Given mounting climate issues, and increased public interest in supporting sustainable brands, the ecommerce world is experiencing a huge shift in how it approaches its operations. Companies are well aware of the massive impact that environmental, social, and governance (ESG) policies have on consumer behavior and stakeholders, and as such more than 88 of them have introduced ESG initiatives in the workplace.
Part of a successful ESG strategy involves monitoring a company’s carbon footprint. And such a mammoth task faces plenty of challenges along the way.
An ecommerce company’s supply chain – anything from raw material sourcing to distribution – can make up a huge bulk of its operations and thus account for an enormous portion of its carbon impact. However, this is seldom the biggest priority embedded within business goals, so the supply chain often goes largely unchecked.
As a result, ecommerce businesses can easily overlook the carbon footprint of their supply chains, which can be 11.4 times larger than operational emissions. What’s even more troubling is that online purchasing is set to balloon in coming years, which should make the problem even worse.
Increasing public scrutiny and calls for greater sustainability are becoming impossible to ignore. Ecommerce companies must therefore look at their supply chain emissions as part of any net-zero strategy. While the carbon footprint from a company’s supply chain can be difficult to monitor, the good news is that it’s often considerably easier for companies to take action against these emissions.
Carbon emissions are so complex that they’re separated into three different sections that form part of the Greenhouse Gas (GHG) Protocol: Scope 1, 2 and 3 emissions. Scope 1 refers to a business’s direct emissions, while Scope 2 deals with indirect emissions from purchased energy, such as electricity.
Scope 3 emissions are those indirectly produced by other businesses and functions in a company’s supply chain. Scope 3 can account for up to 80% of a company’s carbon footprint. However, since these emissions are often the province of other organizations, they are notoriously hard to monitor. Although Scope 3 emissions are considered a big risk indicator in GHG monitoring, few effective frameworks have emerged to help companies monitor Scope 3 emissions effectively.
In the ecommerce supply chain alone, there are many moving parts that make up business processes. For example, a clothing ecommerce company will need to design garments, source materials, ship them to a factory for manufacturing, package items, ship purchases to customers, and so on. If a customer then decides to return a purchase, a similar reverse process comes into effect. It’s not unheard of for some fast fashion companies to send returned garments straight to the landfill rather than engage in the costly process of shipping, checking, and repackaging garments.
Some of these steps also tend to be outsourced to other companies. For example, an ecommerce business may work with suppliers and subcontractors to manage logistics, transport and shipping, or oversee warehouse spaces. With so many other parties involved, monitoring indirect emissions can be tricky, to say the least.
Much of these indirect emissions aren’t currently being accounted for. According to McKinsey, only 25 percent of reporting companies engage with suppliers to try to reduce emissions. Failing to monitor Scope 3 emissions, or even communicate about this with partners. This means that companies simply aren’t able to measure, manage, and reduce their overall emissions
It doesn’t have to be this way. The first step to overcoming the profound challenges of Scope 3 emissions is to recognize the sheer scale of the problem. To do this, companies should develop an overview of every step of their supply chain processes. Luckily, the EPA has created a Scope 3 tool to help companies gain an initial understanding of their supply chain emissions. With this, business leaders can begin mapping supply chain emissions.
We also need to face the challenge of previous monitoring processes becoming outdated. Most carbon reporting processes used in the past are not up to current standards. Plus, they’re overly labor intensive and require business leaders to complete multiple spreadsheets and crunch many numbers in the process.
A new generation of carbon reporting tools is finally changing this, and they can help with Scope 3 reporting, too. For example, the GHG Protocol offers guidance to businesses on how to measure Scope 3 emissions. Also, the Sustainability Consortium has created multiple tools to help businesses develop and track key performance indicators related to supply chains.
After you’ve mapped and gained a better understanding of supply chain emissions, you can then take steps to reduce them.
According to McKinsey, businesses could instantly cut a whopping 30% of supply chain emissions through simple operational changes like the procurement of low-carbon energy. Other minor adjustments such as rearranging the way items are packaged in order to fit more into delivery trucks can go a long way. Taking each of these steps – one by one – is the most impactful way to build a sustainable, scalable strategy moving forward.
There are now plenty of supply chain management tools available that can also help provide better oversight and accountability, albeit through a lens of sustainability. These tools are often integrated with smart devices that can monitor, for example, the temperature of warehouses and turn off lighting when no-one is around.
Working with third-party suppliers always takes a great deal of collaboration, and this is also the case with reducing emissions. Ecommerce partners can leverage their influence and open a dialogue with suppliers to shift toward an emission-friendly strategy. You might even share your reporting tools with suppliers and offer support.
At the very least, the above pointers might inspire ecommerce businesses to start thinking about the supply chain impacts and how to reduce emissions. However, it’s not their mission alone to drive down GHG emission levels.
A dual approach to Scope 3 reporting is necessary in order to encourage the much-needed change. In this dual approach, the government would create policies that demand Scope 3 reporting from businesses, while also providing solutions to facilitate easier Scope 3 reporting in the first place.
Imminent government regulations concerning the monitoring of GHG emissions suggest that the gates are closing in on those who fail to accurately monitor their emissions. If anything, the time is now for ecommerce companies to finally address the full range of their carbon emissions.