action far beyond an organization’s own value chain. 
  6. Action-oriented: companies start now instead of waiting for the challenges around accurate Scope 3 emissions data to be solved.

 

The Supplier Cascade approach is being tested with a cohort of early adopter companies in 2024, with key metrics and learnings captured to assess its impact. Many of the tools and initiatives for supplier engagement listed below can also trigger a cascade effect through the value chain. 

Provide resources and support to businesses in your value chain

One of the easiest ways to engage businesses in your value chain is to direct them to best-in-class support hubs, leveraging existing resources and expertise to support decarbonization. 

Engagement campaigns or supplier communications featuring these resources can help to inform suppliers.  

For small- and medium-sized suppliers:

Engagement from large corporate customers helps the small and medium-sized enterprises (SMEs) in their value chains to overcome barriers to climate action. Small to medium-sized suppliers can report on and cut emissions via the SME Climate Hub, an initiative of We Mean Business Coalition, created in partnership with the Exponential Roadmap Initiative and the UN Climate Change High Level Champion’s Race to Zero campaign. 

For larger suppliers:  

  1. EDF Net Zero Action Accelerator tools, resources and training to create your supplier engagement strategy from the Environmental Defense Fund. 
  2. WBCSD The Climate Drive: a central hub of key decarbonization resources, focused on implementation including a guidebook and 100 suggested actions. 

Develop a strategy for other supplier benefits and incentives

Beyond asking your suppliers to make a net zero commitment and providing them with resources, there is a range of other tools available. These range from incentivizing, such as favourable contract terms or support to develop renewable energy Power Purchase Agreements (PPAs), to punitive, such as levying an external carbon price on contracts or contract nonrenewal. 

Companies can engage their value chain through a ‘carrot and/or stick’ approach.

Figure 1: Companies can engage their value chain through a ‘carrot and/or stick’ approach. Source WBCSD.

Companies can also tie procurement decisions to climate ambition and action by including climate performance as a meaningfully weighted factor in all purchasing decisions.  Access WBCSD’s framework of supplier decarbonization levers that companies can use to take action on decarbonizing Scope 3 upstream emissions. 

 

Supplier engagement guidance

SBTi supplier engagement guidance : guidance to support companies to engage their value chain and take climate action. 

Exponential Roadmap Initiative Supplier Action Guide : a practical framework that any company can use to work with suppliers to set and meet 1.5°C aligned targets.

1.5°C Supplier Engagement Guide: free guidance for companies seeking to reduce greenhouse gas emissions in their value chains from Exponential Roadmap and BSR.  

TONZ Supplier Transformation Framework: a framework to help companies identify and improve their suppliers’ climate performance. 

Incentivizing Supply Chain Decarbonization Series from WBCSD and PwC: guidance to help readers identify the “quick wins” and understand which levers will have the greatest impact in supporting longer-term decarbonization. 

World Economic Forum Net-Zero Value Chain: guidance on key terms, concepts and frameworks, launched by the Alliance of CEO Climate Leaders. 

Support the development of lower emissions products

Companies may join with other companies to send a strong demand signal for decarbonized alternatives to the products and materials that account for a large proportion of value chain emissions.

Product Decarbonization Initiatives

Forest Solutions Group: a global platform for businesses in the forests products sector to build and share solutions to further the transition to a low-carbon and circular economy through the supply of renewable products from sustainable forests.  

SteelZero: a global initiative of steel users working to create a global market for net zero steel through collective buying.  

ConcreteZero: a global initiative working to create a global market for net zero concrete through collective purchasing power.

Sustainable Freight Buyers Alliance: unites corporate freight buyers to shift towards zero-emissions freight across all modes of transport in collaboration with their supply chains and partners. 

Partnership for Carbon Transparency (PACT) : sets foundations for the standardization of emissions data, enabling companies to share interoperable data across the value chain.

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