Plans for seismic regional shifts in the way future energy is generated provides just one macroeconomic example of the scale of the journey ahead to reach the promised land of Net Zero. As last week's story from The Financial Times reported, the emergence of hydrogen as a viable alternative to traditional fossil fuels is a development that can power both cost and carbon reduction.
The carbon reduction strategies that individual businesses adopt will of course play a significant role in further contributing to the global goals outlined at COP26 last year. However, they also have the potential to drive efficiency and performance on their own bottom line.
One of the challenges that businesses face is that carbon reduction is not a standalone goal, but rather one part of an overall strategy. In order to be successful, companies must take a holistic view of their operations and identify where they can make the biggest impact. This means looking beyond the direct emissions from their own factories and offices and considering the full breadth of their supply chains.
There is increasing activity, and no shortage of opportunity, in the area of Scope 3 emissions – those from activities that are not directly controlled by the company but which have an impact on its carbon footprint.
Scope 3 emissions are more difficult to measure than direct (Scope 1 and 2) carbon emissions because they can be influenced by many different factors – from energy prices at source through to consumer behaviour once products reach their final destination. There is also a plethora of sometimes conflicting data sources and standards to attempt to rationalise and adhere to.
The food industry, in particular, suffers from the Scope 3 issue. In many sectors, carbon in the upstream supply chain represents over 50% of the total carbon footprint - in the food sector this is up at around 70%.
A global catalyst for enhanced operational efficiency
While carbon reduction is a global imperative, it should also be recognised as a more localised lever for suppliers, manufacturers, and retailers in industries such as food and beverage to improve the way they work together towards this common goal.
Indeed, increasing stakeholder scrutiny around all matters ESG means that many companies face the prospect of significant reputational damage if they fail to demonstrate that they too are walking the talk. A strong, ambitious strategy is commendable, but it is the subsequent action that will be the only way to deliver on those promises.
In our experience, we have found that a number of specific activities can quickly translate strategy into practical, pragmatic implementation opportunities for businesses, including:
1. Key supplier projects: Switching to more sustainable processes and substituting materials can make significant material gains in terms of carbon reduction and potentially cost reduction too. Resources should also be considered for circularising – such as returnable packaging – in an effort to improve waste efficiency. Embedding sustainable sourcing criteria and supplier carbon target setting is also vital in bringing suppliers on your journey, given the very real threat they may face otherwise in terms of being downgraded or even excluded from supply rosters altogether should they not comply.
2. Raw material sourcing projects: Carbon emissions are often higher in the supply chain because of poor carbon management. This includes farm waste, transport and even energy use at source. Partnering with suppliers to develop carbon reduction strategies will help you manage your own total carbon footprint more effectively by allowing better visibility across the whole value chain – as well as help to drive efficiency on the bottom line.
3. Transport and logistics projects: Many carbon emissions in the supply chain come from transportation, often because of an inefficient use of resources – for example, transporting goods unnecessarily long distances. There are a number of ways to reduce these emissions, including routing optimisation, carrier selection review and using more fuel-efficient vehicles.
4. Sustainable resource sharing projects: Carbon emissions can also be reduced by minimising waste. This often requires a concerted effort across the supply chain – and even possibly with your customers too if they are contributing to carbon through their own disposal behaviour. Beyond the obvious switch to 100% renewable energy, there are many other initiatives such as a water conservation and partnered reduction of energy/emissions production and consumption with suppliers that can further bring down overall impact.
When it comes to carbon reduction initiatives, there is no "one-size-fits-all" approach. However, a common thread still pertains that carbon reduction strategies are not just about reducing cost and carbon but also improving operational efficiency, as well as helping companies gain a competitive advantage.
Carbon reduction is now being seen as an integral part of not only carbon management, but also cost and performance management. The businesses that collaborate with their suppliers to define carbon reduction strategies stand the best chance of success in improving overall performance across all dimensions: cost; carbon and social licence to operate.
The development of green hydrogen, made from water and using renewable electricity, has become a policy priority for many countries as they prepare to cut emissions to “net zero” by 2050.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.