Reducing supply chain emissions, often categorised under Scope 3, is one of the most challenging yet impactful parts of a company’s climate strategy. To tackle this effectively, businesses must measure their supply chain footprint and prioritise the right suppliers and categories for action. Here’s a deep dive into how you can establish an emissions baseline and segment suppliers for sustainable transformation.
Step 1: Establish Your Emissions Baseline and Prioritise Categories
Understand the emission source: You must understand their origin before reducing emissions. Establishing a supplier emissions baseline is a critical first step that reveals which suppliers or categories are responsible for the largest share of your Scope 3 footprint. This data-driven insight helps prioritise engagement efforts with suppliers with the most significant environmental impact.
Analyse emissions at category level: Analysing emissions at the category level is equally important. Different categories, such as metal, plastic, or electronics, come with unique Decarbonisation challenges and opportunities. Certain materials may have established pathways. For emissions reduction, while others might be early in their transition. Recognising these nuances allows you to apply the right strategies in the right places.
Outline the emissions hotspot: Once the emissions analysis is in place, companies can generate a heatmap that plots supplier emissions by category, clearly outlining hotspots across the supply chain. This has become a powerful tool for strategic decision-making.
Step 2: Estimate Supplier Emissions using a different method
Two primary methods, the spend-based method and the average-data method, are used to estimate supplier emissions using secondary data.
- Spend-Based Method:
The spend-based method estimates emissions based on how much you spend with a supplier. It’s a straightforward approach that requires only your procurement spend data and access to emissions databases.
Formula: $ value of purchased goods × emission factor (kg CO2/$) = Estimated CO2 emissions
The emission factors can be sourced from global and regional databases such as:
- Idemat (global averages)
- DEFRA (UK)
- ADEME (France)
- EPA (USA)
- IPCC (international)
The spend-based method provides generalised estimates and may not reflect real-world supply chain complexity.
- Average-Data Method
The average data method calculates emissions using the mass or quantity of products purchased, offering a more accurate estimation if you have access to the required data.
Formula: Mass of product (kg) × emission factor (kg CO2/kg) = Estimated CO2 emissions
This approach relies on detailed quantity data and accurate, activity-based emission factors. A product carbon footprint (PCF) analysis may be required to obtain precise estimates.
If possible, ask your suppliers to provide primary emissions data through PCFS. This offers the most accurate footprint estimation and is essential for robust sustainability performance tracking. When primary data is not available, fall back on high-quality secondary data.
Step 3: Assess Supplier Sustainability Maturity and Risk Exposure
Once emissions have been estimated, assessing each supplier’s sustainability maturity and exposure to environmental risk is essential. Consider questions such as:
- How advanced are their climate policies?
- Have they set science-based targets?
- Are they prepared to reduce emissions in line with global climate goals?
These insights highlight which suppliers are already on the path to decarbonisation and flag those that may require additional support or incentives.
Step 4: Segment and Prioritise Suppliers
With emissions data and maturity assessments, segment suppliers using a supplier-category emissions matrix. This matrix enables you to:
- Visualise carbon hotspots across your supply base
- Prioritise high-emission suppliers within high-impact categories
- Tailor decarbonisation strategies for each segment
This step forms the backbone of any supplier engagement strategy. For example, strategic suppliers with high emissions and low maturity may be engaged through partnerships, capacity-building, or performance-based incentives.
Step 5: Leverage Digital Tools for Supplier Emissions Mapping
Manually analysing procurement and emissions data can be time-consuming and resource-intensive, especially for organisations with large and complex supply chains. Fortunately, various digital tools and platforms are available to simplify and accelerate this process. You can select the tools you need. These tools help companies to:
- Map suppliers based on procurement spending, emissions intensity, and sustainability risk.
- Generate tailored insights and recommendations for supplier engagement and improvement.
- Visualise and track emissions hotspots across categories and regions in real-time.
By adopting these digital solutions, organisations can focus their efforts where they matter most, driving measurable climate action across their supply chain.
Selecting and segmenting suppliers is more than a data exercise; it’s a foundation for climate impact. By combining emissions insights with risk analysis and digital tools, companies can create targeted decarbonisation strategies that make a real difference.
Start by understanding where emissions lie. Then, act strategically, engage with the right suppliers, focus on high-impact categories, and scale solutions that drive environmental and business value.
