To get a full picture of the carbon emissions a business produces from operations, a business needs to include ‘Scope 3’ emissions. Scope 3 emissions refer to indirect greenhouse gas emissions generated throughout a company's value chain. Scope 3 emissions include sources such as freight, staff commuting, and also purchased goods and services. Reporting on purchased goods and services requires knowing the emissions of your suppliers. This article will outline and explain measuring supplier emissions on a deeper and more comprehensive level.
Measuring supplier emissions enables you to gain a holistic view of your supply chain's environmental impact. Not only can it helps you identify emission hotspots, implement targeted emission reduction initiatives, and enhance reporting and transparency, it can help you understand both the environmental and social impacts of your suppliers so you can start to reduce, and eliminate unethical & carbon-intensive processes that may inadvertently receive support.
Measuring emissions from purchased goods may seem like a large and daunting task, but it is a task that is worth the effort and will help mitigate some risks associated with climate change for your business. It is essential to understand how your product ultimately reaches the hands of customers.
Digging deeper into suppliers allows for a clearer understanding of the various contributors in the supply chain. Even for organisations not directly engaged in manufacturing, evaluating the process and origin of their purchases remains a pertinent exercise. Whether it pertains to procuring IT hardware, office furniture, or snacks, scrutinising each company or partner in a manner similar to that employed for manufacturing suppliers can prove to be highly beneficial.
You can start this process by mapping your supply chain, allowing you to identify all the materials and partners involved in bringing a product to market. Equipped with this information, you'll be better prepared to address sustainability initiatives. For organisations aspiring to establish stronger connections with customers, conducting a traceability exercise holds considerable value. Demonstrating your meticulousness and critical evaluation of the companies you collaborate with can greatly contribute to building brand trust among customers and vendors.
Now, let's delve into the concept of tiers within the supply chain. In order to better understand the different parts or elements required for manufacturing a physical product, businesses frequently use a classification system to divide suppliers into "Tiers" based on their proximity to your business or final product. Suppliers are divided into Tiers 1, 2, and 3 as outlined below.
TIER 1 SUPPLIERS
Tier 1 suppliers refer to partners with whom you directly conduct business. These can include contracted manufacturing facilities or production partners. Let's consider an example of a company that specialises in selling apparel. In this scenario, the factory responsible for assembling the company's cotton t-shirts represents a Tier 1 supplier.
Quick Tip: To promptly identify your Tier 1 suppliers, examine your company's expenditure, as Tier 1 suppliers often constitute significant cost centers.
TIER 2 SUPPLIERS
Identifying Tier 2 suppliers is relatively straightforward—they are the sources from which your Tier 1 suppliers obtain their materials. Continuing with the apparel company example, the fabric mill supplying materials to the t-shirt factory would be considered a Tier 2 supplier to the apparel company.
TIER 3 SUPPLIERS
Tier 3 suppliers or partners operate one level further from the final product and typically deal with raw materials. Returning to our apparel company example, the Tier 3 supplier would be the farm selling cotton to the fabric mill.
What Comes Next?
Every supply chain is different, but many companies and organisations depend on complex networks to get their products to customers. Understanding your supply chain completely takes time and effort, often involving months of research and building relationships with suppliers. It's important to be patient because this work is essential for creating a more sustainable product in the future.
Ultimately, you have the power to choose which suppliers you work with, and your choices can make a positive difference socially and environmentally. By understanding how a product is made, where it comes from, and the environmental impact of its production, you gain a complete and holistic understanding of what you're actually purchasing.
