A beginners guide to supply chain sustainability

As businesses work to reduce overall greenhouse gas emissions, many turn to operational emissions, like energy usage or emissions produced by owned assets, as a starting point for sustainability. While the sustainability of owned and indirect energy sources is certainly worth addressing, the bulk of a large corporation’s emissions tends to lie within its supply chain. For businesses working to meet ambitious climate targets, supply chain sustainability is a vital component of a broader decarbonization strategy. 

Research from CDP and Boston Consulting Group found that a company’s supply chain emissions are 26 times higher on average than its operational emissions. Meanwhile, only 15% of companies reporting to CDP have set upstream emission reduction targets, such as those related to capital goods and business travel.

So, for companies that want to accelerate their decarbonization and reach climate goals, digging into supply chain sustainability is key. 

In this guide to supply chain sustainability, we’ll take a closer look at:

• What is supply chain sustainability?
• Top benefits of sustainable supply chain management
• How to improve supply chain sustainability
• Importance of working with a partner for sustainable supply chain management

What is supply chain sustainability?

Supply chain sustainability refers to the emissions impact of all the processes within a company’s upstream and downstream activities, from sourcing to final delivery by a third-party transportation provider. 

Different stakeholders may have different benchmarks for what’s considered a “sustainable” supply chain, but in general, sustainable supply chain management typically focuses on reducing the emissions footprint of a given company’s supply chain.

Some companies might set sustainability goals such as reaching net-zero emissions across an entire value chain, which encompasses scope 1, 2, and 3 emissions, while others may focus exclusively on scope 3 supply chain emissions. Others might not have formal emissions targets but still focus on sustainability, such as by choosing suppliers that have lower energy and water usage than competitors, while also supporting social benefits, e.g., creating employment opportunities in disadvantaged communities.

For businesses with formal climate objectives, such as those set in accordance with the Science Based Target initiative (SBTi), standards bodies provide guidance around supply chain decarbonization. By partnering with suppliers that prioritize climate friendly practices—whether leveraging clean energy in warehouse and transportation operations, implementing biodigesters at animal agriculture sites, or utilizing carbon-neutral concrete in the construction of data centers—businesses can create sustainable supply chains without posing major disruptions to existing operations. 

Scopes of emissions

Supply chain emissions fall under scope 3 emissions, a term that encompasses all indirect emissions within a company’s supply chain. To understand scope 3 emissions, it’s important to first understand how supply chain emissions fit within broader emissions categories. Based on definitions from the Greenhouse Gas Protocol (GHGP), the emissions categories are:

• Scope 1 emissions: These emissions include direct emissions from company-owned or controlled assets or processes, such as emissions from an on-site furnace or process emissions, e.g., on-site heating of limestone for cement production.
• Scope 2 emissions: These emissions reference indirect emissions from the use of purchased electricity, steam, heating, or cooling.
• Scope 3 emissions: Scope 3 emissions are composed of all other indirect emissions across a company’s supply chain. This includes upstream activities like agricultural processes, transportation of goods by third-party logistics providers, and emissions generated by suppliers during the manufacturing process, along with downstream activities like the use of sold products.

Scope 3 emissions often compose the vast majority of an organization’s emissions, with one report finding that over 75% of emissions produced by a given company can be categorized as scope 3.  By partnering with suppliers to strategically reduce scope 3 emissions, including through Supply Chain Reductions (SCRs), businesses can have an outsized impact on their overall emissions footprint. 

Working with a partner like 3Degrees can help you design and implement a supplier engagement program that fits with your unique supply chain and decarbonization objectives. One strategy for supplier engagement is to introduce suppliers to renewable energy solutions, like Renewable Energy Certificates (RECS) or  Power Purchase Agreements (PPAS) to mitigate their scope 2 emissions, thereby lowering your scope 3 emissions. While the purchase of RECs or PPAs is an effective solution for some suppliers, others require more direct value chain interventions. Here too, working with a partner like 3Degrees can help. For example, we can identify opportunities and help execute the contract for a supplier PPA aggregation, where several of your suppliers team up for a PPA that they would otherwise be too small to procure on their own. 

3Degrees also can help your suppliers accelerate renewable energy adoption through our proprietary Supplier REach portal, where they can easily see different types of renewable energy solutions and the costs, specific to their situation. This tool then makes it easy for you to track your suppliers’ progress toward renewable energy adoption.

Beyond renewable energy purchases, you can also improve supply chain sustainability through more direct interventions at specific stages within the value chain. With supply chain reductions (SCRs), sometimes called carbon insetting, you directly invest in emission reduction initiatives within your supply chain. For example, a food and beverage company might invest in SCRs at the farm level, where sustainability initiatives like improved manure management and the use of feed additives that address enteric fermentation can lower these suppliers’ emissions. 

While guidance from organizations like the SBTi is still in progress regarding how these market-based interventions affect scope 3 accounting, these interventions nonetheless represent real-world carbon reduction strategies that bring valuable co-benefits to the people and communities within your value chain. In turn, that could also support benefits like improved supplier relationships for companies that help agricultural partners make these changes.

How to improve supply chain sustainability

Improving supply chain sustainability can take many different shapes, depending on your goals, resources, and the specifics of your business. Typically, though, there’s a mix of actions you can take internally to reduce supply chain emissions and other environmental and social risks, combined with areas where you need to work with your suppliers to make changes that affect your overall supply chain sustainability.

