Your guide to supply chain decarbonization

Did you know that the built environment generates 40% of our annual global emissions? The vast majority of this carbon footprint comes from the production and transportation of building materials such as cement, and production waste emissions are another important contributor. 

Inger Andersen, Executive Director of the United Nations Environment Programme (UNEP) stated: "The buildings sector represents 40% of Europe’s energy demand, 80% of it from fossil fuels. This makes the sector an area for immediate action, investment, and policies to promote short and long-term energy security.”

The 2022 Global Status Report for Buildings and Construction revealed that emissions from building operations have reached an all-time high of around 10 gigatons of CO2. This is a 5% increase from 2020 and 2% higher than the previous peak in 2019 – highlighting that the gap between the climate performance of the sector and the 2050 decarbonization pathway is widening.

In summary, building supply chains have a significant impact on our climate – and companies’ reputations and revenues are increasingly reliant on taking meaningful climate action across these chains. 

Sweep can help you map a smoother path to decarbonization.

Sweep for Supply chain automates supplier data collection and drives collaborative emissions reduction.

It enables you to:  

• Engage your suppliers in climate action
• Jointly identify emission hotspots
• Set collaborative reduction activities
• Climate proof your purchasing decisions
• Use carbon data to optimize supply chain performance

We’ll talk you through the complete supply chain climate journey below and show you how we can help at every step. 

The business benefits of acting on your supply chain emissions

Acting on the carbon footprint of your supply chain can also bring you a range of business benefits. Here are just a few. 

Cost reduction opportunities – Emissions measurement can help you identify carbon hotspots and introduce plans to improve energy efficiency across your value chain, thereby saving you money. 

Reduced waste – Green buildings reduce waste as they have a smaller environmental footprint and use renewable energy and materials. They also use water in a more effective and environmentally friendly way. 

Future-proofed compliance – New legislation is already coming into force in some countries which makes it compulsory to report on your supply chain emissions – and this is likely to become more widespread. If you start taking action now, you’ll increase your regulatory resilience.

Investor appeal – Investors know that companies that fail to take meaningful climate action don’t have a future in the construction industry. So if you’re looking to secure funding, embracing sustainability now simply makes business sense.

Improved reputation – Taking climate action across your entire supply chain will show your partners, clients and stakeholders that you’re truly committed to sustainability, which will boost your competitive advantage. 

All this shows that taking a holistic approach to sustainability can set you up for future success. 

It’s important to remember that responsibility for supply chain emissions is shared. Without effectively engaging your suppliers, you won’t be able to achieve your climate goals. 

But get them on your side, and you have a good chance of driving collective and collaborative climate action. And in doing so, you’ll become a Forever Company. 

Before we get into the business of measurement, let’s get a quick overview of scopes. 

When business leaders assess their carbon footprint, they often find the largest contributor is category 1 of Scope 3 emissions, which refers to "purchased goods and services." But these emissions can be the trickiest to measure.

The three Scopes were established by the Greenhouse Gas (GHG) Protocol to help governments and business leaders to understand, quantify, and manage their emissions. It also enables data to be compared between companies and sectors.

1. Why it’s challenging to measure your Scope 3 emissions 

Scope 3 emissions come from sources not owned or controlled by your company. These include both upstream and downstream activities, such as:

Upstream emissions

• Purchased goods and services 

• Capital goods (including tools and machinery) 

• Raw material transportation 

• Generated waste 

• Business travel 

• Employee commutes 

• Leased assets

Downstream emissions

• Transport and distribution of your product to consumers 

• Processing of sold products 

• Use of sold products 

• Disposal or recycling of sold products 

• Franchises 

• Investments

As these emissions are produced by various external stakeholders, they can be difficult to measure. Below are some of the common challenges that companies encounter with Scope 3 emissions measurement:  

1. Collecting data: Gathering accurate and comprehensive data on your full Scope 3 carbon footprint means engaging with many stakeholders, all of whom are likely to have different types of climate data. 

2. Managing data: Managing and analyzing large amounts of disparate climate data and integrating this with your existing systems can be difficult and time-consuming.

