Decarbonising Scope 3 Emissions: Part 4 – Supplier Contracts – What to ask!

Dec 4, 2022

Scope 3 – supplier contracts what to request

This is the fourth part of our series on Scope 3 emissions. This article is for the contract specialists in your company.

Suppliers or consumers would openly share the required Scope 3 data in an ideal world without utilising contractual levers. However this is a large cultural shift for many organisations, but it is slowly changing.

Collaboration and transparency 

Collaboration and transparency will be critical to achieving your company’s sustainability transition. There are different approaches; as discussed in the previous video, a supportive approach works best but often falls short.

We see this day in, and day out, supplier questionnaires are filled out with the bare minimum level of information or simply the right information is just not provided to enable detailed Scope 3 calculations.

The strongest and most critical lever is to embed the requirements you need for not only Scope 3 emissions but sustainability into your contracts.

Companies are familiar with HSE metrics being requested, the hesitancy is that several suppliers do not have a good grasp or robust reporting in place, or they will be compared against their competitors!

Working with suppliers is your key to Scope 3 Success

You want to inform the suppliers that these requests are coming and provide them with the tools or training to enable efficient reporting.

If you are going through all the trouble of sourcing emissions information, you should broaden this to look at a greater range of sustainability topics. Good practice see’s this as a standalone section in contracts rather than integrated with HSE. This helps to get the focus it requires and to enable appropriate weighting in supplier assessments.

Many suppliers may face difficulties when they produce many products, Scope 3 emissions will need to be allocated accordingly. You should guide them on the methodology for this to ensure consistency. We have helped several major companies develop guidance for contractors in reporting their emissions.

What should you request as part of the contracts?

Typical items to specify in a contract to assist with Scope 3 quantification include:

  • Specific product GHG intensity per unit
  • Source of power utilised
  • Source of fuel utilised
  • Waste intensity
  • Type of waste products and disposal pathways
  • Use of recyclable products
  • Type of logistics (mode, fuel type etc..)
  • Social aspects can also be requested.

The good news is companies are providing digital technologies to aid in sourcing transparent data along your supply chain. We have advised several companies at the forefront of the industry working across various sectors, including electric vehicles, batteries, construction and energy value chains.

One of our clients, Circulor, provides supply chain traceability for minerals and materials. This helps companies to understand their value chain and Scope 3 emissions within it and enables circular solutions.

These digital solutions will drive the systemic change required to calculate supply chain emissions and quantify reductions over time accurately. This is particularly important as we move towards a circular economy.

If you would like to know more

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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