Reducing Scope 3 Emissions Requires Supplier Collaboration Tools

To overcome today's supply chain challenges, brands and retailers need innovative solutions that foster collaboration among supply chain partners and align their goals.

Miha Creative Adobe Stock 484607009
Miha Creative AdobeStock_484607009

For brands and retailers that haven’t committed to a carbon reduction strategy, the clock is ticking. Governments have set ambitious targets to limit global warming and transition to a low-carbon future. Driven by the targets of the Paris Climate Agreement, the European Union has committed to climate neutrality by 2050, and as part of that goal, it’s established a binding target to cut EU greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. The United States, China, and Canada have all committed to their own aggressive reductions.

Meanwhile, growing public awareness and consumer demand for eco-conscious products have heightened the urgency for businesses to reduce their carbon footprints, which is now not only a moral obligation, but also a strategic business imperative. Yet despite the growing global focus on greenhouse gas emissions, a major share of the problem remains unaddressed. Businesses need to mitigate not only their direct emissions (Scope 1) and energy-related indirect emissions (Scope 2), but also Scope 3 emissions created by their supply chains, which encompass everything from the extraction of materials to the production and transportation of finished goods.

For most retailers, these indirect emissions account for around 90% of their total emissions, but with such extensive supply chains and so many tiers of suppliers to account for, reducing them is no simple task. Managing Scope 3 emissions is so difficult because it requires not only full visibility into an enterprise’s supply chains – something the overwhelming majority of retailers lack – but also close collaboration with suppliers, which poses its own set of challenges. Many suppliers operate independently, and their priorities may not align with their buyers' sustainability objectives. Communication barriers, a lack of transparency, varying levels of commitment and a lack of shared environmental objectives further complicate the process.

To overcome these challenges, brands and retailers need innovative solutions that foster collaboration among supply chain partners and align their goals. It’s no longer enough for brands and retailers to merely measure and monitor their supplier’s carbon emissions – they need to put serious reduction plans into action, and they need to do so quickly.

Aligning Suppliers with Multi-Enterprise Platforms

Multi-enterprise supply chain platforms have emerged as critical tools in meeting these objectives, since they act as the connective tissue between retailers and their suppliers. They create key communication channels while fostering the close collaboration necessary to drive impactful reductions in carbon emissions and to work closely together to optimize logistics, transportation, and production processes to minimize energy consumption and waste.

This collaborative approach fosters a sense of shared responsibility, and a multi-enterprise platform introduces the transparency that’s vital in holding suppliers accountable for their emission reduction efforts. These platforms capture suppliers’ complete emissions data, including emissions related to coal, diesel, and natural gas, by automating data collection from factories and suppliers. The result is a data set that provides granular insight into a supply chain's environmental footprint and enables continuous evaluation of suppliers’ performances while facilitating the identification of areas that require further improvement.

The right multi-enterprise platform can use that data to follow up on identified improvements and corrective actions. Some platforms deploy automated prompts to factories and suppliers, ensuring that they adhere to the recommended action plans while tracking improvements over time. In addition to facilitating improvement plans, some solutions also centralize data for convenient reporting to both internal stakeholders and regulatory entities while fostering transparent communication with all supply chain partners. This data transparency enables better alignment between retailers and factories, while dashboards visualize at a glance where room for improvement lies.

Sustainability is now so critical that companies are increasingly considering ESG practices when vetting and auditing current and potential new suppliers. A multi-enterprise platform helps enforce each company’s environmental policies and standards, ensuring that all suppliers have agreed to a company’s terms and conditions and automatically monitoring their certification status and alerting companies to any red flags. By enabling communication and collaboration, these platforms can also foster closer long-term partnerships with suppliers, which can be a powerful motivator for them to invest in emission reduction initiatives. When suppliers know they have a stable and committed customer, they are more likely to prioritize sustainability practices that align with that buyer’s values and goals.

Companies are increasingly adopting these supplier ESG practices not only in response to global regulations, but also because they make good business sense. A systematic approach to reducing carbon emissions can lead to operational efficiencies and cost savings and can enhance brand reputation in an era where consumers’ purchasing decisions are driven by their values.

The journey from awareness to action in Scope 3 emissions is not just about data. It's about turning data into insight, insight into action, and action into a shared commitment with suppliers. The urgency of climate change requires bold steps to reduce carbon emissions. By fostering closer collaboration with their suppliers through multi-enterprise platforms, brands and retailers are paving the path toward more sustainable, resilient, and efficient supply chains.