Incentivizing supply chain decarbonization using procurement criteria

To reach net zero, Scope 3 supply chain emissions must be addressed by businesses globally. Decarbonization within the supply chain plays a critical role in realizing net-zero ambitions, and multinationals are in a unique position to influence supplier behaviors, operations and investments through incentives.

The incentivizing supply chain decarbonization working group hosted by WBCSD in collaboration with PwC considers different decarbonization levers that can be applied to supply chains. These levers range from non-financial to financial, penalty to reward based, and can be grouped into four areas:

1. Leveraging procurement
2. Building capability
3. Rewarding progress
4. Enforcing performance 

In a recent session our working group considered how to leverage procurement criteria and embed carbon as a decision criterion for supplier selection. 

In the pre-tender phase, organizations can introduce core selection criteria that assess suppliers against their commitment to reducing carbon emissions. They can then weight supplier selection towards those with clear plans of action or demonstrably lower emissions, in comparison to competitors. This is a cost-effective way to embed decarbonization incentivization into the supply chain, as it integrates with existing procurement processes and can be formalized over the lifetime of a contract.

See this issue for more guidance on where to start, what to consider, how to approach implementation and when to leverage procurement processes.

Contacts:

Hannah Loake (hannah.loake@wbcsd.org), Climate Action Senior Manager, WBCSD
Patrick Marter (patrick.marter@pwc.com), Procurement Partner, PwC
Barry Middleton (barry.p.middleton@pwc.com), Operations Transformation Partner, PwC
Dan Dowling (daniel.s.dowling@pwc.com), Sustainability Partner, PwC