With many pressures on business finances, there’s a natural temptation for business leaders to defer expenditures on making their businesses more sustainable. As noted in previous articles, however, there are strong commercial benefits, not least of all being better placed to win tenders and to simplify supply chain questionnaires. There are also factors such as having to complete SECR reports or to meet the government procurement requirements of PPN 06/21.
The most common starting point is to measure your Greenhouse Gas (GHG) emissions, often referred to as establishing your carbon footprint. It’s not easy, and there’s much misinformation being peddled, even by some major accountancy firms. The fact is, there are fifteen categories of scope 3 emissions, that’s those outside of your direct control, and mostly within your supply chain. Examples include the emissions due to your teleworkers, or the energy used to create the product you are selling.
Armed with the data, you’ll be steered towards purchasing carbon offsets; and this too is an area rife with charlatans. Overall, this approach neither benefits society nor your business. At the least, your misstatements of fact open the door to regulatory actions, and not is reputational damage far behind. Either way, such approaches to carbon neutrality carry a cost, and one which is increasingly expensive.
There is a better approach, and it’s changing the face of delivering corporate sustainability, no matter whether yours is a mid-sized SME, a global plc, or a public body such as a university. At its heart is the proven notion that sustainability – going green – can be self-funding. And it starts with those scope 3 emissions: we’re going to look at your supply chain!
In broad terms, 80 percent of your emissions are to be found in your supply chain, and across the spectrum of your suppliers, 80 percent of those emissions will be identified as stemming from your top twenty percent of your suppliers. Conquer this, and discussions about purchasing carbon offsets can be ended!
Combining a purchase goods and services (PG&S) audit with carbon accounting provides immediate data for a quality carbon report, one which covers at least eight of the scope 3 criteria. Your report will now exceed the most stringent criteria and you’re instantly more competitive, and you’ve also gained some cool marketing news.
However, and this is the key, this same PG&S audit not only enables consultant analysts to identify easy-to-achieve carbon reduction measures, but it reveals the inefficiencies of your procurement strategy.
Assume a turnover of £50m, and operational expenditures of £5m. Now consider than an average of 8.3% may be saved through procurement optimisation and your business can add £415K to its bottom line for the year without the cost of sales.
Clients taking our PG&S approach to sustainability are reaping the rewards, and simultaneously freeing up the funding to press forward with clean energy initiatives, such as solar and air source heat pumps – altogether a more responsible approach to carbon reduction than carbon offsets.
If you would like a consultation, please get in touch.
Humperdinck lectures on ESG, Risk, Supply Chain, and Net Zero and both Kingston University and UCL (University College, London). He leads the daily operations at ESG Pro and specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals internationally.
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