By Martin Chilcott, CEO of Manufacture 2030
Article 4 of 4 - Improvement
“For 12 years, we’ve pioneered new ways to spread sustainable practices across manufacturing supply chains. We partnered with some amazing brands like Tesco, GSK, Asda-Walmart, Coop and Unilever… Not everything we tried worked, but a lot did, and we made it our mission to learn even more. This is the summation of those best bits.”
This is the final article in a four-part series written for an audience with a manufacturing supply chain and either a Net Zero or Science Based Target for reducing their upstream carbon impact.
In the first article, we gave an overview of the three steps that are essential to achieving your Scope 3 supply chain carbon reduction target. In subsequent articles, we dived deeper into each of the first two steps.
To recap, those three steps were:
- Measure: go beyond historical, enterprise-level data collection and measure in detail each supplier manufacturing site’s baseline carbon emissions (Scope 1, 2 and 3) and their estimated glidepath towards your target, based upon their reduction action plans.
- Manage: use the glidepath data you have collected to understand the gap to your target and manage their progress to close that gap.
- Improve: accelerate improvement by building the supplier’s capacity, focused specifically on closing their identified gap to your target.
You need to be able to do this at scale, hundreds and thousands of times simultaneously, and that will require technology.
In this final article, we will consider how you can improve your suppliers’ capacity so that they can implement their action plans, accelerate carbon reductions and get their glidepath on track to your target.
So here it goes.
You don’t need data - you need improvement
This is where the rubber hits the road. Measuring and managing your suppliers’ emissions is all meaningless if they don’t improve their performance and cut carbon fast enough for you to hit your Scope 3 target.
You can have complete visibility of the carbon emitted across your supply base and have the right incentives in place, and yet your suppliers still can’t change fast enough. Here are the main reasons why and what you can do about them:
1. Suppliers often lack the requisite ‘know-how’ and technical capability
If you have read the previous two articles, you will know how you can help your suppliers to identify the gap between their current reduction ‘glidepath’ and your target. If, as we recommend, you are collecting data through supplier action plans, you will also be in a position to compare plans and outcomes and so help each supplier identify exactly what extra initiatives they could add to their action plans to close their gap to your target.
With that insight you can now focus on helping your suppliers develop the exact technical know-how and capability they need. The great news is, that because you are working with hundreds (perhaps thousands) of your suppliers, the engineering and procurement knowledge they need is probably somewhere in your supply base already, but stuck in silos. You need to unlock it, and your suppliers’ action plans will tell you exactly where that knowledge sits and it doesn’t take much encouragement to get teams from one organisation to share their insights with their peers from another. If everyone is doing it, everyone wins.
At Manufacture 2030, we use the insights we get from the detailed site-level data we collect to share knowledge like this in a number of ways, including:
- Inside our platform, we have an evergreen and growing database of approximately 500 actions for reducing environmental impacts. Each action has functionality to enable teams from different supplier sites, working on the same action, to share insights, ask questions etc.
- Via peer-to-peer webinars and masterclasses that give suppliers an opportunity to showcase their sustainability initiatives, while providing tips and advice on particular subjects. Some of the most popular sessions have attracted hundreds of eager engineers. You can see an example of one of our webinars below.
- In pre- and (hopefully) post-Covid times, through on-site treasure hunts where engineers are invited to a site to see an example of a process or technology in return for helping the host to identify opportunities for savings that they may have otherwise missed.
Highly targeted, peer-to-peer knowledge exchanges of this sort are very valuable; but if the know-how in your supply base is not sufficient, you should have no difficulty in inviting consultants or other third parties in to show off their capability for free.
So, in our experience, it is perfectly possible to scale expertise across a supply base rapidly. You should be able to use data from supplier action plans and glidepath gap analysis to let your suppliers know exactly what to do and through targeted peer-to-peer knowledge exchanges, how to do it.
2. Suppliers lack access to capital
Of course, implementing actions costs money. However, the good news is that many of the actions that we recommend to suppliers via our platform require little to no CapEx to implement, and most will also see a quick return on investment in resource savings. In our experience, most suppliers have a lot of this low-hanging fruit to work through before they need to turn to serious capital expenditure.
But, there are some initiatives which will require capital and have an ROI time frame that is too long to get the backing of the CFO easily - this can be a particular challenge for smaller suppliers. In such cases, there are various things you can do to make it easier for your suppliers to get the investment they need:
- Help them build a better business case - Engineers are not generally experts at building a compelling business case, and sustainability initiatives often create value in surprising ways. Run webinars demonstrating best practices in how to identify multiple layers of value that can be reaped from sustainability initiatives beyond just a reduction in energy or material costs. For instance, we recently ran a case study webinar on installing an anaerobic digestion plant, which showed how it reduced waste disposal costs, generated a high value nutrient compost as well as biogas, which was used to reduce energy bills.
- Invite your suppliers to seek your overt support for their initiatives - To add weight to the business case and understand how their initiative will lower the ‘true’, carbon-inclusive cost of their products. Demonstrate how it will improve their rankings, or score card with you, and their ‘true’ price-quality competitiveness.
3. Suppliers struggle to influence their own raw material suppliers
A very significant part of your tier 1 supplier's footprint is going to be the purchased goods and material inputs into their manufacturing processes (their Scope 3, Category 1).
To make progress in reducing the embedded carbon in the input materials they are buying requires your supplier to either:
- Change input materials (e.g. ingredients) to lower carbon ones.
- Change suppliers if the latter cannot/will not lower the carbon footprint of their materials.
- Actively engage their suppliers to change.
However, all three options will be difficult for many of your suppliers because they will have little leverage over the market they are buying from, either because of their relative size, or because they are buying commodities through intermediaries.
In either case, you can help. Through your measurement data you will have sight of the key input material hotspots in your supply chain. Using this insight, you can convene your suppliers to act in concert and use your own muscle to negotiate changes further down the supply chain such as better mining, recycling or agricultural practices and the introduction of new technologies and alternative materials.
In the earlier article on ‘Management’ I wrote about creating a sense of “collective ownership” across the supply base that encouraged suppliers to view action on carbon as an exercise in future-proofing their industry and own business. As the supply chain owner, you can help convene collaborative initiatives to address common input materials challenges led by your suppliers. This is a great place to focus “collective ownership” and accelerate positive change. The power of thousands of cheque writers working together should not be underestimated.
The proof of the pudding is in the results.
We have been measuring, managing and driving improvement across the combined food and drink supply chains of the UK retailers, Asda and Coop. In just the last three years, the 1,000 participating supplier sites have on average:
- Reduced their Scope 1 and 2 carbon intensity by almost 20%.
- Doubled their use of renewable energy.
- Halved the amount of waste going to landfill.
In the last year alone, they have started to measure the carbon in over 900 million tonnes of raw material inputs into their factories and committed to over 5,500 new carbon reduction initiatives within their action plans.
This latter data is important because it tells us not just what they have achieved to date, but whether their action plans and glidepath mean they are likely to hit their target in the future, and if not, exactly what we can do to help achieve it.