Improving supply chain sustainability through internal action

Some of the top ways to improve supply chain sustainability that you can do on your own include:

• Understanding your scope 3 emissions: To effectively reduce scope 3 emissions, the first critical step is accurate and targeted measurement. For many businesses, this starts with a basic calculation to quickly determine their overall emission profile and identify major hotspots (e.g., purchased goods and services, and transportation). This initial assessment, even when utilizing secondary, industry-average data, provides the essential foundation needed to prioritize action and investment. While striving for granular data across all 15 categories is an aspirational goal, businesses should initially focus their deeper data collection and analysis efforts on these material hotspot categories. Understanding which suppliers, products, and logistics routes are the primary contributors to the carbon footprint allows companies to prioritize areas for intervention, focusing resources where they can achieve the most significant impact on their supply chain emissions with the greatest efficiency.

• Aligning with a specific goal: Reducing scope 3 emissions requires a clear, long-term commitment articulated through an ambitious, science-aligned goal. Setting a target, such as one validated by the SBTi, provides the necessary framework and internal motivation. These goals must be integrated into the company’s core business strategy, demonstrating that sustainability is a key performance indicator, not just a peripheral project. Aligning with a specific goal ensures consistency in decision-making, from procurement to product design, and establishes accountability across all departments, making emissions reduction a shared organizational responsibility.

• Building an action plan: Once emissions are understood and a goal is set, the business needs a detailed, actionable roadmap outlining the path to reduction. This plan must involve strategic interventions tailored to the largest emissions sources. For instance, the plan may include a supplier engagement program focused on decarbonization, investments in low-carbon logistics, or product redesign for material efficiency and circularity. Crucially, the plan should also allocate internal resources, define specific KPIs, and establish a governance structure for regular progress tracking and reporting. An effective action plan translates the high-level goal into measurable, departmental tasks that drive concrete reductions in scope 3 emissions.

Supplier engagement for supply chain sustainability

By partnering directly with suppliers, businesses can transform their supply chains from a source of emissions to a source of climate action. To accelerate supplier action while strengthening key relationships, consider the following approaches:

• Early engagement with suppliers: Reach out to your suppliers to discuss what they’re willing and capable of doing to measure and lower emissions, along with addressing other important issues like water usage and biodiversity preservation (depending on the type of supplier). 

You might find that suppliers are open to making changes but don’t know how, in which case you might coach suppliers to improve climate action. For example, your sustainability team might put together a supplier engagement program that includes hosting informational meetings and 1-on-1 coaching calls with suppliers to address issues like energy efficiency or scopes 1 and 2 emissions reporting. By taking these steps proactively, businesses can ensure that decarbonization becomes a collaborative initiative with suppliers, rather than a top-down mandate.

Working with a partner like 3Degrees can help you design and implement a supplier engagement program that fits with your unique supply chain and decarbonization objectives.

• Supplier renewable energy solutions: Suppliers may also be open to procuring renewable energy to mitigate their scope 2 emissions, thereby lowering your scope 3 emissions, but need help doing so. This can align with supplier engagement, such as coaching suppliers on how to procure PPAs or renewable energy certificates (RECs). But some suppliers need more direct interventions rather than just education.

Here too, working with a partner like 3Degrees can help. For example, we can identify opportunities and help execute the contract for a supplier PPA aggregation, where several of your suppliers team up for a PPA that they would otherwise be too small to procure on their own. 

3Degrees also can help your suppliers accelerate renewable energy adoption through our proprietary Supplier REach portal, where they can easily see different types of renewable energy solutions and the costs, specific to their situation. This tool then makes it easy for you to track your suppliers’ progress toward renewable energy adoption.

• Supply chain reductions (SCRs): You can also improve supply chain sustainability through more direct interventions. With supply chain reductions (SCRs), sometimes called carbon insetting, you directly invest in emission reduction initiatives within your supply chain. 

For example, a food and beverage company might invest in SCRs at the farm level, where sustainability initiatives like improved manure management and the use of feed additives that address enteric fermentation can lower these suppliers’ emissions. 

While guidance from organizations like the SBTi is still in progress regarding how these market-based interventions affect scope 3 accounting, at the very least there’s a real-world impact from addressing these emissions. In turn, that could also support benefits like improved supplier relationships for companies that help agricultural partners make these changes.

Importance of working with a partner for sustainable supply chain management

As these supply chain sustainability examples show, there are many ways to address sustainable supply chain management both on your own and in collaboration with suppliers. 

Given the stakes, such as the strategic and operational risks of poor supply chain management, along with the opportunities to win over customers and strengthen relationships through improved supply chain sustainability, it’s important to work with a partner that can help you maximize your impact.

The right partner can act as a key accelerator of supply chain emissions reductions by implementing strategic decarbonization initiatives, including:

• Designing and implementing a supplier engagement strategy
• Educating suppliers on renewable energy procurement
• Setting up a supplier PPA aggregation that enables multiple smaller suppliers to team up for one combined renewable energy contract
• Providing suppliers with renewable energy procurement technology
• Establishing processes and tools to measure and report your supply chain emissions
• Guiding you through evolving regulatory, legal, and voluntary carbon accounting practices

Ready to start reducing your supply chain emissions? Please contact 3Degrees today to see what steps we can take together.

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