Decarbonising Scope 3 Emissions: Part 2 – Know your Companies Value Chain

Nov 28, 2022

Decarbonising Scope 3 Emissions across your Value Chain

Understanding your value chain is critical to quantifying your Scope 3 emissions, developing a strategic decarbonisation pathway or unlocking circular solutions. This article explores the basics of your value chain, why you need to know where you sit and what role you play.

What is your Company Value Chain?

Firstly, lets recap what a value chain is.

A company’s value chain is typically part of a larger value system that includes companies both upstream (suppliers) and downstream (distribution channels).

This perspective about how value is created forces companies to consider and see each activity not just as a cost but as a step that adds some increment of value to the finished product or service. It’s not just cost, you now have to think about the embodied carbon (Scope 3) and other environmental and social aspects within your value chain.

Know where you sit in your Value Chain

It is critical that you know where you sit and who you serve in your value chain. The demand for lower carbon products and sustainable procurement is increasing rapidly, you need to stay ahead of your competition to maintain commercial sustainability and a shift to a regenerative future.

How to get started with Value Chain Mapping

The best way to understand your value chain and where you sit is to map it out.

You don’t need to overcomplicate the mapping; grab a whiteboard, start with the upstream side of your operations, and map it as far as you can at a high level.

Then map the downstream value chain components, including logistics, between each step. You might not get very far!

Now, look at the value chain and flag whether the company is a small, medium or large contributor to the overall system.

This step is typically more challenging with clients; it is now you begin thinking, I wonder how far I can get!

Why do we do this?

You want to know two things:

  • Firstly – the potential for carbon emissions and overall environmental impact
  • Second – how much influence you may have over them.

This will then feed into the materiality assessment.

Next Step is the Materiality Assessment

Now that you have mapped out your supply chain, how do you understand the materiality of carbon emissions along the value chain?

There are multiple ways you can approach this, you can do it based on spend data, or you can do it based on emissions intensity (either utilising industry representative data or supplier specific); the accuracy will vary. However, the major hotspots are typically the same using either approach.

This purpose is to narrow your focus down to a critical set of suppliers where the highest percentage of your emissions sits.

Depending on your product or service, most clients’ hotspots in the industry will be similar, for example, if there is steel production or the use of construction materials.

The focus is on these sectors to decarbonise. However, this will begin to flow down the value chain to other areas, so you must be prepared, as you might be next!

There is increasing demand for Sustainable Procurement, which is entering the contracts space. The Australian Government has some excellent guidance material on Sustainable Procurement.

If you would like to start your Scope 3 Strategy

Contact us at Evolveable Consulting, and we assist businesses in identifying decarbonisation solutions and strategies to reshape their business. You can learn more about our services or book a consultation directly with us.

 

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