Faced with climate change, the decarbonisation of our society and our economy is becoming a priority. Many companies would like to gradually reduce their carbon dioxide emissions to achieve carbon neutrality within the same time frame. To achieve this, they will have to rely on their procurement department, which has a major role to play in the company’s direct and indirect emissions, but above all on those produced by their suppliers.
Carbon neutrality, is a priority for everyone
First of all, let’s clarify what carbon neutrality is. Its principle is to find a balance between carbon dioxide (CO2) emissions from human activity and CO2 sequestration by carbon sinks, on a global scale. By stabilising the level of CO2 concentration in the atmosphere this way, the increase in global temperature will be limited.
According to the European Parliament, natural carbon sinks, such as soil, forests and oceans, absorb up to 11 gigatonnes of CO2 per year, while global emissions amounted to 38 gigatonnes in 20191. Because our absorption capacities are limited, we must drastically reduce our greenhouse gas emissions at all levels.
The Paris Agreement thus marks a major milestone, setting a binding objective around global warming that unites all nations. Adopted by 196 parties at COP21, this agreement aims to limit global warming to a level well below 2° C (ideally 1.5 °C) compared to pre-industrial levels, achieving carbon neutrality by the middle of the 21st century.
To achieve these commitments, the European Union has implemented its Green Deal for Europe, which aims to achieve climate neutrality by 2050 through a whole range of policies. It is in this context that companies are also turning to decarbonisation, integrating the reduction of greenhouse gas emissions into their responsible procurement policy.
(Box) Unlike carbon neutrality, climate neutrality involves all greenhouse gases (methane, nitrous oxide, ozone, etc.), and not just carbon dioxide.
Purchasing faced with scopes 1, 2 and 3
The greenhouse gas emissions of organisations are commonly organised into three main families:
- Scope 1: the company’s direct emissions from equipment, installations such as heating, air conditioning, fuel for car fleets, etc.;
- Scope 2: indirect emissions related to the production of energy consumed by the company, such as electricity, etc.;
- Scope 3: indirect emissions linked to the value chain, i.e. all emissions produced by the various stakeholders (suppliers, service providers, and customers). This covers, for example, the purchase of products and services, and the upstream and downstream transport of goods, up to the use and end of life of the products and services sold.
Although carbon offsetting is only a temporary solution, companies are getting ready to reduce all of their greenhouse gas emissions, whether in scope 1, 2, or 3.
However, special attention must be paid to this scope 3, which is not only difficult to control but also particularly harmful. Sylvain Guyoton, Senior Vice President of EcoVadis, explained in a webinar: ‘Most large companies manage to calculate their carbon emissions, and according to the overview we have, scope 3 represents 70% of emissions on average in most sectors.’2
And who else, other than procurement departments, to reduce indirect emissions in the value chain? Being at the heart of climate issues, the procurement function will be able to reduce emissions from the upstream ecosystem, without which companies will not be able to achieve their carbon neutrality objective.
Two complementary approaches
To contribute to this transition, procurement departments can combine two methods:
Adopt a targeted approach
To initiate this approach, procurement departments can focus on major projects. After identifying the sectors with a high impact, they must assess the maturity of the business teams, as well as that of the supplier markets. Based on this mapping, procurement departments will be able to adjust their specifications and integrate the appropriate criteria into their future consultations.
Initiate systemic change
Procurement departments can also adopt a more global approach, through:
- A review of processes, integrating decarbonisation objectives into strategic, operational, and management processes.
- The adaptation of purchasing and supplier performance management tools, so that they take into account the measurement and monitoring of CO2 emissions. Certain technologies, such as blockchain and artificial intelligence, could facilitate the implementation of this.
- The development of competencies of purchasing teams, allows them to assess externalities and possible areas of optimisation.
(Box) In this regard, the circular economy represents a tremendous opportunity. The purchase of reused products such as, example, reconditioned products, enables manufacturing emissions to be eliminated from the carbon footprint.
For Magali Blaise, PMO Group Director of Global Procurement, Supply Chain and Performance at Orange, reducing the carbon footprint is not, however, a subject reserved for purchasing: ‘Procurement departments cannot act alone. They must be able to rely on their internal and external ecosystem in a process of mutual enrichment.’2 Thus, achieving the objective of carbon neutrality can only be achieved through a collective approach and a win-win logic. With this dynamic, companies will be able to meet social and environmental requirements and thus remain competitive.