Alan Holland, chief executive officer of Keelvar, describes the challenge of measuring the carbon emissions of suppliers in multi-tier global supply chains.
As defined by the Greenhouse Gas Protocol, Scope 3 emissions are those emanating from a company’s suppliers — in other words, those that lie outside the control of the original equipment manufacturer. Scope 3 emissions “are inherently more difficult to measure and control, because they’re not coming out of your factories,” says Holland. Sources include producers of components and raw materials, as well as transportation providers.
Growing awareness of the importance of measuring Scope 3 emissions has major implications for sourcing and procurement. For businesses with manufacturing supply chains, Scope 3 emissions can account for between 65% and 90% of total emissions, notes Holland. “It’s imperative that companies get a handle on this.”
The measuring of Scope 3 emissions must become an integral part of the supplier selection process. “Procurement is very much on the front line now,” says Holland. By making emissions a criterion for selection, OEMs can realize dramatic reductions in overall carbon emissions.
Getting accurate information isn’t always easy. Some suppliers might not know what their emissions are. In such cases, the OEM might ask them about the equipment they’re using, then draw on third-party knowledge of those components in order to assess the supplier’s emission levels. Then there’s the challenge of obtaining similar information from multiple tiers of the supply chain, all the way back to suppliers of raw materials. Holland says Tier 1 suppliers should be responsible for monitoring emissions of their upstream vendors, but the OEM might also be privy to that knowledge. In addition, there are outside vendors that can help OEMs to obtain the necessary information about their suppliers. “Procurement teams are tackling this on multiple fronts,” Holland says.
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