Empowering SMEs to Drive the Decarbonization of Global Supply Chains

September 20, 2022 EcoVadis ‏‏‎

With a company’s supply chain accounting for up to 90% of its carbon footprint, gaining visibility of greenhouse gas (GHG) emissions hotspots and driving collaboration on carbon management among suppliers is essential to decarbonization at scale. However, as EcoVadis’ first-ever Carbon Maturity Report found, achieving this remains a distinct challenge. The report showcases data from the first 15,000 carbon maturity ratings issued by EcoVadis since the launch of the Carbon Action Module in 2021. This rapidly expanding dataset on our network’s carbon maturity reveals that small and medium-sized enterprises (SMEs) – which comprise the bulk of global supply chains – are at a much earlier stage of managing their emissions than their larger counterparts. Constrained by more limited resources, networks and, at times, technical expertise, SMEs will require more support from buyers and business partners to enable them to increase their carbon management capacity and help drive global decarbonization efforts. 

 

Building Transparency and Collaborating for Supply Chain Decarbonization

Enhancing supply chain transparency is a crucial step toward better understanding and benchmarking suppliers’ current carbon management maturity levels. Our data shows that first-time reporters, and SMEs in particular, have less capacity to collect and report high-quality emissions data. Buyers and business partners often struggle to provide the targeted and continuous support that SMEs need to enhance these capabilities. The EcoVadis Carbon Action Module was launched to address this gap by giving companies a deeper understanding of how their suppliers are performing on a range of carbon metrics – from science-based target setting to emission reductions across all scopes. The engagement since launch has been impressive: To date, the EcoVadis network has reported an aggregated 2,479 Gt of GHG emissions, with over 7,500 companies reporting quantitative metrics on carbon. 

 

Data Insights: Supply Chain Partners’ Carbon Management Performance

A higher percentage of large companies have attained an Advanced or Leading carbon maturity level.

  • Among large companies, 10% showcase Advanced or Leading carbon maturity, compared to just 3% of companies overall. 

  • Larger companies tend to have more resources at their disposal and are under greater stakeholder pressure to implement and follow through on their sustainability agenda – this is reflected in their performance data.

A higher percentage of small to medium-sized companies are at an Insufficient level of carbon maturity.

  • By contrast, 44% of companies across all sizes are still in the early stages of developing a carbon management system.

  • The percentage of companies at an Insufficient maturity level was greatest among small companies at 61%, compared to a much lower 19% among large companies.

 

The percentage of small, medium and large companies at each EcoVadis carbon maturity level

 

Target Setting – SMEs Lag Far Behind Large Companies

According to the GHG Protocol, “any robust business strategy requires setting targets for revenues, sales and other core business indicators […]. Likewise, effective GHG management involves setting a GHG target.” While target setting is a crucial early step for companies embarking on their decarbonization journeys, there is a considerable gulf between the percentage of large companies and SMEs in the EcoVadis network that are setting emission reduction targets. As shown in the chart below, roughly 32% of large-sized companies have announced their targets publicly compared to just 7% of medium-sized companies and only 2% of small companies. Publicly announcing targets is a best practice that not only builds transparency but also has the potential to rally stakeholders around decarbonization efforts. The low percentage of SMEs currently disclosing their GHG reduction targets makes it difficult for buyers to effectively map decarbonization pathways in their supply chains. In response, buyers must ramp up their support and capacity-building efforts to help SMEs overcome the obstacles they face when it comes to developing, setting and publicly announcing targets.

Setting reduction targets across all emission scopes is essential if a company wants to demonstrate a clear commitment to decarbonizing its operations and supply chain. While roughly 20% of large companies have Scope 1 and 2 targets in place, only around 5% of medium-sized companies and 1% of small companies have followed suit. SMEs tend to have fewer resources available for establishing a GHG emission inventory and benchmarking their performance. They also more regularly encounter limitations in defining and setting GHG emission targets. To address these gaps, SMEs need access to the right tools to help them establish baselines that they can then use to set targets. 

While there are different types of emission reduction targets – such as incremental targets – investors are increasingly expecting companies to set science-based targets. Across the EcoVadis network, approximately 14% of large companies have either committed to or set such targets under the Science Based Targets initiative. However, this percentage decreased to only 0.5% and 1.9% among small and medium-sized companies respectively, which illustrates the urgent need to make science-based climate tools more accessible to SMEs.

The use of GHG KPIs and setting of emission reduction targets vary widely by company size 

 

Empowering SMEs to Take Ownership of Their Carbon Management

According to the European Commission, the vast majority of SMEs (72%) do not yet have a concrete strategy to reduce their carbon footprint and ultimately become climate neutral or negative – where a company removes more carbon from the atmosphere than it emits. Most SMEs currently lack the expertise and resources they need to enhance their carbon management. The EcoVadis Carbon Action Module responds to this capacity gap by providing the insights, tools and support that many smaller and less mature SMEs urgently need. First and foremost, the EcoVadis Carbon Maturity Rating and Scorecard gives companies an in-depth understanding of the strengths and weaknesses related to their carbon performance. This baseline is the foundation from which companies can drive improvements and buyers can work with their suppliers to develop tailored Corrective Action Plans. 

Various capacity-building tools are available to SMEs on the EcoVadis platform to help them develop an approach for internal GHG data tracking, management and disclosure. The user-friendly Carbon Calculator enables suppliers with limited resources to calculate their GHG footprint – some for the very first time. The Carbon E-learning Hub provides courses on a range of topics to help rated companies build the internal capacity they need to begin moving from climate ambition to action. As collaboration is essential to more effective carbon management, the EcoVadis platform enables suppliers to connect with industry peers to exchange learnings and best practices. 

With the help of the EcoVadis Carbon Action Module, SMEs can develop a carbon management system – or bolster their existing one – and begin to make tangible improvements. Buyers have access to a portfolio dashboard that provides an aggregated view of supplier carbon performance and enables them to filter by region and industry. As more and more SMEs are empowered to take ownership of their carbon management, the potential for deep decarbonization across global supply chains will grow exponentially. Read the Carbon Maturity Report for more insights. 

Get in touch to learn more about how EcoVadis can help your company drive decarbonization efforts throughout your organization and supply chain. 

 

 

About the Author

EcoVadis ‏‏‎

EcoVadis is the world’s most trusted provider of business sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains. Backed by a powerful technology platform and a global team of domain experts, EcoVadis’ easy-to-use and actionable sustainability scorecards provide detailed insight into environmental, social and ethical risks across 200+ purchasing categories and 175+ countries.

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