Race to Zero – Procurement can be the Pacemaker

Some call it the Race to Zero. Despite this race being a marathon rather than a sprint, the notion of speed matters. Unfortunately, when it comes to taking action to limit the effect of Global Warming, many companies are hardly even out of the blocks. The procurement function of companies should play a vital role in tackling this challenge. This is an opportunity for Chief Procurement Officers (CPOs) to support their company’s vision and take a leading role in the transformation by implementing sustainability at the heart of their way of working.

We need to increase the speed in our Race To Zero

The Carbon Disclosure Project (CDP), Science Based Target Initiative (SBTi) and other organizations regularly share encouraging statistics about the number of companies pledging to sustainability targets and one could think that this is a sign that we are on the right path.

While the above statement might not be false, it is also obvious that we need to look beyond commitment. We – governments, companies, and individuals – are collectively failing to deliver on the promise to limit Global Warming to 1.5 °C (2.7°F), as committed in the Paris Climate Agreement signed in 2015. The UN (United Nations) report  issued in October 2022 indicates that we are on a path to reach 2.5-2.8 °C average temperature increase, instead of 1.5 °C, by the end of the century. An increase that would have unimaginable consequences or as UN Secretary Antonio Guterres put it:

“We are headed for a global catastrophe. The emissions gap must be filled”

Looking at these facts we could ask ourselves if companies with ambitious targets really have the speed needed to realize them in time in our Race to Zero?

Procurement will play a vital role when companies take action

Organizations such as CDP have a significant influence and make it clear that to get the required scale in corporate decarbonization, companies will have to involve their supply chains. According to their  Global Supply Chain Report from 2021, a company’s supply chain emissions are on average 11,4 times higher than its operational emissions. Hence, we are only stating the obvious when we claim that for companies the supply chain has immense potential when it comes to decarbonization.

Despite the supply chain being the main source of emissions, many companies are not mature in how to deal with this area and are yet to identify what action to take to reduce emissions. Complexity and lack of qualitative data are only some of the reasons used as an explanation why.

The above facts present a clear case:

• Emissions are not reduced in the pace needed
• Corporations play a key role in accelerating the de-carbonization journey
• For most companies, the supply chain is where the best potential lies

Hence, we can conclude that procurement functions, in their role as the bridge towards the supply chain, will be critical to increase the speed in our Race to Zero.

Lack of knowledge transfer and upskilling act as a speed trap

In many procurement divisions we observe that sustainability in general and decarbonization in particular is often treated as a topic so complex it can only be managed by so-called experts. The approach to solve this is often to create a centralized team that is, or becomes, experts on decarbonization within the supply chain. While both logical and pragmatic, this approach also often creates a huge dependency on a small group of people that are expected to trail-blaze and lead the way forward. This creates an internal bottleneck and limits the procurement organization’s ability to act with the speed needed.

Instead, decarbonization from an organizational perspective must be treated as any other complex area within the procurement domain. There is still room for a central team of experts that can guide and support the organization but to drive change at the required scale and with the pace needed, organizations need to upskill all employees with a role in the procurement domain.

A good upskilling program will consider that not all employees have the same knowledge need. For some only the very basics are enough while for some, for example sourcing managers in charge of high emitting suppliers, a deeper level of knowledge is required. Hence it is beneficial for companies to work with a modular training concept where users can tailor their own learning journey based on individual needs.

With the proper knowledge among the employees, many procurement organizations will realize that decarbonization is very similar to a cost reduction program. An activity in which they most often excel and can leverage previous knowledge from.

A typical decarbonization program is built on the same foundation as a cost reduction program. It will involve cross-functional internal teams working to identify potential decarbonization activities. Such activities then need to be prioritized based on, for example, effort and potential. This would allow a funnel of both short- and long-term initiatives and enable the organization to build a solid plan for how to achieve their targets.

The increased knowledge level in the organization should unleash its full potential. This combined with a structured way of driving the decarbonization program should significantly increase a company’s chances of accelerating their journey towards Net Zero, something we will all benefit from.

Authors

Jonathan Eriksson Manager – Procurement Transformation, Capgemini Invent

Jérémy Thioliere Senior Manager – Procurement Transformation, Capgemini Invent