Put your suppliers' carbon data to work

Have you ever found yourself collecting vast amounts of supplier data, only to realise that you cannot actually use it?

For many, this is becoming a recurring frustration as supplier engagement efforts are ramping up. Significant effort goes into gathering data from suppliers, yet the resulting insights often fall short of what organisations need to make clear decisions about sustainability, procurement and finance. The underlying issue is not just a lack of supplier data (though certainly for some organisations, this is a barrier) but data that is not accurate, comparable or useful enough to be a true business asset.

The upside, when the data is truly fit for purpose, is significant:

• Sustainability – Improve footprinting accuracy and pave the way for supply chain decarbonisation efforts.
• Procurement – Inform supplier selection, contract negotiations, volume allocation and performance management, enabling a shift towards low-carbon sourcing. Supply chain risk can also be better managed with insights into supplier exposure and resilience.
• Finance – Support investment decisions, cost forecasting and scenario analysis as carbon pricing and transition risks become more material.
• Product development – Support lower-carbon product design by identifying emissions hotspots in materials and processes.

The Scope 3 challenge

Supplier emissions fall under ‘Scope 3' and have become central to businesses' transition plans and risk management, as upstream supplier emissions often represent a material share of the footprint. With increasing pressure from multiple angles – customers, regulations, financing and more – measuring and managing Scope 3 emissions must be a priority for organisations and requires collaboration across departments.

Measuring emissions tends to precede reducing them. As organisations focus on the emissions in their supply chain, many are engaging suppliers to request supplier-specific product carbon footprints, activity data and emissions factors for material parts of their upstream footprint. Such requests are often planned narrowly with product or organisational footprints in mind, rather than seeing the broader potential of this data, from procurement decisions to risk mitigation.

The result is that, all too often, supplier data can be used only for footprinting. This blocks teams from moving onto the next critical stage of supplier engagement: collaboration on emissions reductions.

The three-questions test

There are three simple questions that should be used to determine whether supplier engagement programmes have been planned and executed effectively:

Can the data be trusted? Different data sources, methodologies and assumptions can result in suppliers calculating significantly different values – even if they should in reality be very similar. It can be tempting to use supplier data regardless of quality, as it is perceived as being more accurate than secondary emission factors. But this is not the case if the data does not meet certain quality thresholds.

Can the data be compared with other suppliers' data? Without consistency, real-world differences between suppliers become hard to spot. This necessitates up-front planning to ensure that supplier data requests set common requirements for suppliers in the same sector.

Can the data be used in various business decisions? The true value of supplier data lies in its ability to inform decisions. If data cannot be deployed across footprinting, procurement decisions, product design and risk mitigation strategies, its impact will be limited. An internal working group – pulling together key stakeholders from procurement, finance, sustainability, product design, and others – should determine which data to request before engaging suppliers externally.

These questions provide a high-level framework for planning supplier data collection programmes and validating received data. They are all interlinked and often overlap, but there are subtle differences. On the whole, trustworthy data can be compared with other trustworthy data. However, if there are two suppliers that produce two very similar products, but one uses mass balance allocation in their footprint while the other does not, both footprints would be ‘trustworthy', but not necessarily directly comparable without considering their allocation methods. These questions provide a foundation for checking the integrity of the data you receive; the more ‘yes' responses, the better.

Thinking ahead

These questions provide a practical lens for designing supplier engagement programmes and should inform how you prepare for, execute, and validate your efforts:

Beforehand:

• Segment suppliers into relevant sectors or groups and ensure that data requests are tailored.
• Set clear expectations on what should and should not be included in a supplier's product carbon footprint, how it should be calculated, and what level of data quality is expected.
• Align with other business functions on what they need the data for and whether this affects the type and format of the requested data.

During:

• Provide ongoing support to suppliers on data queries, footprinting challenges and more.
• Get ahead with the methodology for checking data quality.

Afterwards:

Check data thoroughly, with certain ‘must-haves' versus 'nice-to-haves' that enhance supplier data quality. An example must-have for a chemical business could be data's alignment with Together for Sustainability.

• Re-engage suppliers to request changes to the format, share queries, or provide feedback to push for better-quality data in future rounds.
• Once data has been sufficiently checked and validated, circulate it to other teams for use beyond sustainability activities.
• Identify lessons learned from your most recent engagement to refine the approach for the next time.

Supplier engagement is about continuous improvement. For organisations just starting out on their engagement programmes, resist the temptation to go broad. Engaging a small cohort of suppliers first, by testing what works before scaling, will have far more impact than an ambitious programme that stretches teams.

For those further along, the priority is leadership buy-in beyond sustainability. With a clear mandate and proper resourcing, supplier data stops being a burden on already-stretched sustainability teams and becomes a business-wide asset. It can then inform procurement, finance and product decisions in equal measure, on top of driving progress for sustainability teams in Scope 3 categories.

The organisations that are on top of this will find themselves making better business decisions because of it.

Pierre-Victor Morales Aubry is a consultant at the Carbon Trust, and Saleem Rizvi is a senior associate at the Carbon Trust.

This article is sponsored by the Carbon Trust.