The hidden value of going carbon neutral

By Adam Miller, Carbon Accountant, BP Target Neutral

More brands and organisations are going carbon neutral and it is easy to see why1, it’s an appealing proposition for lots of reasons. It’s a quick and relatively inexpensive way to let your customers or stakeholders know that your organisation is serious about carbon and taking action. It can give brands an edge in a competitive marketplace where consumers are increasingly conscious about the carbon footprint of the products and services they buy. Investors are putting more pressure on businesses to take action on carbon which can have an impact on long-term valuations and there is an increasing focus on carbon emissions across supply chains which can impact an organisation’s ability to work with partners who demand a carbon strategy.

But, the biggest plus of going carbon neutral might not be the headline brand, reputation or marketing benefits at all – it could well be releasing the ‘hidden’ value that comes with carbon neutral certification – specifically using the carbon footprint to identify inefficiencies in the supply chain.

By its design, the purpose of ‘carbon neutrality’ is to manage carbon impact. You can ‘only manage what you measure’ and so all carbon neutral programmes start with a detailed carbon footprint. Carbon footprints model the energy consumption at every stage of the life of a product – from material acquisition, processing, transportation, customer use and end-of-life processes – this is what is defined in the industry as ‘cradle-to-grave’. Energy expenditure is a strong indicator of efficiency. The carbon footprint is therefore an effective business management tool, mapping energy use and indicating where to focus to increase efficiency in your supply chain operations.

The supply chain accounts for 50-70% of both total expenses and greenhouse-gas emissions for most manufacturing companies2.  Carbon ‘hot spots’ within your supply chain help identify where inefficiencies may have built up. By identifying these inefficiencies using the carbon footprint, you can establish initiatives in order to make improvements and reduce emissions. The financial benefits impacting the bottom line are two-fold: making efficiency improvements directly represent cost saving benefits and mitigate the cost risks of soaring energy bills; whereas reducing the absolute footprint brings down the overall cost to offset. Getting focus on your carbon ‘hot spots’ demonstrates a real commitment to taking action on the climate challenge. You only have to look to the leaders in the industry (Unilever, Nestlé etc.) to see that supply chain sustainability is a driver of competitive advantage.

“Supply chains are complex and developed over many years to suit varying business needs. Understanding the carbon footprint of a supply chain and relevant hot spots provides new insight into where you are likely to see pressure from customers, emerging policy and where there is most potential to unlock opportunity in terms of cost savings.”

Bryan Hartlin, ERM (Environmental Resource Management)

Establishing an action plan does not have to be costly or complex. Often there are easily achieved initiatives to be implemented which will reduce the most cost within the supply chain, typically in line with already established supply chain strategies. You can quickly start making a real difference in 3 steps:

1. Mine your data

Get an accurate carbon footprint across your supply chain. Greater information allows you to make more informed decisions to allocate capital in a more efficient way.  In an age when data itself holds value, developing a quality dataset is a real asset. Next, conduct a materiality assessment of your footprint to understand your carbon ‘hot spots’. According to IBM’s Chief Procurement Officer Study, 83% of high-performing CPOs excel at leveraging analytics compared to just 63 per cent of the low performers3.

2. Strategy innovation

Design a carbon management plan and prioritise its implementation across the different lifecycle stages. Favoured initiatives include supplier engagement programmes, value chain emission reduction programmes, procurement strategies, and integrated management systems. You can tailor your initiatives to support your core business strategy. For example, if your business has a strategy to take responsibility of its waste plastic then establishing a carbon reduction initiative to reduce the plastic in your packaging helps manage both the emission footprint and waste footprint, plus any negative reputational risk that is associated with branded packaging contaminating the environment.

3. Tackle suppliers

For some businesses, especially those with manufacturing, production and logistics supply chains, a significant portion of your organisation’s emissions could be in the supplier base. It is therefore a focus area where businesses can have a strong influence to drive changes without being overly resource intensive and so has the potential for cost-effective improvements to reduce the footprint. Applying a sustainability lens to address procurement decisions presents an opportunity to engage in more meaningful conversations with suppliers, spark additional innovation and drive stronger relationships. Recognising the scale of this opportunity, the CDP (Carbon Disclosure Project) have developed the tools to assist purchasing organisations with these conversations. The UN Global Compact Report say that real progress can be made by setting the priority at the top of your organisation. This makes it possible to expand the scope past the first tier of suppliers to the suppliers that are likely to have the most significant challenges4.

40% of CDP members report that they have realized financial savings from their emissions reduction activities. More than a third have benefited from new revenue streams or savings gained as a result of their suppliers’ carbon reduction activities.

Carbon Disclosure Project

In conclusion

Carbon neutral offers are built on valuable resources – footprint models – often overlooked due to complexity and other business priorities. By investing in a data-rich and scientifically robust carbon footprint it is possible to extract further value beyond carbon reduction. Ultimately, a consideration of the bigger picture is required; in a future where the footprint of the supply chain is being increasingly seen as the health check of any business, this should be seen as valuable data to help protect the longevity of your business.

1. https://www.carbonneutral.com/our-clients

2. https://www.accenture.com/gb-en/insight-outlook-why-sustainable-supply-chain-is-good-business

3. https://www-03.ibm.com/press/uk/en/pressrelease/41174.wss

4. https://www.ey.com/Publication/vwLUAssets/EY-the-state-of-sustainable-supply-chains/$FILE/ ?EY-building-responsible-and-resilient-supply-chains.pdf