Domino effect: Businesses urged to promote renewables into supply chains
Corporates that leverage their purchasing power for renewable energy could create a "domino effect" that improves the energy efficiency of supply chains to create more clean generation capacity, a new report from SmartestEnergy has found.
Research from the Renewable Energy in the Supply Chain report, released on Wednesday (1 November), noted that companies should be calling on suppliers to disclose energy and climate information, to better understand how they could drive efficiencies down the supply chain.
SmartestEnergy’s chief commercial officer David Cockshott said: “Procurement of renewable energy by corporates is already having a tangible impact on the increasing proportion of low-carbon generation in the energy mix. By encouraging their suppliers to also choose renewables they can rapidly multiply their own contribution to climate change.”
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The number of brands pursuing the transition to 100% renewable energy has been driven by the RE100 initiative, which currently consists of 111 members. At a global level, renewables account for nearly 17% of electricity capacity, a near 10% increase over the last decade.
Analysis from Carbon Clear suggests that the private sector could play a huge role in driving renewables growth. Nearly two thirds of FTSE 100 companies are buying or generating renewable energy. This pool of companies has around 2,800 major suppliers, the SmartestEnergy report notes, and are likely to have “many thousands more smaller suppliers”.
If these major corporations could successfully encourage supply chains to switch to renewables, the report suggests that it could ignite a “domino effect” that improved data disclosure, stimulated demand for renewables and created a “virtuous low-carbon circle”.
But as the Carbon Trust’s senior consultant Guy Rickard notes, this should be driven by top-down engagement from corporates by demonstrating leadership.
“For most large companies, engaging with the supply chain is the single biggest opportunity they will have to take action on climate change,” Rickard said. “One of the best ways to have an impact is through supporting and incentivising suppliers to take action on their own emissions, for example through the purchase of renewable electricity.”
'Beginning of something big'
Analysis from CDP found that 1,021 out of 2,418 reporting companies are purchasing renewable energy. The more sophisticated companies are also including scope 3 emissions in their disclosures, which cover indirect impacts upstream and downstream of an organisation, including supply chains.
CDP has its own supply chain programme, established in 2008, which partners with more than 100 purchasing organisations to engage with 9,700 suppliers globally. Research from the programme found that the uptake in renewables in supply chains is “far from sufficient”, but that encouraging suppliers to switch could have a direct impact on corporate scope 2 emissions.
Apple has tripled the number of supplier sites listed in its energy efficiency programme aimed at reducing onsite emissions, for example, and its suppliers will procure and generate more than 4GW of new clean power worldwide by 2020.
The report suggests striking the right balance when approaching suppliers. The adoption of renewables shouldn’t replace existing efficiency efforts, or take precedent over new energy projects they are working on.
CDP’s head of supply chain Dexter Galvin commented: “A small but growing number of leading private and public-sector buyers are beginning to drive supply chain resilience by pushing key suppliers towards renewable energy. This feels like the beginning of something big.
“The increased adoption of renewables within global supply chain networks is key to a successful transition to a low-carbon economy, and will be a huge driver in market growth for the sector.”
Options to drive renewables into supply chains include recommending an energy company that can offer verified renewable products. Predicted energy price increases and carbon taxes could also be cited as financial incentives for suppliers to reduce emissions and energy consumption.
A step further would be to establish a buying group, enabling key suppliers to join a portfolio to procure renewable energy. The SmartestEnergy report features insight from a roundtable hosted by the independent energy supplier and edie.
The roundtable featured discussions from 14 sustainability and procurement professionals from companies including, BT, PepsiCo and GlaxoSmithKline. The delegates discussed “carrot and stick” methods to promoting supply chain efficiency, but also how a hypothetical buyers club could work. An ideal scenario would see the formation of a pan-industry group of corporates that purchase renewable electricity to allocate/sell back to their supply chains.