Why and how can a company improve its GHG footprint through supplier engagement?

An organization's carbon footprint depends heavily on its ecosystem

A company’s carbon footprint is defined by the amount of greenhouse gas emissions it generates and depends heavily on the emissions of its service providers—a fact that is less widely known.

In fact, decarbonizing procurement offers the greatest potential for reducing companies’ GHG emissions. Incorporating the “carbon footprint” criterion into supplier evaluation and selection is a decision that every company will have to make in the coming years, as this criterion has become one that their own customers now demand!

“One person’s upstream carbon is always another person’s downstream carbon.”

"Carbon footprint" refers to the amount of greenhouse gases (GHGs) emitted throughout a product's entire life cycle—that is, from the production of its raw materials through its end use and disposal.

The significance of the carbon footprint of purchases is steadily increasing as the economy shifts toward the service sector and imports of carbon-intensive manufactured goods—such as electronics and automobiles—rise.

The need for responsible, low-carbon procurement must therefore be increasingly emphasized in corporate strategy. This will enable companies to significantly reduce the carbon footprint of their operations, thereby lowering their carbon footprint, improving their Carbon Competitiveness®, and—very soon—reducing the associated taxes.

🎯 Scope 3: Why Is It Important?

The inclusion of the three regulatory scopes is mandatory when preparing a comprehensive GHG balance sheet.

 🌿 Scope 1: includes direct emissions

🌿🌿 Scope 2: covers indirect emissions related to energy

🌿🌿🌿Scope 3: includes all other significant indirect emissions resulting from the legal entity's operations as well as, where applicable, from the use of the goods it produces

Thus, Scope 3 is the category that encompasses the majority of a company's emissions.

Scope 3 refers to indirect emissions such as:

For a business:

• The extraction of materials purchased by the company for the manufacture of the product,
• Purchased products,
• The transportation of goods upstream and downstream,
• Those related to the transportation of employees and customers coming to purchase the product,
• Those related to the use of the goods sold
• etc.

For a local government:

• Purchased goods (government procurement),
• Waste Management in the Region
• etc.

Scope 3 emissions therefore account for 50 to 80 percent of the carbon footprint of local governments and businesses. The procurement of materials, products, and services thus represents the area with the greatest potential for reduction.

⚠️ It is therefore important to account for GHG emissions under Scopes 1, 2, and 3, because if we look only at direct emissions, we get a limited view of an entity’s climate responsibility.

This is where emission factors come into play. The method used to calculate an organization’s carbon footprint is simple: multiply the organization’s activity data by a set of corresponding emission factors, which convert them into metric tons of CO2 equivalent.

❌ The Limitations of Emission Factors

The emission factors provided by reference databases (Base Carbone®, Defra (UK), EcoInvent, etc.) are often calculated using average data and do not allow for the identification of the best suppliers—those with the lowest carbon footprint.

As a result, they make the company’s BEGES (Carbon Footprint Assessment) less accurate and prevent it from using a qualitative carbon criterion to select its suppliers, thereby depriving it of the greatest potential for reducing its emissions.

It is therefore essential to be able to account for the actual emission factor of each supplier along the value chain, rather than relying solely on the average emission factors from reference databases.

A reminder of what an emission factor is:

An emission factor (EF) is the coefficient that relates GHG emissions to the data on the activities that generate those emissions. There are four of them:

1️⃣ Monetaryemission factors (in kgCO2e per euro spent): These are provided by ADEME in France or EcoInvent in Switzerland, for example, and apply to Scope 3 emissions. They greatly simplify the process of entering data into the GHG inventory.

🔴 Cons:

• Offers little confidentiality regarding accounting data: the company must disclose accounting information to prepare its GHG balance sheet
• Insignificant FE: Its emissions depend on the prices at which its electricity and other goods were purchased…
• ADEME estimates an 80% uncertainty for these FE values

2️⃣ Carbon footprints by product or service type: These are provided by ADEME in France (Base Carbone® or Base Impacts®) and EcoInvent in Switzerland, for example. These are average values: a product (such as a T-shirt) may be manufactured in Asia or Europe using different processes, which can skew the product’s actual carbon footprint.

🔴 Cons :

• Not all assets are covered by these FE.
• These FE values are still approximations that do not distinguish between service providers.

3️⃣ Composite Product Carbon Footprints (PCF):These are calculated based on detailed composition data and take into account the GHG emissions associated with each stage of a product’s life cycle (extraction and transport of raw materials, manufacturing processes, distribution from the factory, product use, and end-of-life).

