A Call to Urgency for Sustainability in Procurement

Keelvar’s note: We are pleased to welcome Sustainable Logistics and Supply Chain Management Consultant, John Muncey, as our guest author for this content. This article also features as a foreword in our Buyer's Book Volume III, How to Enact Sustainable Sourcing Today to Reduce Scope 3 Emissions.‍

The Intergovernmental Panel on Climate Change report released during the summer 2021 confirmed that Greenhouse Gas Emissions (GHG) are almost certainly to blame for increasing global temperatures and degradation in air quality levels.

Critically though, it also provided an update to the “less than 2C” global temperature increase guidance previously included as part of the 2015 Paris COP 21 meeting, with the required target now “well below” 1.5C in order to avoid irreversible climate damage. The reasons for climate change are well documented and multi-faceted, spanning all industry sectors. For Transport and Logistics specifically, it is estimated that emissions from this sector represent 16% of the total annual GHG emissions.

According to the International Transport Forum’s Transport Outlook 2021 report, emissions from the global Transportation and Logistics sector are forecast to grow a further 42% by 2050 (from 3.85 trillion tonnes of CO2 in 2015 to 5.46 trillion tonnes) if the current rate of emission production continues unabated. Despite being a major contributor, at the time of writing, most countries are yet to implement any legislation which commits Logistics Service Providers (LSPs) to report their GHG emissions or implement measures to ensure an annual reduction.

As a result, despite technology being available, many service providers have failed to invest in this area and are still unable to report GHG emissions at the customer/shipment level. Of those who can report, they tend to use less-than-precise default values as they are not capturing primary data directly from their assets.

At the same time, only a relatively small number of companies have made public commitments to reduce their GHG emissions by setting Science Based Targets. Except for a handful of LSPs, these commitments tend to cover Scope 1 and Scope 2 emissions only (which emit from one’s own operations), with Scope 3 that includes indirect transportation being excluded.

Research has shown that Scope 3 emissions can often represent up to 70% of a company’s total GHG emissions and are typically far larger than Scope 1 and 2 combined. By excluding Scope 3, companies are potentially missing the largest opportunity to reduce their total GHG emissions and to help cap Global Warming to less than 1.5C.

We have no time to lose in the battle to reduce GHG emissions. Irrespective of whether your company has set a formal Scope 3 emissions reduction target or not, the Supply Chain and Procurement community has control over its own emissions, as it is you who chooses the sourcing location, the transport mode and your service provider.

Solutions to this challenge are now supported by Keelvar’s sourcing optimization and automation platform allows you to factor GHG emissions as part of your buying criteria in addition to price and service performance.

This approach incentivizes Suppliers to develop reporting capability if they do not have it in place today in order to compete in your tenders, whereas those that are already reporting GHG emissions will be encouraged to refine the accuracy of their submissions in order to maximize their chances of winning.

This information allows Supply Chain and Procurement professionals to make informed decisions on supplier selection whilst simultaneously establishing a GHG baseline, if one does not exist today, or helps lower overall GHG emissions if a baseline exists.

Critically though, it focuses attention on the immediate need to start decarbonization efforts in earnest if we are to meet our climate reduction objectives.

John Muncey is a 30-year veteran of global logistics and supply chain management who is now working as a consultant on how to drive sustainability in those areas for greater global good.

This blog is taken from our Buyer's Book Volume III, a practical guide for procurement and supply chain on the use of sourcing optimization and automation to meet sustainability targets. Download your complimentary copy here.

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