In society today, sustainability and environmental responsibility are becoming progressively more material, with carbon accounting and supply chain transparency playing a crucial role in helping organizations meet their sustainability goals. By tracking and managing carbon emissions throughout their supply chain, organizations can identify areas where they can reduce their impact, improve efficiency, and meet consumer demand for environmentally conscious products and services.
If pursuing a climate-resilient business, knowing all aspects of your company’s supply and value chains is essential. Effectively, supply chain transparency improves an organization’s accountability for managing the social and environmental impact of their operations, helps identify carbon emissions hotspots, and minimizes the risk of potential supply chain disruption (i.e., geopolitical instability, rising costs, etc.). Since supply chain management (SCM) encompasses both upstream and downstream activities, quantifying supplier impact is essential to capturing your business’ carbon outputs. Improving traceability within supply chains can lead to greater efficiency; organizations can identify and address bottlenecks, reduce waste through sustainable procurement options, and identify inefficiencies and opportunities for cost savings. In many cases, supply chain transparency (to some degree) is paramount to regulatory compliance and an instrumental part of executing an actualized carbon accounting system.
While carbon accounting guides the measuring, managing, and reporting, it also considers an organization’s energy usage, transportation, and waste disposal practices. Additionally, carbon accounting helps organizations stay compliant with environmental regulations and standards while providing valuable carbon footprint information for consumers and investors alike. A beneficial tool for many companies is the Greenhouse Gas Protocol, which provides a global framework for calculating the associated GHG emissions from operations, value chains, and current mitigation actions. Many companies utilize the GHG Protocol and its methods to quantify and benchmark their emission outputs, report on their annual progress, and inform their carbon mitigation strategies.
As this practice requires substantial supply chain oversight, it does come with a few hurdles:
Complexity: Measuring and reporting carbon emissions can be complex and time-consuming, especially for organizations with intricate supply chains and operations in multiple countries. The quality of carbon emissions data can vary, creating inconsistencies in reporting and difficulties in accurately assessing emissions.
Incomplete coverage: Some emissions sources may be overlooked or underreported, leading to incomplete carbon accounts and potentially inaccurate information for stakeholders.
Usage of offsets: Carbon offsetting is an indirect way of reducing emissions and is not enough to significantly reduce global carbon emissions without using a direct and quantitative mitigation strategy.
Ultimately, supply chain transparency and scope emissions tracking are essential for decarbonization targets regardless of industry. Both of these practices have the potential to extend beyond environmental considerations, and by implementing this two-pronged approach to emissions reduction and clearer procurement, businesses can demonstrate their commitment to science-based sustainability objectives, manage potential ESG supply chain risk, and contribute to a more sustainable future.