French Frontiers: Taking the lead in decarbonizing value chains

March 28, 2024

Executive summary: On February 5th, 2024, Schneider Electric’s Sustainability Business and EcoAct held an event in the heart of Paris, bringing together leaders from Michelin, Leroy Merlin, and Decathlon to exchange ideas and share feedback on Scope 3 decarbonization practices and supplier engagement. The following are five takeaways from the event, which sparked debate and inspired innovative approaches to drive action.

1. Upstream Scope 3 emissions are, on average, 11.4 times higher than operational emissions.
Scope 3 plays a crucial role in a company’s ability to achieve their climate goals. Although the share of emissions from this Scope can vary depending on a company's sector of activity, they represent approximately 75% of the total carbon footprint – on average, 11.4 times higher than operational emissions. The scale of Scope 3 makes value chain decarbonization a priority for companies —and with regulations, voluntary standards, and reputational pressure to lower emissions, companies are working toward net-zero action with suppliers to address Scope 3 emissions.

When you consider the upstream part of the value chain, Scope 3 emissions mainly come from products and services purchased by the company from its suppliers. Again, supplier engagement is a critical lever to effectively decarbonize Scope 3.

The Zero Carbon Project

The Zero Carbon Project supports the global transition towards a low-carbon future by collaborating with Schneider Electric's 1000 major suppliers, responsible for 65% of the group's CO2 emissions. This project, launched in April 2021, is the first step in the strategy to reduce greenhouse gas emissions from Schneider Electric's suppliers. By the end of 2023, the project has achieved a remarkable performance of 27% reduction in operational emissions and has laid the foundation to accelerate decarbonization in the years to come.

Implementing a supplier engagement program, such as the Zero Carbon Project, requires several steps, including reflection phases to determine the right approach. There is no one-size-fits-all method; there are as many possible approaches as there are companies. Supplier programs will depend on specificities associated with a company’s business, including its role within the value chain, its suppliers' sectors of activity, stakeholder maturity, available resources, etc.

Regardless of the approach taken, it is important to analyze suppliers and map them by maturity levels and strategic importance. This step helps build an engagement strategy that can be tailored to various supplier profiles. A supplier engagement program can take different forms: skills development support, sharing and co-constructing forward-looking visions to act together, or implementing incentives such as internal carbon prices.

Supplier Mapping Illustration

2. Measurement is a crucial step – but not the end goal.
Measuring Scope 3 emissions is not an end in itself; it primarily serves as a basis for action. It is an iterative process within a continuous improvement approach. It is important to not delay emission reductions due to a lack of precision. Instead, begin with measuring emission reductions with available data and methodologies, ensuring compliance with current standards, even if not exhaustive or precise.

"A large part of the suppliers were already responding to the CDP questionnaire, so we started there to collect company-level data. We are currently collecting CO2 emissions per ton of product purchased."

- Hélène Vermont, Sustainable Procurement Manager at Michelin

The use of digital and automated tools allows companies to set carbon reduction targets, accurately measure emissions across the value chain, and effectively report on carbon reduction metrics. According to a “Supply Chain Decarbonization” research study conducted by Schneider Electric’s Sustainability Business in 2023, more than 80% of survey respondents said digitization is key to measuring carbon footprint, however, less than 6% are currently using digital tools.

3. Defining an appropriate trajectory is a key success factor.
It is essential to map a clear trajectory through modeling which integrates economic projections and associated carbon emissions at the product and/or service level. A good understanding of a company’s ecosystem is also crucial to distinguish direct decarbonation levers that the company controls from exogenous developments in its environment. This includes understanding your suppliers' sectors of activity and anticipating future evolution dynamics, such as sector decarbonization.

"At Leroy Merlin, we have very heterogeneous products ranging from heavy industry, like cement, to decorative products like lighting. We have chosen a prism focusing on the social and environmental impact of the product."

- Alice Fruchart, Product CSR Manager, Leroy Merlin

4. Implementing a reduction strategy must be tailored to the company.
Decarbonation levers should be prioritized based on their impact and the resources required for deployment. Financing requirements for associated economic opportunities, operational constraints, and necessary resources must be identified. An essential step is co-constructing a climate governance that is accepted by teams and stakeholders. The ability to rally suppliers upstream, including those with whom you have indirect relationships, is a key success factor. It is important to sequence this step by starting with suppliers who have a direct relationship with the company.

"Our strength lies in having employees who work with suppliers every day in the field. We have relied on this advantage to enhance their skills."

- Tristan Louis, Sustainability in Production Leader at Decathlon

5. The evolution of the buyer's role requires a cultural change within the company.
A major cultural transformation must take place within the company – led by top management – to train buyers and help build a shared pathway to cooperation and supply chain management, ensuring supply resilience and securing access to resources.

Furthermore, upstream Scope 3 decarbonization measures must involve teams who lead the company’s purchasing function. These individuals need to be trained on topics related to their value chain's environmental impact, so they have a clear understanding of selection criteria for supplies to integrate new socio-environmental criteria into procurement choices.

Going beyond carbon and addressing other issues

Supplier engagement should not be limited to decarbonization issues alone. Value chains have a significant impact on reaching planetary boundaries; they can particularly be destructive to biodiversity. All environmental impacts and risks must be considered to reduce impacts to their unavoidable thresholds, and to intervene within the value chain to regenerate ecosystems on which a company’s activities depend.

Source ref: https://www.stockholmresilience.org/research/planetary-boundaries.html

Addressing Scope 3 decarbonization measures and engaging suppliers is a crucial topic in 2024 and beyond. This event marks the first in a series of meetings to advance sustainable development and energy management within companies. Schneider Electric’s Sustainability Business and EcoAct are now one team, combining expertise to offer new services to clients and providing holistic decarbonization solutions with broader geographical coverage to meet evolving sustainability needs.

Schneider Electric's Sustainability Business provides integrated solutions for companies of all sizes to achieve sustainability and energy efficiency goals. They focus on reducing carbon footprint, optimizing energy consumption, and enhancing environmental performance through innovative technologies and expert advice. The company helps clients transform their operations into sustainable business models, emphasizing circular economy, renewable energy management, decarbonization strategy, regulatory compliance, and maximizing returns on investment.

Learn how to build, act and accelerate an end-to-end sustainability journey with your value chain partners. Download this research report for a full overview of Scope 3 decarbonization.

Definitions:

Scope 3 emissions: these emissions come from sources owned or controlled by other entities in the value chain (for example, material suppliers, third-party logistics service providers, waste management service providers, travel service providers, tenants, waste management suppliers, travel suppliers, tenants and lessors, franchisees, retailers, employees, and clients).

Upstream Scope 3 emissions: Upstream emissions are indirect greenhouse gas emissions related to goods and services purchased or acquired.

Contributors:

Clément Chevalier, Sustainable Transformation Senior Consultant, EcoAct
Julie Cousin, Energy Transition Manager EcoAct
Elie El Chemaly, Sustainability Consultancy Manager Schneider Electric Sustainability
Hamza Hennani, Sustainability consultancy, Manager Schneider Electric Sustainability
Virginie Peccoud, Sustainability analyst, Schneider Electric Sustainability
Aurelie Soulier, Marketing and Communication Officer, Ecoact