Scope 3 data and the growth of virtuous chains

In Part 1 of this article, we spoke with Jarrod McAdoo, Director of Procurement at Ivalua, a procurement software company with a handle on value chains and Scope 3 complexities, about why some companies hadn’t yet started collating and reporting their Scope 3 data on their supply chain’s carbon footprint. In Part 2, Jarrod tackled the issue of “involuntary greenwashing” as a result of a Scope 3 data shortfall. And in Part 3, we talked about how smarter procurement could make a real difference in taking companies from a place of not knowing where to start to making genuine, meaningful progress on their sustainability journey with Scope 3 data.

To round out our discussion of Scope 3 data in supply chains, we asked Jarrod whether it was possible that the process of gathering the data could result in greener supply chain circles of virtue – and if so, how important visibility across the chain was in delivering those circles.

JMcA:

Yep. Exactly, that – virtuous circles. And in terms of the visibility, it’s crucial – and there are tools that can help deliver that visibility, and they’re exciting and sexy.

THQ:

Sexy visibility tools. Alllrighty…

JMcA:

Tools that can help you make these sophisticated sourcing decisions where you can evaluate suppliers and have that data to base your decisions on? That is sexy.

THQ:

Totally not judging.

Communication chains.

JMcA:

And now there’s AI. AI plus a lot of data points and you can go “Boom! Here’s my optimization, and all these other things.” That really gets me excited. It’s like back in the days when we first got reverse auctions. As a procurement person, that was really cool to do.

But the reality is that’s just a small portion of the work. If, every time we ran into an issue, we could just go out to the market and find a new supplier that meets our needs, this stuff would be easy. The real challenge is that you can’t just switch suppliers at the drop of a hat. You have developed these relationships, so a bulk of the business starts looking at questions like these through the lens of having these very aged relationships with these very experienced suppliers who know the business and who the business knows.

THQ:

Does that make it difficult to drive those cycles of green virtue?

JMcA:

You might be surprised. Here’s an example. We have a customer in the US who deals with healthcare. And coming out of COVID, they faced shortages of materials, meaning they had backlogs developing. But they didn’t go out and find a new magic source that they didn’t know about before, for getting PPE or other medical devices, they really started going out to their suppliers and just saying, “Alright, how do we solve this together?”

These are the sorts of things that I take out of some of the conversations I get to participate in, and I think they’re crucial. That urge in difficult times is to reach out to existing suppliers, companies with which you have a pre-existing relationship, and ask how to solve problems – to get that feedback from as many places as possible within the circle that already exists.

Healthy forecasts.

In terms of Scope 3 data and greenhouse gases, we’ve seen the same sort of thing happening. Suppliers saying “You know, I could give you better service if I could position product in a warehouse closer to some of your facilities. Because right now, I have a warehouse in this part of the country…” And of course, the customer was like, “Well, that’s great, do it.” The supplier said “I can’t really do that, because I have no idea how much stock I’ll need. I need some assurances. ‘If I build it, will you come?’”

That discussion got to the point where they could start using some of our forecasting tools, so the customer was able to confidently say “This is my forecast of what I intend to buy over the next 18 months.” It gave the supplier that assurance to invest in the closer facility, to help on resilience. But it also helps on sustainability, because now the supplier can do big shipments to this facility to store, which will cut down their carbon footprint as well – and in terms of Scope 3, that works both ways round.

That kind of forecasting tool helps inform decisions within the supply chain that exists, and that’s been built over time, to help improve everyone’s green credentials. Being able to make different, better decisions on that final mile is crucial, because it means they can make the greener decision without paying through the nose and going out of business.

Cumulative changes.

That’s the power of feedback between suppliers and customers. It can be cumulative, too. We don’t have electric semi-trucks all over the States yet, to be able to ship items in from everywhere, but I can make different decisions if I’m going the final mile from the warehouse to your facility.

We’re finding those sorts of conversations all over the place. Customers telling suppliers “Hey, you’re not using recyclable packaging, you’re using these pallets that we ended up throwing away, when there are recyclable ones, won’t cost you any more…”

Being able to share your business profile with your suppliers really helps them – and you – make smarter decisions, not only for what’s being produced, but how you get it from place to place.

We really started seeing this happening during COVID, because customers really needed to start taking a look deeper into their supply chains for risk assessment purposes. Because it wasn’t just the immediate supplier you bought things from that you needed to consider, it was the whole chain, ultimately back to the plastic makers in China, or the chipmakers in Taiwan and so on.

That kind of long-consequence thinking from the age of Covid is now beginning to create those virtuous circles – or virtuous chains, at least – when it comes to Scope 3 data and improvements to processes that can drive sustainability.

THQ:

You know what? You’re right – that is pretty sexy.