Connecting the dots for effective supply chain Scope 3 measurement

The UK’s government’s Spring Budget has pushedsustainabilityfirmly to the top of the news agenda, and supply chain leaders are once again under pressure to reduce their carbon footprint. Supply chain emissions, referred to as Scope 3, are currently responsible for a staggering90%of an organisation’s greenhouse gas footprint.

The UK’s government’s Spring Budget has pushed

sustainability

firmly to the top of the news agenda, and supply chain leaders are once again under pressure to reduce their carbon footprint. Supply chain emissions, referred to as Scope 3, are currently responsible for a staggering

90%

of an organisation’s greenhouse gas footprint.

With theeffectsof climate change clear, tangible action is urgently needed to reduce Scope 3 emissions and minimise supply chain waste. The most intuitive way to do this is to simplify and streamline supply chains to create transparency and reduce complexity. Yet, global partner networks are becoming more complex, not less. For example, supply chains in Europe are becomingincreasingly ‘glocal’ and diversified to counter ongoing disruption. Siloed information and a lack of transparency makes it very difficult to connect the dots between various partners, business processes, and operations in the supply ecosystem.

With the

effects

of climate change clear, tangible action is urgently needed to reduce Scope 3 emissions and minimise supply chain waste. The most intuitive way to do this is to simplify and streamline supply chains to create transparency and reduce complexity. Yet, global partner networks are becoming more complex, not less. For example, supply chains in Europe are becoming

increasingly ‘glocal’ and diversified to counter ongoing disruption. Siloed information and a lack of transparency makes it very difficult to connect the dots between various partners, business processes, and operations in the supply ecosystem.

So, what can be done now to ensure global partner networks operate as one, collaborating and sharing data to meet Scope 3 emissions reduction targets in 2023 and beyond?

Gaining a unified view of end-to-end operations

While many companies produce locally, many also sell globally, requiring them to adhere to both local and global regulations. For example, new rules proposed in the European Union and potential regulations in the US are poised to require companies to significantly measure and disclose their Scope 3 emissions. At a minimum, this would involve mapping the bulk of the value chain, including all tiers of supply, outsourced manufacturing, co-packing, transportation, storage, distribution, use and disposal, and gathering emissions-related data from each link.

However, the challenge here is multi-fold. First, a company’s value chain is not apparent. Most companies know their tier-1 and tier-2 suppliers, but the value chain may ultimately include many more tiers than this. Identifying and mapping those suppliers and the relationships between them is an important step in connecting the dots. Second, the data from complex, global partner networks is often siloed, making it impossible to gain a unified view of end-to-end operations. Third, breaking the silos will help in understanding the Scope 3 footprint, but it won’t necessarily help in reducing it to meet net zero targets. That’s because a significant amount of emissions are caused by a suboptimal use of resources.

Optimising supply chain planning, sourcing, manufacturing, transporting, and selling activities takes immense analytical and execution power. Turning raw data into knowledge, then into decisions, and then into execution is no easy feat. For large supply chains, this could require hundreds of thousands of inter-related decisions each day, plus monitoring of the execution for ongoing reporting and optimisation. This is far beyond the capability of human data analysts and requires advanced AI to achieve the best results.

Fortunately, by connecting partner networks via an intelligent, cloud-native technology platform, companies can safeguard compliance while identifying areas for improvement. With these capabilities, the global partner network can be mapped, and the data harmonised to enable informed decision-making when it comes to sustainability, alongside accurate and data-driven Scope 3 reporting.

By connecting these dots, supply chain leaders can also identify new opportunities to future-proof their businesses for the challenges and opportunities ahead. For example, the challenge of rapidly developing regulatory oversight will place much greater onus on reporting. Developments such as the EU’sCorporate Sustainability Reporting Directive(CSRD) and theNew York State’s Fashion Sustainability and Social ResponsibilityAct (Fashion Act) expand existing reporting requirements. In the case of the latter, companies can be fined up to 2% of gross revenues above $450 million for non-compliance, affecting both their brand’s reputation and bottom line.

By connecting these dots, supply chain leaders can also identify new opportunities to future-proof their businesses for the challenges and opportunities ahead. For example, the challenge of rapidly developing regulatory oversight will place much greater onus on reporting. Developments such as the EU’s

Corporate Sustainability Reporting Directive

(CSRD) and the

New York State’s Fashion Sustainability and Social Responsibility

Act (Fashion Act) expand existing reporting requirements. In the case of the latter, companies can be fined up to 2% of gross revenues above $450 million for non-compliance, affecting both their brand’s reputation and bottom line.

In fact, investors are increasingly recognising the importance of ESG, with sustainability metrics being considered equal with financial performance when considering investment. For instance,almost half of investorsare even willing to divest from companies that are not taking sufficient action on ESG issues.

In fact, investors are increasingly recognising the importance of ESG, with sustainability metrics being considered equal with financial performance when considering investment. For instance,

almost half of investors

are even willing to divest from companies that are not taking sufficient action on ESG issues.

Real-time decision making for real-time impact

Not only does a connected approach allow for detailed and accurate retrospective reporting, but the data also powers more informed day-to-day decisions. With an end-to-end, real-time view of the entire supply chain, leaders can better identify waste and inefficiencies that can be removed. This empowers companies to make impactful changes across the value chain rapidly, not having to wait on end-of-period reports to take action.

When responses are more reactive, there is a risk of lower service levels, potentially harmful ESG impacts, regulatory penalties, and damage to brand reputation. With multi-enterprise, multi-tier data harmonised in a single, AI-enabled platform, organisations can make quick, proactive decisions. This not only moves the dial on sustainability but can result in a competitive advantage. When you intelligently connect your supply chain, you can seize opportunities for greater efficiencies and cost-savings, responding dynamically to any disruption.

Working collaboratively as a unified supply chain network

At each point in the supply chain, every player is accountable for both reducing and reporting on Scope 3 emissions. Therefore, consistent reporting based on accurate, data-driven measurements is essential. One outlier or underperformer in the supply chain ecosystem can cause a ripple effect that diminishes a company’s hard-earned improvements. Therefore, connecting the dots will also enable supply chain leaders to spot underperforming partners within their ecosystem more quickly and effectively, and take rapid action.