Supporting your supply chain

Scope 3 emissions – all the indirect emissions associated with your organisation’s supply chain – can be notoriously hard to measure, track and manage. According to the UN Global Compact, on average, Scope 3 emissions account for 70 per cent of an organisation’s total emissions but can be as high as 99 per cent.

Despite this, boards have a leadership role to play and a responsibility to shareholders, independent director and Chapter Zero Steering Committee member Abby Foote CFInstD said at a Chapter Zero New Zealand event in Auckland on Tuesday, part of the Climate Change and Business Conference.

However, from an organisational perspective, it also presents opportunities to strengthen your brand, develop deep relationships with your supply chain partners, respond to customer demand, maintain competitive advantage, and expand your impact beyond organisational boundaries.

The panel event explored how organisations can support their supply chain partners to decarbonise while recognising the Scope 3 emissions for one organisation are the Scope 1 and 2 emissions of another organisation. That means boards need to work with their supply chain to support decarbonisation, as well as recognising their own role in the supply chain.

Cassandra Crowley MInstD, a director of Silver Fern Farms, warned “what we’ve always done can’t continue. You need to create deep partnerships with your supply chain”. While the magnitude of the overall change required can feel overwhelming, “you need to look at what you can directly control versus what you can influence”. She stressed that realness and commerciality were inescapable in supply chain discussions with buyers.

As well as requirements by climate reporting entities in New Zealand to understand their Scope 3 emissions, there are also increasing demands from other countries. Sixty per cent of world GDP is now subject to mandatory disclosures and currently 80 per cent of New Zealand exports by value go to markets that have mandatory ESG reporting either in place or proposed.

Foote said sustainability is frequently top-of-mind for their overseas buyers who want reliable and verifiable data across a range of metrics, such as water use, waste and decarbonisation. It was acknowledged data collection can be hard, but it is important to have verifiable data to enable accountability.

Similarly, organisations need to work with their supply chain partners to understand their footprint, and what measures might be possible to achieve a carbon reduction.

Auckland Transport (AT) chair Richard Leggat CMInstD said they do a lot of work with their suppliers to innovate, such as exploring the use of pumice to make low-carbon concrete. Supporting suppliers on their decarbonisation journey also meant working with supply chain partners as early in the procurement process as possible and having procurement policies that encourage and enable your executive team to work with suppliers. 

AT also has a code of conduct which sets out minimum expectations applicable to all suppliers and contractors providing goods and services. The code requires suppliers to set reduction targets, and calculate and disclose carbon emissions.

Foote said exiting a supplier was an option of last resort, and it was better to work with them, understand their challenges and support their decarbonisation journey. Suppliers may lack key emissions data, so sharing data and developing measurement tools will support them. 

Similarly, working with smaller suppliers can provide more opportunities to influence them and develop a deep relationship to create a long-term symbiotic relationship.