If your company is subject to one of the ESG reporting standards that require Scope 3 emissions disclosure, such as the CSRD or ISSB, chances are you’ve already been reading up on how to engage with suppliers regarding their sustainability performance.
However, even with best practices in place, many companies still find Scope 3 reduction to be one of the most challenging areas of their climate strategy. This suggests that hidden obstacles still remain, along with valuable lessons waiting to be uncovered.
In this article, we’ll explore some of those key barriers that often prevent progress on Scope 3 emissions reduction, such as conflicting procurement practices and siloed data, along with ways to overcome them. We'll begin with a brief review of best supplier engagement practices.
tips to improve supplier engagement on scope 3 emission reduction
- Identify and engage with a targeted group of right suppliers that account for the greatest percentage of company spend
- Integrate carbon requirements into procurement processes and business discussions, and ensure formal top management commitment
- Set clear expectations for suppliers to provide Scope 1 and 2 emissions data, but also to set timed reduction targets
- Encourage suppliers to sign up to the Science Based Targets initiative (SBTi) to ensure their data is verified
- Actively support suppliers to produce accurate climate accounting reports and reach set goals
- Join relevant industry coalitions and initiatives to pool resources, streamline supplier engagement, and increase collective impact across the supply chain.
To be clear, none of this is a walk in the park. It can take years to successfully obtain top management support for ambitious targets and programs of this magnitude. Not to mention the effort and skill required to build internal consensus and collaboration across various business lines, legal and procurement functions. Making the business case, and obtaining the resources, to make consistent progress can also be a major challenge as company priorities shift in line with volatile market conditions.
various barriers to scope 3 emission reduction
Reducing Scope 3 emissions is often more complex than it first appears. Despite best intentions, many companies encounter persistent challenges that slow progress. Understanding these barriers is the first step toward overcoming them and unlocking new opportunities for meaningful change.
conflicting purchasing practices
One of the biggest challenges to improving suppliers’ sustainability performance is the disconnect between procurement objectives and environmental goals. For example, pushing for lower prices and faster delivery times while also expecting suppliers to meet strict sustainability requirements can create conflicting pressures. These demands often increase supplier costs, making it harder for them to invest in emissions reduction.
Possible solutions include identifying this tension as a material issue and work with top management to address it. For instance, if a retail brand typically maintains a 40% profit margin and its suppliers have a 2-5% profit margin, the brand could decide to pay a slightly higher price in return for supplier commitment to reach more ambitious carbon reduction target.
focusing on normalized emission reductions
It can be tempting to set emission targets based on revenue or product sales, as it allows your organization to show progress without impacting business growth. However, if the real aim is to cut greenhouse gases that drive climate change, the focus must shift to reducing absolute emissions. This path demands more effort and investment, but delivers greater environmental impact.
There’s no doubt that it’s a learning process to identify where and how to reduce emissions across all scopes, but the sooner meaningful targets are set to reduce absolute emissions, the greater your organization’s ‘carbon fitness’, This, in turn, boosts corporate willpower for innovation to achieve greater resilience.
unintelligible, siloed data limits action
Many companies continue to struggle with fragmented data sets that are rarely translated into a coherent picture. This makes it difficult for decision-makers to understand what is really going on and make informed choices.
One effective solution is to use a technology platform that enables managers to easily track progress on emission-reduction objectives, providing the clarity required to identify bottlenecks. For example, if 70% of suppliers have committed to providing Scope 1 & 2 data and setting emission reduction targets within 12 months, but only 10% have done so after 8 months, it's better to flag the issue sooner rather than later.
limited industry coalitions
Although some industries have made significant progress in developing a common framework to address supply chain sustainability challenges, reducing emissions is still difficult.
One reason is that certification programs and audits tend to focus on small, step-by-step improvements. Industry coalitions could make greater progress by agreeing a sector-wide roadmap laying out clear targets for emissions reduction and other material issues.
Progress would improve even more by establishing a common platform for data collection across the supply chain. This way, suppliers only need to share their sustainability information once, instead of answering many similar questionnaires from different customers.
But what about the hidden opportunities for greater positive impact? Three opportunities stand out as particularly compelling.
three opportunities to accelerate scope 3 emissions reductions
1. materialitymapping to identify hotspots
Rather than focusing solely on a few major suppliers, it is important to identify which parts of the supply chain contribute the most to emissions. This approach helps target the areas with the greatest impact.
For example, greater emissions reductions may be achieved by engaging with a smaller supplier whose manufacturing process involves high-emission chemicals, rather than concentrating only on a large supplier with relatively energy-efficient operations.
2. innovation partnerships with suppliers
Some companies are taking the (double) materiality mindset further by setting emission-reduction targets to be achieved in partnership with suppliers.
For example, P&G has identified product use as a key Scope 3 category for target emission reductions. In practice, this could involve focusing on a product like household detergent where 90% of the footprint comes from heating water in the washing machine. In this case, supplier collaboration might focus on developing new formulas that clean clothes effectively using water at room temperature.
3. collaboration builds stronger bonds
Companies that have been at this for a while often report better results from deep supplier partnerships that generate high degrees of trust. And while this might seem like common sense if we think about human relationships, it can often be overlooked in a business context.
A simple but effective step is to sit down with suppliers and discuss what each party values and how collaboration could result in a win-win for everyone and the planet. This approach is especially promising for engaging suppliers further down the supply chain.
If you would like to discuss your Scope 3 challenges, please contact our team to see how we can help. Our AMCS cloud-based ESG Solution helps you measure, manage, and report your value chain emissions with at-a-glance dashboards to focus on the metrics that matter most and, along with purpose-built tools to engage suppliers - helping you achieve your sustainability goals more easily.