Digitalization Helping Supply Chains Cut Scope 3 Emissions

Digitalization of supply chains is the use of digital tools to improve the flow and quality of goods and services. It can also help reduce the environmental impact of business activities, especially the indirect emissions that happen outside the company’s control.[1]

These technologies connect, monitor, and manage the various actors and activities involved in producing and delivering goods and services. They enable greater visibility, transparency, efficiency, and collaboration across the supply chain, as well as improved decision-making and performance. But digitalization of supply chains isn’t only beneficial for business competitiveness and customer satisfaction. It’s importance also lies in its potential to address one of the biggest challenges facing the world today: climate change.[2]

Let’s explore how digitalization of supply chains can help tackle Scope 3 emissions, which are indirect emissions that occur upstream and downstream of a company’s operations. Scope 3 emissions account for the majority of most companies’ carbon footprint, but they are also the most difficult to measure and manage. Data sharing through digitalization holds enormous promise for addressing these emissions as well as driving circular economy principles and practices. As such, it has incredible implications for the future of supply chain management in a low-carbon economy.

Digitalization in Supply Chains — Green Check Mark on Global Map for Scope 3 Emissions Reduction

Digitalization in Supply Chains — A Green Light for Cutting Scope 3 Emissions

Data Sharing for Scope 3 Emissions: Benefits and Challenges

One of the key aspects of digitalization of supply chains is data sharing, which refers to the exchange of information among different parties along the supply chain. Data sharing can provide valuable insights into the environmental impact of each stage of the product life cycle, from extraction to disposal. This can help companies identify and reduce their Scope 3 emissions, as well as communicate their sustainability efforts to their stakeholders.[3]

Data sharing for Scope 3 emissions can offer several benefits, such as:[4]

• Improved accuracy and reliability: Data sharing can enable companies to access primary data from their suppliers and customers, rather than relying on industry averages or estimations. This can improve the accuracy and reliability of their Scope 3 emissions reporting.
• Enhanced innovation and collaboration: It drives innovation and collaboration among supply chain partners, as they can learn from each other’s best practices and co-create solutions for reducing emissions.
• Increased competitiveness and reputation: It enhances a company’s reputation in the market, as it demonstrates its commitment to transparency.
• Reduced costs and risks: Data sharing can help companies optimize their operations and reduce their costs by identifying inefficiencies and waste in their supply chain. This means they can better mitigate risks associated with regulatory compliance, stakeholder pressure, and climate change impacts.

However, data sharing for Scope 3 emissions is not without challenges:[5]

• Legal and regulatory barriers: It may encounter legal and regulatory barriers that limit or outright prevent the access and use of data across different jurisdictions. China, for example, has incredibly strict data protection laws on the disclosure or transfer of personal or ‘sensitive’ data without authorization (which nowadays, is rarely if ever given).
• Lack of interoperability: Data sharing may face technical difficulties due to the lack of interoperability among different data formats, standards, systems, and platforms. In other words, data may be incompatible or inconsistent across different databases.
• Data privacy concerns: It may raise data privacy concerns among supply chain partners who may be reluctant to share their data due to fear of losing their competitive advantage or exposing their confidential information. In other words, such data may reveal trade secrets or business strategies.

To overcome these challenges, data sharing for Scope 3 emissions requires collaboration and partnership among multiple players in the value chain, never an easy task. It’ll also require the development and adoption of common frameworks, protocols, tools, and incentives that facilitate data exchange and ensure data quality, security, and integrity. In other words, data sharing for Scope 3 emissions requires a shift from a linear and siloed approach to a circular and integrated approach to supply chain management.

A Tablet and Newspapers Depicting Global Logistics Efficiency

Digitalization in Supply Chains — A Comparative View of Traditional and Modernized Warehousing for Scope 3 Emissions Reduction

Circular Economy Principles and Practices: A New Paradigm for Supply Chain Management

A circular economy is a system that aims to eliminate waste and pollution, keep products and materials in use, and regenerate natural systems. It’s based on three principles: design out waste and pollution, keep products and materials in use, and regenerate natural systems.[6]

Adopting this system offers a new paradigm for supply chain management, as it challenges the traditional linear model of “take-make-waste” and promotes a more sustainable and resilient way of producing and consuming goods and services. By applying circular economy principles and practices, supply chains can potentially make large reductions to their Scope 3 emissions.[7]

Some of the circular economy principles and practices that can help supply chains tackle Scope 3 emissions include:[8]

• Eco-design: the process of designing products and services that minimize their environmental impact throughout their life cycle, from raw materials to end-of-life. Eco-design can help supply chains reduce their Scope 3 emissions by using renewable or recycled materials, optimizing resource efficiency, extending product lifespan, enabling reuse or repair, and facilitating recycling or composting.
• Reverse logistics: the process of managing the flow of products and materials from their point of consumption to their point of origin for reuse, repair, remanufacturing, or recycling. Reverse logistics can enable recovery of value from waste streams, reducing landfilling or incineration, and creating closed-loop systems.
• Digital platforms: online or cloud-based applications that enable the exchange of information, goods, or services among different parties. Digital platforms can thus enhance visibility, transparency, efficiency, and collaboration across the supply chain. It is also facilitating the development of new business models such as product-as-a-service, sharing economy, or peer-to-peer.

