From data fatigue to decarbonization: Charting the course for sustainable supply chains

This quarter I’ve had the opportunity to interact with hundreds of business leaders who are passionate about reducing carbon emissions in the value chain for their organizations. New and upcoming disclosure requirements affecting, for example, US public companies, larger California businesses, larger Australian businesses, and SGX listed entities in Singapore are helping to bring focus to one of the greatest challenges of our time. Regardless of how the requirements will be implemented, many more supply chain and sustainability leaders now have a compelling event for transformation programs in their organizations. The business case for these transformation programs can also be informed by, for example, the experience of progressive organizations who have already set science based targets and who track the number of emissions data requests from their trading partners. The unintended consequence of all these requests and questionnaires is supplier fatigue…I’ll share an idea for doing better later in this blog. It’s very clear from interacting with other attendees at the recent GreenBiz 24 event that many business leaders don’t quite know how or where to get started with decarbonization. For Avarni and our professional services business partners, this is both an opportunity and a challenge. We are working together to support customers at different levels of maturity.

I’m really encouraged by the progress that our customers are making and the feedback we’ve been given about our platform. One of our new users had previously been calculating emissions for a couple of years, using labor intensive methods and a broad brush approach to emissions factors. Avarni has enabled them to improve accuracy and precision. Specifically, our AI-powered platform has matched hundreds of emissions factors to thousands of business activities, and has generated results with clear evidence of the procedure used. The more precise approach means this organization's emissions are ~15% lower than they had previously calculated. To be clear – the activity didn’t change – but a more accurate assessment of the priorities is now possible. Second, this organization has made the bold step to measure and reduce Scope 3 emissions associated with their suppliers, by directly engaging with their suppliers and using their data. The shift from proxy data enables a more nuanced approach to suppliers than were previously misclassified, and better directed efforts for decarbonization.

Avarni recognizes that, in our role as an enabling technology, our platform needs to calculate and record emissions data that can be trusted, and made available to support confident decision making around a range of ESG measures. We’ve noticed that ESG Controllers, with similar responsibilities to Financial Controllers, are being appointed in progressive organizations. A professional services firm has used Avarni to verify hundreds of thousands of emissions calculations in minutes rather than weeks, which leaves more time for analysis and abatement strategies for their clients.

We recognize that supply chain professionals want to refine procurement strategies based on the progress their business partners are making on decarbonization. One organization using Avarni has implemented a 15% weighting factor related to carbon emissions when evaluating bids from prospective suppliers. But incentives only go so far – the decarbonization journey for many business relationships is a massive challenge. Another user Avarni in the hospitality industry has a multi million dollar relationship with a supplier of edible proteins. This part of the supply chain helps to serve thousands of meals every day. Can any business afford to cut out a critical supplier because, for example, that company can’t disclose their carbon emissions in near real-time? Industries including pharmaceuticals and electronics have concentrations of their suppliers of critical materials. A decision made with great intentions around decarbonization, that might disrupt supply, could have far reaching consequences. Effective supplier mobilization requires careful alignment of internal and external stakeholders, assessment of risks and opportunities, and some courage. Technology platforms have a role to play.

I’m really curious about the future state of systems that will be used to make these difficult decisions. Perhaps there will be a convergence of the disparate platforms that are currently used for planning, sourcing, buying, contracts, supplier performance management, carbon accounting, supplier mobilization and disclosure. Earlier I shared an observation that many trading partners are suffering from data request fatigue. We should only expect the demand for data, disclosure and outcomes on decarbonization will increase. So, technology providers like Avarni have an obligation to innovate for the benefit of trading partners in a network. We are thinking deeply about data networks, and how to enable trading partners to calculate emissions once, easily analyze data from trustworthy sources, seek assurance, and share in a secure fashion as often as necessary.

_{Cover image:  Phoenix Arizona, where GreenBiz 24 took place in February – Source}