3. Engaging stakeholders: With many conflicting business priorities, it’s often hard to get buy-in both internally and externally for Scope 3 carbon measurement.

Here’s how the Swiss telecom giant is using Sweep to empower teams, partners, and customers to reduce their collective emissions.

2. Supply chain carbon measurement challenges

When looking at the supply chain itself, there are further challenges to overcome: 

1. A lack of carbon knowledge: Many suppliers don’t understand what a carbon footprint is or how to begin measuring their emissions. Educating them in this regard is therefore crucial. 

2. The sophistication of the supply chain: Many supply chains are formed of multiple tiers of suppliers – which makes it difficult to get a good depth of measurement. 

3. A lack of data accuracy: In upstream supply chains, most emission estimates focus on the organization as a whole. They would have to be translated into product level emissions to be easily compared. At the moment, there is no standard methodology for this. 

4. Limited trust among value chain partners: Some suppliers are wary of sharing detailed carbon data as they fear it could lead to the breakdown of their cost structures.

In short, tackling supply chain emissions is about having a strong dialogue and good governance. 

The collective goal should be to make sure your customer-supplier relationships revolve around more than just pricing. Why? Because when we add a climate-action dimension to this relationship it benefits both sides. 

Three ingredients for an effective calculation

There are three key ingredients needed for a robust calculation of your supply chain emissions: 

1. The right measurement method for your baseline 

2. A clear map of all your supply chain contributors 

3. Tools to collect accurate data from the most important suppliers 

Let’s go through each of these in more detail. 

1. Select the right method based on your data

The best method for establishing a baseline measurement for your supply chain emissions depends mostly on the supply chain data at your disposal and the resources available for tracking and measuring emissions. Below, we give you an overview of the four key ways to calculate the carbon footprint of your supply chain. Sweep helps you to select the right method based on your data maturity.

2. Map your supply chain contributors

Mapping your supply chain contributors is crucial as it gives you a clear picture of the activities, processes, and systems involved in the entire chain. It also helps you identify your top emitters. 

With a clear map (which we refer to as a ‘Tree’ in Sweep) you’ll be able to visualize exactly what data you’ll need and from whom. You can also use this to conduct a baseline measurement of your emissions using the data that you have at your disposal. 

“We need to demystify the challenges of supply chain emissions. It starts with empowering teams and supplier educational resources and user-friendly tools like Sweep. When I started digging into QIMA’s carbon footprint, Sweep’s Tree was incredibly helpful to understand, structure, and get a full overview of our global emissions. That’s a key step to identifying missing data and our main emission sources, and taking action from there.” Anouschka Jansen, Director Sustainability Solutions at Qima.

3. Collect more accurate data and set targets

Focus on the strategic suppliers using the Pareto principle of 80-20: 20% of your suppliers are likely responsible for 80% of your carbon footprint.

Focus on these suppliers first, and get them on board by making more exact data collection as simple as you can. Provide your procurement and sustainability teams tools to automate data collection for purchased goods and services. Empower them to send surveys to suppliers to collect missing data. 

Since using Sweep, they’ve obtained a dynamic and granular view of their carbon footprint and reduction efforts across their entire company and value chain. Read about their climate journey.

The Sweep methodology

If you don’t have exact supplier-based data at your disposal, don’t worry. You can still obtain a baseline measurement for your supply chain emissions. Our platform is specifically designed to suit companies with varying levels of data maturity. 

We can help you:  

1. Model your supply chain using benchmark data and identify your emission hotspots. We use industry averages and spend-based data as a starting point. 

2. Send each supplier a straightforward climate survey. This is the first step to embarking on their own climate journey and tracking the impact of their actions. Note that you can adapt our climate surveys to make them suited to your needs.

It’s tempting to think that taking climate action is a four step, linear process: measure, set targets, reduce, communicate… Although – for the sake of clarity – this guide addresses each of these elements, the reality is somewhat different. In fact, a climate action pathway is best seen as of activity, moving ever outwards. 

