Mar 05 2024

Supply Chain Decarbonisation Benchmarking: How Does Your Company Compare?



Supply Chain Decarbonisation Benchmarking: How Does Your Company Compare?

In the world of business, the old adage "what gets measured gets managed" has never been more true than when it comes to sustainability. As companies face increasing pressure from investors, customers, regulators, and other stakeholders to reduce their environmental footprint and contribute to the global fight against climate change, the imperative to quantify, track, and report on sustainability performance has never been greater.

And nowhere is this imperative more pressing than in the supply chain. For most companies, the vast majority of their greenhouse gas emissions - up to 90% or more - come not from their own operations, but from the complex web of suppliers, logistics providers, and other partners that make up their value chain.

This means that any serious effort to decarbonize the business and align with the goals of the Paris Agreement must focus on Scope 3 emissions - the indirect emissions that occur upstream and downstream of a company's direct operations. But measuring and managing Scope 3 emissions is notoriously challenging, requiring deep collaboration, transparency, and data sharing across the supply chain.

That's where benchmarking comes in. By comparing your company's supply chain emissions performance and reduction efforts against industry peers and best practices, you can gain valuable insights into where you stand, where you need to improve, and what strategies and solutions can help you accelerate your decarbonization journey.

But benchmarking is not just about keeping score or chasing rankings. It's about driving meaningful, measurable impact and value for your business and stakeholders. Here are just a few of the key benefits of supply chain decarbonization benchmarking:

Identify gaps and opportunities for improvement

One of the most obvious benefits of benchmarking is that it helps you identify areas where your company is falling short or lagging behind industry peers in terms of supply chain emissions performance. By comparing your Scope 3 emissions data, reduction targets, and initiatives against others in your sector, you can pinpoint specific areas for improvement and prioritize your decarbonization efforts accordingly.

For example, if benchmarking reveals that your company has a higher percentage of emissions from transportation and logistics compared to peers, you may want to focus on strategies like mode shifting, route optimization, and low-carbon fuels to drive reductions in this category. Or if you find that your suppliers are not as far along in their own decarbonization efforts as those of your competitors, you may need to step up supplier engagement and capacity building programs to help them catch up.

Identify and adopt best practices

Benchmarking is not just about identifying gaps, but also about discovering and adopting best practices from industry leaders and innovators. By studying the decarbonization strategies, technologies, and partnerships of companies that are achieving superior emissions reductions and supply chain sustainability outcomes, you can gain valuable insights and inspiration for your own efforts.

For example, if benchmarking reveals that a particular company in your industry has been able to achieve significant emissions reductions through a combination of renewable energy procurement, circular economy initiatives, and supplier collaboration, you may want to explore how to adapt and scale these practices within your own supply chain. Or if you find that a competitor has developed an innovative low-carbon product or business model that is resonating with customers and driving market share, you may want to consider how to develop similar offerings and value propositions.

Enhance credibility and stakeholder trust

In today's era of heightened transparency and accountability, companies are under increasing scrutiny from investors, customers, regulators, and other stakeholders to demonstrate credible, science-based progress on sustainability and climate action. By benchmarking your supply chain decarbonization performance and disclosing your results and progress against industry standards and best practices, you can enhance your company's credibility and build trust with key stakeholders.

For example, by participating in respected sustainability benchmarking and disclosure programs like CDP, EcoVadis, or the Dow Jones Sustainability Index (DJSI), you can signal to investors, customers, and other stakeholders that you are serious about measuring and managing your supply chain emissions, and that you are willing to be transparent and accountable for your performance. This can help you attract and retain sustainability-minded investors, customers, and talent, and differentiate your brand in an increasingly competitive and environmentally conscious marketplace.

Accelerate progress towards decarbonization goals

Perhaps most importantly, benchmarking can help you accelerate progress towards your supply chain decarbonization goals by providing a clear and compelling case for action, investment, and collaboration. By quantifying the gap between your current performance and industry best practices, and by identifying the most impactful and cost-effective strategies and solutions for closing that gap, benchmarking can help you build momentum and buy-in for your decarbonization efforts across your organization and value chain.

For example, if benchmarking reveals that your company is significantly behind peers in terms of renewable energy adoption or supplier engagement on climate action, you can use this data to make a strong business case for increased investment and resources in these areas, and to set more ambitious and science-aligned targets for emissions reduction. Or if you find that you are outperforming peers in certain areas of supply chain sustainability, you can use this as an opportunity to demonstrate leadership and share your successes and lessons learned with others in your industry.

