As more and more manufacturers embark on the journey to net zero, procurement has become one of the biggest factors in meeting ambitious carbon reduction targets. There’s a good reason for this: In many sectors, emissions from suppliers have the highest impact on a company’s carbon footprint. In fact, emissions from purchased goods and services (what’s known as scope 3.01 activities) account for up to 80 percent of the overall carbon footprint.
With the corporate world acknowledging that it must unequivocally join the race towards zero emissions, the pressure on procurement leaders is mounting. In many cases, however, they haven’t been part of the discussion around scope 3.01 reduction targets, yet clearly, they have a vital role to play in minimizing their company’s carbon footprint. The emissions for which their teams’ activities are responsible must be reduced — fast.
From a focus on price to a focus on CO2
It is thus no wonder that we are seeing a paradigm shift in procurement, from price attributes to CO2 attributes through initiatives such as:
- Sustainable procurement of services and raw materials
- Substituting fossil fuel-based raw material with natural organic materials
- Shifting to low carbon alternatives for raw materials
However, this shift is easier said than done. With different business streams sourcing products from multiple suppliers across the world, getting an overall picture of an organization’s procurement-based carbon footprint is a complex task. Traceability and transparency due to the numerous product information silos is creating a barrier to sustainable procurement. And while there is a limited number of tools coming on to the market to help procurement leaders track and measure emissions in line with corporate sustainability KPIs, there’s now the added challenge of identifying which of the startups or technology firms they should work with. Building a digital ecosystem supporting the procurement function in meeting the challenge of placing CO2 at the same level as € or $ in the sourcing decision making process is the next key focus for the CPO in the coming months.
Driven by science-based targets
The climate crisis facing us all is escalating and demands immediate action. This urgency is predicated on science. The ambitious 1.5C reduction target set out in The Paris Agreement is backed by scientists who suggest that we now only have eight years in which the world must cut its greenhouse gas emissions by half or face irreversible damage to our planet.
The manufacturing sector recognizes that it has a role to play in the global response to this emergency, with 62 percent of manufacturers in a recent survey citing reducing their emission footprint as an environmental priority, second only to reducing waste. The same survey found that 91 percent of organizations aimed to achieve 100 percent renewable electricity and 87 percent aimed to be carbon neutral by 2040.
Without a sustainable approach to procurement, however, it will be impossible to reach these milestones. Procurement teams must get an end-to-end picture of what and from where they source materials, along with sustainability commitments from their suppliers. We’re already seeing some great examples of this. For example, as the CRI report reveals, Unilever’s Responsible Sourcing Policy includes a set of mandatory requirements that all its suppliers must meet in order to do business with the company. And Nike has a target of sourcing 100 percent of its material from vendors that meet sustainability criteria.
4 steps to sustainable procurement
The above examples, however, are among the few shining stars in a manufacturing industry where just 11 percent of sustainability initiatives launched are actively being scaled across the organization.
Procurement leaders can help to transform this picture by taking four steps:
- Step 1: Create high-level transparency mapping emission spends with carbon equivalent coming from external data providers. For example, at Capgemini Invent we use our Supplier Assessment Tool and input-output models that enable organizations to get an initial grip on procurement emissions based on their spend data on a granular level. First objectives being to create a baseline and identify carbon emission hotspots.
- Step 2: Focus on hotspots to switch from a ‘spend’ to a ‘physical carbon assessment’ approach relying either on data provided by suppliers or resulting from lifecycle assessment initiatives. A full switch to the physical approach will not happen at once, rather it will be progressively reached.
- Step 3: Use the above transparency to collaborate with your suppliers on reduction measures using all kinds of levers (demand management, volume bundling…) and define the reduction ambition. This should enable you to translate your reduction target into annual objectives.
- Step 4: Implement an automated carbon KPI dashboard to continuously monitor the success of the measures taken and act if they are not on track with carbon reduction targets. For example, monitoring will identify if they are in line with the overall decarbonization roadmap or whether certain reduction measures are not as effective as originally planned/calculated.
Of course, as with any new approach to business, it’s important to take your people with you. The procurement team needs to be given the skills to better understand any sustainability KPIs embedded in the tender process. This might entail collaborating with engineering and product design teams to understand processes and materials requirements. Can products be redesigned to remove fossil fuel feedstock sources, such as plastics? How can suppliers be brought onboard in this process so that they incorporate environmentally oriented or sustainable materials?
Find out more
Sustainability begins with procurement. At Capgemini Invent, we help our clients gain end-to-end transparency of their procurement operations to inform sustainable decisions that have a direct impact on their journey to net zero.
Accelerate your path to sustainable procurement by:
- Connect with me at LinkedIn
- Learning more about our Sustainable Operations and Supply Chain offering here.
I’m a Senior Procurement transformation professional with a passion for sustainability related questions in procurement. Becoming Carbon net Zero as a corporate Starts in procurement!
Head of Procurement Transformation – Capgemini Invent France