How Scope 3 can boost strategic independence

The recent political developments, where presumed allies are threatening to confiscate strategic territories and introducing trade tariffs to push their agenda, do not really seem the right time for sustainability to take front-and-centre. And indeed, sustainability and climate are less prominently in the news, and sentiment has turned somewhat to ‘there are more urgent things at play now’. Yet in some way, many elements core to sustainability are very much aligned to topics currently top-of-mind, like geopolitical resilience, local sourcing and strategic independence. Especially scope 3 and value chain emission measurements can play a key role here.

With the current set-up of determining value chain emissions, there is hardly any interaction with suppliers. Companies or consultants creating carbon emission inventories mostly work from quite siloed data, based off company operations and procurement volumes, which are then multiplied by the best-at-hand emission factors available. Although this suffices for a reporting need, and for a first baseline, it fails to capture the strategic value that lies hidden beneath the surface within the supply chain.

Now consider the methodology where data is directly sourced from the supply chain. This may be harder to set-up first, but does have the potential to truly embed value chain emissions in a company’s strategic value proposition. Instead of directly starting off with emission factor databases – generic, black-boxy and not always relevant – instead engage with the main supply chain to obtain the data you need. Obviously, your suppliers do not know all the answers either, but they will have a good overview of their operational emissions, which they can share with you on a product-by-product basis. Then, the process multiplies: your Tier-2 supply chain is engaged by your suppliers, and do a similar exercise. In the process, the emissions of your value chain suddenly become crystal clear: for every step you can see operational emissions which accumulate, the exact emission source (gas, fuel or electricity) and basic production data.

Next to the fact you now have insights in the real emissions instead of a generic average, you have created something else: a supply chain digital twin. Through the interactions and Tier-2 engagement, you can assess your supply chain on locations, potential bottlenecks due to trade tariffs or export restrictions and conduct scenario planning on supplier alternatives. The former will shape your long-term climate ambitions, while the latter is essential on the short-term, where taking control of the supply chain and shaping those to be as resilient as possible from any geopolitical upheaving as possible. The blocking of the Suez Canal in 2021 is a clear selector. As a company, the event could not have been prevented or specifically predicted, but the clear winners were those who had resilient supply chains. Those with clear insight in alternative routes and suppliers, and those who and nearshored essential parts already.

Challenging? Yes! Impossible? Definitely not. But what is essential is a high-trust supply, cooperative supply chain (and let trust and large scale cooperation be one the main European value traits). Software, like Vidya Carbon Insights, will take care of all the number crunching and the secured chain of custody. In the current context, supply chain insights are your main hedge against geopolitical risk, and results in a big step forward towards your firm’s overall resilience.