Key metrics and frameworks for supply chain decarbonization benchmarking

So how exactly do you go about benchmarking your company's supply chain decarbonization performance? While there is no one-size-fits-all approach, there are a number of key metrics and frameworks that can help you get started:

Greenhouse gas emissions: The most fundamental metric for supply chain decarbonization benchmarking is, of course, greenhouse gas emissions. Using the Greenhouse Gas Protocol's Scope 3 Standard as a guide, companies should aim to measure and report on all relevant categories of upstream and downstream emissions, such as purchased goods and services, transportation and distribution, and use of sold products. By comparing your Scope 3 emissions data against industry averages and best practices, you can get a clear picture of where you stand and where you need to focus your reduction efforts.
Emissions intensity: In addition to absolute emissions, it's also important to benchmark your emissions intensity - that is, your emissions per unit of output, revenue, or other relevant business metric. This allows you to compare your emissions performance more accurately across companies of different sizes and scales, and to track your progress over time as your business grows and evolves.
Reduction targets: Another key metric for benchmarking is your company's emissions reduction targets - both in terms of the level of ambition and the time frame for achievement. Using science-based target setting methodologies like the Science Based Targets initiative (SBTi), companies should aim to set Scope 3 reduction targets that are aligned with the goals of the Paris Agreement and the latest climate science. By comparing your targets against those of industry peers and best practices, you can ensure that your ambition is both competitive and credible.
Supplier engagement: Given that the majority of most companies' Scope 3 emissions come from their supply chain, supplier engagement is a critical metric for benchmarking. This can include metrics like the percentage of suppliers that have set their own emissions reduction targets, the percentage of spend or emissions covered by supplier sustainability programs, or the number and impact of supplier collaboration initiatives. By comparing your supplier engagement metrics against industry best practices, you can identify opportunities to drive greater alignment and action across your value chain.
Low-carbon initiatives: Finally, benchmarking should also consider the range and impact of specific low-carbon initiatives and solutions that companies are implementing across their supply chains. This can include things like renewable energy procurement, energy efficiency improvements, sustainable transportation and logistics strategies, circular economy and waste reduction programs, and nature-based solutions like reforestation and regenerative agriculture. By comparing the adoption and impact of these initiatives against industry peers and innovators, you can gain insights into the most effective and scalable strategies for driving supply chain decarbonization.
To support companies in their benchmarking efforts, a number of industry-specific and cross-sector frameworks and platforms have emerged in recent years. For example:

The CDP Supply Chain program provides a standardized platform for companies to request and benchmark environmental data from their suppliers, and to collaborate on emissions reduction initiatives.
The Sustainable Apparel Coalition's Higg Index allows companies in the apparel and footwear industry to measure and benchmark the sustainability performance of their products and supply chains across a range of environmental and social indicators.
The World Business Council for Sustainable Development's (WBCSD) Value Chain Carbon Transparency Pathfinder provides guidance and case studies on how companies can measure and disclose Scope 3 emissions data in a consistent and comparable way.
The Global Logistics Emissions Council (GLEC) Framework provides a standardized methodology for measuring and reporting emissions from transportation and logistics activities across the supply chain.
By leveraging these and other benchmarking resources and partnerships, companies can accelerate their supply chain decarbonization efforts and contribute to the collective goal of building a more sustainable, resilient, and low-carbon global economy.

Putting benchmarking into practice

Of course, benchmarking is not a one-time exercise, but an ongoing process of measurement, comparison, and continuous improvement. To truly leverage the power of benchmarking for supply chain decarbonization, companies need to embed it into their sustainability strategies, governance structures, and performance management systems.

This means setting clear and measurable goals for supply chain emissions reduction, aligned with science-based targets and industry best practices. It means regularly collecting and analyzing emissions and sustainability data from across the value chain, using standardized and credible methodologies and platforms. It means engaging suppliers, customers, and other stakeholders in the benchmarking process, and collaborating on shared goals and solutions. And it means transparently reporting on progress and performance, both internally and externally, and using benchmarking insights to drive accountability, innovation, and impact.

Easier said than done, right? As anyone who has attempted to measure and manage Scope 3 emissions knows, the challenges and complexities of supply chain decarbonization are immense. From data gaps and quality issues, to misaligned incentives and competing priorities, to the sheer scale and diversity of global value chains, the barriers to effective benchmarking and action are many.

But the imperative for supply chain decarbonization has never been greater, and the benefits - for companies, society, and the planet - are too significant to ignore. By embracing benchmarking as a critical tool for driving transparency, collaboration, and impact, and by learning from and building on the successes and innovations of industry leaders and peers, companies can accelerate their progress towards a more sustainable and resilient future.

The time for incremental change and half measures is over. As the climate crisis deepens and the pressure to act mounts, companies that fail to step up and drive meaningful, science-aligned emissions reductions across their supply chains risk being left behind - by investors, customers, regulators, and history.

But for those that rise to the challenge and seize the opportunity, the rewards are immense. Not only can supply chain decarbonization help mitigate climate risks and build long-term resilience, but it can also drive innovation, competitiveness, and value creation in the low-carbon economy of the future.

The journey ahead will not be easy, but it is one we must undertake together. By benchmarking our progress, sharing our learnings, and collaborating for impact, we can build the sustainable, inclusive, and prosperous supply chains and economies of tomorrow, today.

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