With 80% of emissions occurring in the value chain, sourcing and procurement need radically rethinking in order to cut Scope 3 emissions.

The pressure on companies to reform the processes driving their environmental impact is increasing. This growing demand for more sustainable activity throughout the value chain is originating from multiple sources, including customers, employees, and investors. However, more pressingly, the regulatory landscape is changing to support these shifting societal attitudes. 

As noted by Nic Bosshard and Tom Van Herzele of EY consulting in their new report, “sustainability action has become a business imperative.” 

Ambitious targets and underwhelming impact 

Bosshard and Van Herzele note that, despite the ambitious targets set by many organisations, “value chains often still fall short in delivering real impact.” They argue that high level strategy dictation becomes so watered down by the time it reaches day to day decision making that it dilutes any real impact. This “reporting-dominated, backward-looking view of sustainability performance, coupled with an inability to project future environmental and social impacts, are currently causing a mismatch between intention and action,” they write. 

It’s an established fact that the vast majority of an organisation’s environmental impact is not located inside its own walls. In fact, approximately 80% of all emissions occur in organisations’ value chains. These emissions, known as Scope 3, are the hardest to track and address, given the fact they fall outside an organisation’s direct control. 

However, lack of direct control does not confer a lack of responsibility. Bosshard and Van Herzele argue that “a radical new approach is needed to deliver on commitments at the speed and scale required by the urgency of environmental and social issues the world is facing.” 

A radical new approach to supply chain planning (one step at a time)

The new, more sustainable approach to supply chain planning advocated by Bosshard and Van Herzele focuses on visibility over all physical and information flows at every stage of the value chain. 

From transparency to action, they highlight four key steps that most organisations can follow to bridge the gap between intention and action. 

First, leadership needs to clarify which data they need to steer their sustainability strategy. They should then make this data usable by translating it into “planning-relevant key figures”. Next, they should combine this ESG data with the supply chain planning process to “provide visibility over future impacts and start educating planners with these new insights.” 

The third step is the most crucial and difficult. This is moving from insights to action, by embedding the ESG dimension into planning decisions. Bosshard and Van Herzele note that this requires an upgrade of the planners’ job descriptions as well as an enhanced collaboration with all functions both internally and externally. Lastly, the fourth step requires procurement leaders to enrich their optimisation algorithms and AI-enabled automation solutions with ESG parameters, allowing them to scale up the process. 

“This is key to getting the green line and the bottom-line to work in harmony and for the benefit of all stakeholders,” they write. 

  • Sourcing & Procurement
  • Sustainability

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