How can I reduce my emissions from Purchased Goods & Services?

The Purchased Goods and Services (PG&S) of a business almost always make up a significant portion of its carbon footprint, and are often the single largest contributor. The manufacturing and transportation of goods and raw materials, and the delivery of services (such as advertising, recruitment, legal and consulting services) all have indirect scope 3 emissions associated with them. 

Using the example of a company who manufactures rubber tyres: there are emissions along the entire value chain from growing the rubber trees, harvesting the raw material, processing and transportation, right up until the tyre manufacturing company acquires the rubber (this segment of the value chain is known as cradle-to-gate). So as you can tell, emissions from PG&S are multi-layered and highly complex.

PAUSE

I want to pause here, because a lot of people panic when they see the contribution that PG&S makes to their carbon footprint. You may already be rolling your eyes, thinking you have no control over the goods and services you need to procure, or have no influence over your suppliers - and if you're an SME, you're probably right! Scope 3 emissions in general are hard to manage. Size is important when deciding which emissions to attack, but so is your level of influence over those emissions, so I want to encourage a bit of a change in mindset when it comes to Scope 3 emissions, in particular PG&S:

Difficult target: "Let's reduce our supply chain emissions by 50% compared to baseline by 2035"

Better target: "Let's ensure 50% of our suppliers have their own Net Zero targets by 2035"

That way, you can be confident that you're aligning your value chain with a Net Zero future, rather then stressing about emissions you can't change right now without going out of business. Most Net Zero targets are set for 2050 anyway, there's a lot that needs to happen between now and then to make Net Zero achievable, not the least of which being technological leaps that haven't occurred yet.

CONTINUE

This all means that unless your suppliers are already measuring their own carbon inventory or conducting Life Cycle Assessments for their products, convincing them to do so can be incredibly time and resource consuming. However, engaging with suppliers proactively and collaboratively to encourage them to undertake such assessments is a crucial step in managing this segment of your carbon footprint in the long run.

In the meantime, Trace helps you to account for these emissions by applying our spend based emissions factors (kgCO₂,/$), which incorporate industry average emissions and revenue to give you a starting point for quantifying these emissions so far as they relate to your business operations.

So what CAN I do about it?

We have some great guidance within our 'Help Your Suppliers Become More Sustainable' reduction initiative in your Reduce Dashboard, but I'll summarise some key points below:

1. Develop a Sustainable Supplier Policy (here's a free template!): this should reflect your company’s environmental and social values, and have a preference for carbon neutral/net zero suppliers of goods/services where possible. Part of this policy should be to conduct a “supplier audit” by which you build an inventory of all your suppliers and their climate/social action, including any emissions reduction targets).
2. Proactively and collaboratively engage with your suppliers (here's a free supplier engagement guide... Oh and a free Supplier Survey!): to encourage positive action and better understand their environmental impact.
3. Lead loudly by example: partnering with Trace to measure and reduce your carbon footprint is a great place to start and communicates to all your stakeholders that you value climate action.
4. Reduce consumption: while the spend-based methodology of calculating these emissions is still the most accessible measurement option, reducing consumption (and therefore spend) on goods and services where possible is a sure way to reduce your carbon footprint in this area. This of course isn't always an option, but we'd be remiss not to mention it.
5. External Pressures: Lastly, there’s one more consideration which should give you some hope for your supply chain emissions. Globally, shareholders, governments and consumers alike are starting to demand more disclosure and action around ESG topics - notably, the concept of mandatory ESG reporting is becoming ever more present:

• • The UK’s Streamlined Energy and Carbon Reporting (SECR) policy requires organisations of a certain size to share energy use and carbon emissions information in their annual reports. 
  • The Australian government has also introduced mandatory climate reporting in 2024, a move that will hold significant consequences for large businesses and is expected to trickle down to SMEs and supply chains. The Australian government released a consultation paper on 27 June 2023 which proposes:
    • mandatory reporting requirements will commence from 1 July 2025 for Australia's largest listed and unlisted companies and financial institutions, with other businesses subject to the requirements over time
    • reporting subject matter to cover financial materiality, governance, strategy risk and opportunities and greenhouse gas emissions (initially only scope 1 and 2, with material scope 3 emissions from second year)  
    • It’s expected that as large listed and unlisted companies are legally required to report their emissions, they will be applying pressure to their supply chain members to measure and reduce their own carbon footprints. 

It could soon be the case that smaller suppliers will have to keep up with ESG best practice if they want to be in business with large corporations. So, while you may not feel that your company has the power to influence the impact of your supply chain right now - measurement, reporting and reduction of emissions could soon be a wide-spread practice across businesses of all sizes.