➡️ Obtaining these FE requires the involvement of one's suppliers.

4️⃣ Carbon Footprint per Unit of Work (CFPUW): These are calculated based on an organization’s carbon footprint by allocating its GHG emissions to its production units. They allow for the precise consideration of the various stages of the life cycle.

🤝 How to Engage Your Suppliers with Decarbo’Solution®

Today, any buyer—whether public or private— has the right to require its service providers to submit their GHG reports. But it is far more beneficial to know the specific emissions factor of the products and services offered by suppliers; their “Carbon Footprint” enables “positive carbon discrimination,” which is essential for improving one’s Carbon Competitiveness®.

Therefore, to encourage each of them to report their “Carbon Footprint, ” the company provides the following on the Decarbo’Solution® platform:

• A “dissemination” module: automatic notification to each of its service providers regarding this request for information on their GHG emission inventories, along with a recommendation from the Decarbo’Solution® service to ensure compliance and simplify the submission of calculations.
• A tool for analyzing the “carbon footprint” of bids, allowing it to prioritize those that can demonstrate a lower carbon footprint associated with their goods or services.

By requesting their own emission factors, companies or local governments can calculate the actual carbon footprint of their goods or services, thereby eliminating the need to use default values, which are generally higher.

This collaborative monitoring of the environmental performance of service providers and customers over time—facilitated by Decarbo’Solution®—makes the concept of sustainable procurement a reality.

It helps guide the supplier in accordance with the requirements and recommendations:

• Standards from the ISO 14040 series specific to Life Cycle Assessments
• ISO 14 067 on the carbon footprint of goods and sector-specific benchmarks from ADEME’s Base Impacts®

These guidelines also help steer suppliers —who are familiar with the various processes and materials used to produce their goods or services—so that they can correctly allocate the GHG emissions from their operations to the units of work for which they wish to calculate the carbon footprint to be disclosed to their customers.

The various FE metrics per unit of work (expressed in terms of weight, volume, area, euros, man-days, etc.) that can be estimated are as follows:

• FE / Production Units (Consumer Goods Produced)
• FE / Department

Decarbo’Solution® enables companies to enroll their carbon-emitting suppliers, which is essential for the continuous improvement of their own Carbon Competitiveness®​.

The virtuous cycle between buyers and suppliers:​

" My Carbon Competitiveness® depends on that of my suppliers, and determines that of my customers."​

✅ Calculate a Composite® emission factor

Accurately measuring composite emissions requires the involvement of service providers. Therefore, it will be easier to convince them by introducing them to the Decarbo’Solution® platform, where they can:

• Either conduct free evaluations of their compliant FE composites® in a simple, educational, transparent, and auditable manner—and thus enforceable against third parties.
• Either they can conduct their own comprehensive GHG inventory completely on their own , thereby simplifying the calculation process even when dealing with a large number of emission sources , and receive tailored emission reduction action plans at highly competitive prices (made possible by the 100% digitization of the process), all while benefiting from the support of Decarbo’Solution® experts.

In some cases, a PCF’s request to its supplier may not be appropriate because the supplier is unwilling or unable to calculate a PCF per unit of work using Decarbo’Solution® for various reasons.

In this case, the Decarbo’Solution® platform provides customers with an interface for “Calculating a PCF or a composite emission factor” based on various databases:

• The EMPREINTE® Database: Official generic inventory database for the French government’s environmental labeling program for consumer products. (Processes, energy, raw materials, etc.)
• The UK BEIS (DEFRA) Database: UK database of the Department for Business, Energy, and Industrial Strategy

Thanks to the various “primary” emission factors “primary” available in the databases presented above, anyonecan evaluate a product’s emission factors by referring specifically to the processes and materials used in its design.

Thus, in the event of a failure on the part of its supplier, the company can perform this composite emissions factor assessment itself, provided it knows the composition and the manufacturing and delivery process of the purchased product.

👕 Example: You need to incorporate the carbon footprint associated with a line of imported T-shirts for which you know the exact components (raw materials, processes, production location, transportation, etc.). You can create a composite FE using emission factors from the Empreinte® Database, the Ecoinvent® Database, and the UK BEIS Database, which allow you to calculate the carbon footprint based on the following information:

• Recycled cotton yarn/kg
• New cashmere yarn/kg
• Yarn Dye per kg
• Wash-out/kg
• Coating per square meter of fabric
• kWh of electricity by process (by country of production)
• Transportation

Conclusion: Based on the various processes and raw materials used to manufacture a product, it is possible to assess with reasonable accuracy the overall carbon footprint associated with its production.

