Whether you’re a sole trader or you have a team of over 200, all small businesses are part of a supply chain, and many small and medium-sized businesses go through the procurement and tendering process. In a supply chain, you may find you’re asked for information about your carbon footprint.
Both the public sector and private sector are having to report and account for their greenhouse gas emissions to achieve net zero emissions by 2050. The ability to gain new customers and access new supply chains are fundamental to growing a business. With the increasing focus on net zero, it makes sense to embed this mindset within your organisation.
What are supply chain impacts?
Supply chain impacts are classed as “Scope 3” or indirect emissions as per the Greenhouse Gas Protocol. There are 15 categories within the Scope 3 emissions guidance documents, including:
- purchased goods and services
- business travel
- processing of sold products
- use of sold products
- end of life treatment of sold products
For many businesses, Scope 3 emissions will be the largest of all emissions, for example, business travel.
Why does this matter?
As larger businesses begin to make corporate pledges to achieve carbon neutrality by 2050, it is an inevitability that if you are in such as corporate supply chain you will be asked to report on your greenhouse gas emissions at some point in the future. Small businesses can start to leverage the benefits of calculating a carbon footprint year on year to access supply chains where this information is required. For some, this may even be a prerequisite for supplier onboarding.
The introduction of the UK Government’s Procurement Policy Notice (PPN), whilst only applicable to contracts over £5 million per year, could impact small businesses involved in these contracts. The business community can effectively gain a competitive advantage by being able to show a verified carbon reduction plan also known as a carbon management plan to potential suppliers. This will make them more attractive to those larger corporates and for government contracts over the £5 million threshold.
The PPN released in 2021 contains detailed requirements including the bidder’s commitment to reach net zero by 2050 and to show their current emission sources, including Scope 3. Bidders must now set out environmental management measures in effect, including certification schemes or specific carbon reduction measures adopted. A key requirement is an annually updated carbon reduction plan. This needs to be published on the supplier’s website, approved by a director and be able to show a clear commitment to emissions reduction at the highest level.
For the private sector, the application of similar criteria and requirements for the supply chain is in some cases already in effect. To be onboarded as a supplier, and to pre-qualify, a smaller business can gain an advantage by sharing their carbon footprint data and carbon reduction plans.
The Greenhouse Gas Protocols can be easily downloaded for free and current guidance as to emission factors, data collection guidance and how to calculate credible carbon footprints is included. This includes the technical guidance for calculating scope 3 emissions which is jargon-free and accessible to all.
As a small business, you may begin to notice that your customers or suppliers could ask you for your carbon footprint data, and your carbon reduction plans. There will be a genuine reason behind this request, and therefore there is a competitive advantage to having this data and plan to hand. As a business owner, you can make a pledge via the SME Climate Hub to show you are on your journey towards net zero. This is free to use the portal, which has guidance, downloadable content, and access to case studies.
If your business already has a formal management system such as ISO 9001 or ISO 14001, you can incorporate setting objectives and targets around your carbon footprint into these systems, keeping the data in one place and allowing for a formal annual review as part of the management review requirements of these standards. There is also the option to consider more specific frameworks such as PAS2060 Carbon Neutrality, should your organisation have the resources to implement this.