Your company can begin measuring its carbon footprint using benchmark data. Use this to set targets and engage in reduction activities across your supply chain. But once you start reducing your emissions, you need to reach a deeper level of accuracy with your carbon measurement. Here, getting data directly from your suppliers is crucial.

The below diagram shows how your climate action should evolve and grow – from a straightforward baseline measurement, to a comprehensive reduction strategy involving your entire value chain.

1. Setting separate targets for Scopes 1, 2, and 3

A common method in carbon accounting is to establish a starting point, known as a baseline year, and then set science-based targets (SBTs) to decrease emissions in comparison to that baseline. It's worth setting separate targets for your Scope 1, 2, and 3 emissions, either absolute or intensity-based.

Absolute emission targets

Absolute emission targets refer to a specific amount of emissions that your company commits to reducing or avoiding over a given period of time. This target is set in terms of the total amount of emissions and isn’t dependent on the growth of your business, or the profits made in a given year. 

Example: Duff’s Beer pledges to reduce its Scope 3 emissions by 40% by 2030. 

Intensity-based emission targets

Intensity-based emission targets refer to a reduction in emissions per unit of economic activity. They allow businesses to set emission reduction targets while at the same time accounting for growth or business changes (such as mergers or acquisitions). 

Example: Honeydukes pledges to remove 5 metric tonne (MT) of CO₂ per $1 million in sales.

2. Setting supplier climate targets

As category 1, Scope 3 emissions represent the biggest part of your carbon footprint, you’ll have to work with your suppliers to align on your science-based targets – their targets effectively feed into your broader company target.

You might view this as a next generation climate KPI –  is your supply chain aligned with the science-based trajectory of limiting global warming to 1.5 degrees? 

 A targeted approach to reduction

A data-driven strategy for carbon reduction allows for more precise targeting, increased efficiency, and accountability in building a more sustainable business. 

Sweep can help. We can empower you to get a thorough understanding of carbon emissions across your supply chain, enabling a more targeted approach to reduction. You’ll have access to a powerful carbon simulation tool which can help you test the impact of specific activities in terms of reduction potential, cost and feasibility. This will also support you to drive collaboration between CSR and procurement. 

When it comes to reporting, one of your key KPIs will be your suppliers’ progress on their Scope 3 emissions. This will require you to share your reporting tool with each of them and to regularly monitor progress against targets. Each individual supplier target will fit into your own overall climate target. 

Some companies choose to classify their suppliers based on their progress towards decarbonization. The idea is that a supplier can move up to the next level once they've taken the next step in measuring or addressing their emissions. 

The below levels is just one suggestion of how you could conduct your classification:

Level 1. Suppliers that have achieved net zero for Scopes 1 and 2, and their Scope 3 reduction trajectories are aligned with a 2°C max increase in temperature.

Level 2. Suppliers whose Scope 1 and 2 trajectories are aligned with a 2°C max increase in temperature and their Scope 3 calculations are 80% based on physical data. 

Level 3. Suppliers whose Scope 1 and 2 trajectories are aligned with a 2°C max increase in temperature and their Scope 3 calculations are 60% based on physical data. 

Level 4. Suppliers that have calculated their Scope 1 and 2 emissions based on physical data and their Scope 3 carbon footprint based on spend-based data. 

Level 5. Suppliers that are using a spend-based approach across all scopes to calculate and act on their carbon footprint.

Such classifications enable you to more easily demonstrate progress against targets. 

E.g. In January 2020, we had 10% of suppliers at level 3, 20% at level 4 and 70% at level 5. But in January 2023, we have 5% of suppliers at level 1, 15% at level 2, 30% at level 3 and the remainder at level 4.  

Your company’s Scope 3 emission reports are likely to be requested by a number of stakeholders, including customers, suppliers, investors, and analysts. Reporting is also essential for complying with industry standards. These depend on your region and scope of operations. 

Reporting your Supply Chain Emissions with Sweep

Sweep comes ready packed with detailed dashboards and reports to give you great insight into all your emission data. All our reports are aligned with industry standards, like the GHG Protocol and Bilan Carbone. So your data’s ready to be audited.