Decarbo’Solution® then allows this carbon footprint to be utilized in the form of a composite FE for use in the GHG inventory report to make it more accurate, as well as in the associated reduction action plan.

To be effective,decarbonizing procurement requires taking into account suppliers’ precise emissions and implementing this criterion as an essential complement to the traditional quality-versus-price assessment.

The Benefits of Decarbonizing Procurement

Aside from its environmental impact, decarbonizing procurement also brings significant value to organizations that embark on this initiative. Whether from a competitive, regulatory, or market perspective, there are only benefits.

🥇 Carbon Competitiveness Improvement®

Carbon Competitiveness® is the ability to demonstrate, while maintaining the same quality of service or product, lower GHG emissions than one’s competitors.

This recent concept is a direct result of customers’ new demand for decarbonization in their purchases. Everyone has become concerned with reducing their own carbon footprint, givennew fiscal, regulatory, and commercial constraints; this “Carbon Competitiveness®” isalsobecoming a requirementfor them, particularly in requests for proposals.

So here is a new component in its own right of every company's strategy.

Conversely, ignoring it means running the risk of seeing competitors gain an edge in this area, which has become an additional criterion for market selection.

It is up to each individual to strike a balance between reducing greenhouse gas emissions—a competitive advantage—and the economic imperatives of traditional competitiveness, including, in particular, the selling price.

The goal, therefore, is for the company to report emission factors for its products and services that are lower than those of its competitors—which are also calculated rigorously and in compliance with regulations.

➡️ ISO 14 067 specifically defines the methods for calculating and verifying the results used to determine these factors, known as PCF (Product Carbon Footprint).

The significant role that purchasing plays in these calculations presents a great opportunity to establish a new type of collaborationwith one’s own suppliers:

💪A company’s Carbon Competitiveness® depends on that of its suppliers, determines that of its customers, and generates benefits for everyone:

• A virtuous cycle that fosters a lasting relationship of shared progress between the parties.
• The promise of accelerating a solid low-carbon trajectory—one that brings together all stakeholders, benefits everyone, and is essential to our shared fight against climate change.

💯 Competitive Advantages

Embarking on a decarbonization initiative increases a company’s chances of meeting the new requirements in requests for proposals. In fact, more and more governments and organizations are including criteria related to sustainability, decarbonization, and environmental responsibility in their requests for proposals. Companies that can meet these criteria are therefore more likely to win these bids and gain a competitive advantage.

📃 Compliance with Regulations

The Grenelle II Act of July 12, 2010 requires companies with more than 500 employees (250 in the overseas departments) to conduct a Bilan Carbone® assessmentat least once every four years, and local governments with more than 50,000 residents to do soat least once every three years.

Decree 2022-982 has just strengthened and expanded this requirement, as Scope 3 reporting is now mandatory, as is the publication of a transition report demonstrating the company’s low-carbon trajectory.

Therefore, companies have a critical interest in engaging their service providers—who are responsible for the bulk of their Scope 3 emissions—to ensure they report their “carbon” performance and select them based on that performance.

In this way, a company will be able to assess the environmental and societal impacts of the resources it uses and make changes if it determines that they do not align with sustainable sourcing practices.

💰 Tax Benefits

The upcoming implementation ofthe carbon quotas adoptedin July 2021 for transportation (with rapid implementation for maritime transport, followed by road transport) and the real estate sector, the announced end of free allowances, and the introduction as early as 2025 ofthe Imported Carbon Tax passed by the European Union are creating a new requirement for precise, third-party-verifiable calculations and verifiable emissions reductions.

At stake is, in fact, the reduction of thefuture Carbon Tax Base®; this could amount to significant sums for those who have not already begun reducing their GHG emissions—the basis for these new taxes.

💬 Customer Testimonial from Samuel Réthoré

As an expert in procurement and CSR engineering and Director of Programs at the Académie des achats, Samuel Réthoré explains why it is essential to integrate CSR issues into a company’s overall strategy:

“Decarbonizing industrial, commercial, and service-sector activities is now seen as an imperative and top priority, as evidenced by the increasing regulatory requirements.”

Therefore, to stay ahead of regulatory requirements, organizations must begin implementing a low-carbon strategy now. To that end, Samuel Réthoré explains how the Decarbo’Solution® platform is the ideal tool for defining and communicating their low-carbon trajectory:

“The user-friendly design of the Decarbo’Solution® software solution will make it easy and quick to report periodic decarbonation measurements, enabling performance monitoring in the short, medium, and long term.”