Discover how leading companies are taking action to decarbonise their supply chains through innovative supplier engagement strategies.

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In recent years, there has been a growing recognition of the urgent need to address climate change and reduce greenhouse gas emissions. One crucial area where companies can make a significant impact is in decarbonising their supply chains. By engaging with their suppliers and promoting sustainable practices throughout the value chain, these companies are taking vital steps towards a greener future. In this article, we will explore the top 3 companies that are leading the way in decarbonising their supply chains through supplier engagement.

Understanding Decarbonisation in Supply Chains

Before delving into the strategies employed by these companies, it is crucial to understand the concept of decarbonisation in supply chains. Decarbonisation refers to the process of reducing or eliminating carbon dioxide and other greenhouse gas emissions from a company's operations and value chain. It involves identifying and implementing measures to mitigate the carbon footprint associated with the production, transportation, and consumption of goods and services (Scope 3 emissions).

Decarbonisation in supply chains is a multifaceted endeavour that requires collaboration and cooperation among companies and their suppliers. By working together, they can identify areas for improvement and implement sustainable practices to reduce emissions throughout the entire value chain.

One aspect of decarbonisation that deserves further exploration is the role of technology. Companies are increasingly leveraging innovative technologies to drive sustainable practices. For example, the use of advanced analytics and artificial intelligence can help identify inefficiencies and emissions hotspots in supply chains, enabling companies to make data-driven decisions for emission reductions. Additionally, the adoption of blockchain technology can enhance transparency and traceability, allowing companies to track and verify the environmental impact of their supply chains.

Leveraging technology is a whole other subject matter that needs to be explored separately. But for now, let’s dive deeper into supplier engagement.

The Importance of Supplier Engagement in Decarbonisation

Focusing on the emissions released by suppliers is an important opportunity to enhance climate impact. It is often the case that emissions produced by a company’s suppliers (Scope 3) are far greater than the company’s direct (Scope 1) and indirect (Scope 2) emissions combined. Hence, Supplier Engagement is one of the key factors in supply chain decarbonisation as it allows companies and suppliers to engage in a collective effort that drives sustainable practices in reducing a massive chunk of emissions. 

Actively involving suppliers creates a community of committed partners with a shared goal towards a greener future. This engagement provides insight into supply chain environmental impact and fosters responsibility and ownership among suppliers to adopt greener practices and invest in cleaner technologies. It further facilitates long-term partnerships based on shared values and sustainability objectives, enabling both parties to overcome challenges and pioneer meaningful change together. 

The Role of Companies in Driving Sustainable Practices

Leading companies understand the pivotal role they play in driving sustainable practices throughout their supply chains. They recognise that their decisions and actions can have far-reaching effects on the environment and society as a whole. As a result, these companies lead by example and guide the rest to follow suit by striving to achieve ambitious targets for reducing emissions.

Although decarbonisation in supply chains is a complex but essential process that requires multifaceted approaches, supplier engagement remains a key step in pursuing significant strides to a more sustainable future.

The Journey Towards Decarbonisation: Top Leading 3 Companies’ Strategies

Decarbonising a supply chain is a complex undertaking that involves various steps and challenges. Let's explore the strategies of the leading companies and how they utilised supplier engagement in decarbonising their supply chain. 

IKEA: Committed Suppliers toward Recycling and Renewable Energy

IKEA has been a frontrunner in sustainable procurement and continues to be committed to becoming a circular business. They aimed to source 100% of their wood, paper, and cardboard from sustainable sources, as well as investing in RetourMatras to recycle all mattresses disposed of in the Netherlands. They continue to work across private and public sectors to make recycling more efficient. Notably, should RetourMatras receive continuous support from the company, its nearly fully automated solution allows for up to 85% of the materials from a mattress (foam, metal, textile, wood) to be recycled.

Furthermore, in their Sustainability Report for 2023, they stated that they are strongly committed to decarbonising their suppliers. With this, they implemented initiatives that support their suppliers in the transition to renewable energy as well as working toward the phase-out of coal and oil-based fuels in the production of their manufacturers. The share of renewable energy use throughout the IKEA supply chain had increased from 63% to 69%. In addition, despite a slight increase in coal and oil-based supplier factory emissions largely due to inflation, IKEA's remaining oil and coal-dependent suppliers have committed roadmaps and deployment plans to complete the transition to renewable energy.

Nike: Sustainable Procurement Journey

Initially troubled by sustainability and ethical sourcing challenges, Nike underwent a remarkable transformation through their sustainable procurement initiatives. By implementing stringent supplier standards and fostering transparency in supplier relationships, Nike sourced 93% of its products from sustainable suppliers by 2019, demonstrating significant reductions in water usage, waste production, and carbon emissions. These efforts coupled with other initiatives like Nike Forward, led to an increase in sales and profit margins by $50 million. Collaborating with organisations like the Fair Labor Association and the Better Cotton Initiative addressed risks and improved practices in key sectors. Nike's commitment to sustainability not only revitalised its brand image but also set industry standards, demonstrating that responsible procurement practices can drive economic success while making a positive impact on society and the environment.

Unilever: 1 billion Euro Clean Future Strategy

Emphasising how Scope 3 emissions are usually larger than Scope 1 and 2 combined–Unilever, recognised that over 60% of its value chain emissions come from raw materials and packaging. With their focus on upstream partners, the Clean Future Strategy replaces fossil-fuel-derived carbon with renewable alternatives, potentially cutting product emissions by up to 20%. Through engaging with over 300 suppliers, Unilever provides guidance and resources to assist them with measuring and reducing their emissions, demonstrating a shared commitment to sustainability. 

Moreover, Unilever takes advantage of nature-based solutions and collaborations with industry initiatives to boost climate action. While most of the company’s emissions come from the upstream, it continues to put forth actions for its downstream supply chain. They are currently testing battery-operated refrigeration systems in transport trailers and piloting warmer ice cream cabinets with innovative formulations, demonstrating the company’s commitment to sustainable practices across its entire supply chain.

Decarbonise through Supplier Engagement

Recognising that emissions from suppliers often surpass a company's direct emissions, leading organisations have put serious action into engaging with their suppliers to drive collective efforts towards sustainability. Through supplier engagement, companies would get to see what it’s like to be in the shoes of the supplier and vice versa, which fosters empathy and understanding of what both parties need help and assistance with, gain valuable insights into their supply chain’s impact, and adopt greener practices together. This approach facilitates long-term partnerships through shared values and sustainability goals and enables all parties to work together, overcome challenges, and pioneer meaningful change towards a greener future.