Digital Connections in Supply Chains Reducing Industrial Emissions

Digitalization and Sustainable Supply Chain Emissions Reduction

How Some Companies Are Using Digitalization of Supply Chains to Reduce Scope 3 Emissions

To illustrate how digitalization of supply chains can help tackle scope 3 emissions, here are some examples of how some companies are using this approach:[9]

• Unilever aims to halve its environmental impact by 2030 and is using digital technologies and platforms to measure and manage its Scope 3 emissions across its value chain, from sourcing to distribution. They use satellite imagery and geolocation data to monitor deforestation and land use change in its palm oil supply chain. Unilever also uses blockchain technology to trace the origin and quality of its tea ingredients. They’re also using digital tools to engage and educate its consumers on how to reduce their environmental footprint, such as the Clean Future Calculator app that helps users calculate the carbon emissions of their laundry habits.
• Maersk seeks to achieve net-zero emissions by 2050. It’s also using digital technologies and platforms to optimize its operations and reduce its Scope 3 emissions across its transport network, from ports to vessels. Artificial intelligence and machine learning is being heavily leveraged to plan and execute its routes, taking into account factors such as weather, fuel consumption, and customer demand. Maersk also uses ‘Internet of Things’ (IoT) devices and sensors to monitor and control the temperature, humidity, and location of its refrigerated containers. As such, they’re better able to collaborate and communicate with their customers on how to improve their sustainability performance. Their ‘Emissions Dashboard’, for example, provides real-time data on the carbon footprint of their shipments.
• HP is hoping to achieve net-zero emissions by 2040. HP uses 3D printing technology to create customized and on-demand products that reduce material waste, transportation emissions, and inventory costs. It’s also using cloud computing and software solutions to enable remote work and learning, reducing energy consumption as well as travel emissions. They’ve proven adept at empowering and enabling their customers and suppliers to adopt circular economy practices, such as the HP Planet Partners program that offers free recycling of HP products.

These examples show how digitalization of supply chains are enabling sustainability in different industries, by providing data-driven insights, enabling circular economy principles, fostering innovation and collaboration, and creating value for stakeholders.

Digitalization in Supply Chains — Cutting Scope 3 Emissions Through Global Connectivity Visualized

Digital Technologies Transforming Global Supply Chain Sustainability

Digitalization of Supply Chains: A Key Enabler for Scope 3 Emissions Reduction

In conclusion, supply chain digitalization is becoming a key enabler for tackling Scope 3 emissions, which are indirect emissions that occur upstream and downstream of a company’s operations. By using digital technologies and platforms, supply chains can gain greater visibility, transparency, efficiency, and collaboration across their value chain, as well as improve their decision-making and performance. Moreover, by applying circular economy principles and practices, supply chains can reduce their environmental impact, create value for their stakeholders, and contribute to global sustainability goals.

There are a number of resources that you engage on to explore how digitalization can help reduce Scope 3 emissions:

• The Science Based Targets Initiative. This is an initiative that helps companies set ambitious and science-based targets for reducing their greenhouse gas emissions in line with the Paris Agreement. It’s a great resource to discover more about the importance of Scope 3 emissions, how to measure and report them, and how to align them with your business strategy.[10]
• The World Economic Forum. An organization that engages leaders from various sectors to shape global agendas on key issues, including sustainability. You can learn about the latest trends and developments in digitalization of supply chains, how they affect different industries and regions, and what are the opportunities and challenges for sustainability.[11]
• The Ellen MacArthur Foundation. They promote the transition to a circular economy. Full of resources and insights, anyone can learn about the principles and practices of a circular economy, how they apply to different sectors and contexts, and what are the benefits and impacts for sustainability.[12]

Digital Technologies Greening the Supply Chain Through Scope 3 Emission Reductions

Green Circuit Board and Leaf Symbolizing Scope 3 Emissions Reduction

Sources

1. World Economic Forum | How the digitalization of the supply chain will help us achieve the SDGs
2. ScienceDirect | Digitalization for sustainability: A systematic literature review and framework development
3. ScienceDirect | Data sharing for sustainability: A review of data sharing initiatives in supply chains
4. ScienceDirect | Digitalization for sustainability: A systematic literature review and framework development
5. ScienceDirect | Data sharing for sustainability: A review of data sharing initiatives in supply chains
6. Ellen MacArthur Foundation | What is a circular economy?
7. Ellen MacArthur Foundation | A New Dynamic: Effective Solutions in a Circular Economy
8. Ellen MacArthur Foundation | A New Dynamic Effective Solutions in a Circular Economy
9. World Economic Forum | How the digitalization of the supply chain will help us achieve the SDGs
10. The Science Based Targets Initiative | Home
11. World Economic Forum | Shaping the Future of Advanced Manufacturing and Production
12. Ellen MacArthur Foundation | Home

Digitalization Helping Supply Chains Cut Scope 3 Emissions → Implementation → Corporate…