Sustainability is becoming ever more important to consumers, perhaps nowhere more so than in the data center market. A recent 451 Research survey revealed that 97% of customers of colocation providers are asking for sustainability commitments. This changing customer dynamic is forcing data center operators and colocation providers to reconsider how they manage their supply chains to reduce overall emissions. Engaging with your suppliers to identify and address their carbon footprint will help reduce their greenhouse gas (GHG) emissions alongside other ESG issues.
However, before you can begin tackling the emissions in your supply chain, first you must understand them. The GHG Protocol establishes comprehensive global standardized frameworks to measure and manage emissions from private and public sector operations and value chains. These frameworks also provide guidance on quantifying mitigation actions.
The types of greenhouse gas emissions
These emissions fall into three categories in Scope 1, 2, and 3. Scope 1 refers to direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. Finally, Scope 3 includes all other indirect emissions in a company’s value chain, from suppliers upstream, and the use of products downstream. According to The United Nations Global Compact, scope 3 emissions account for more than 70% of the carbon footprint of many businesses.
For many companies, a majority of their carbon footprint rests in the supply chain. CDP reports that, based on 2020 data from more than 8,000 companies, supply chain emissions are more than 11 times higher on average than operational emissions. For FY 2021, Microsoft reported that Scope 3 accounted for over 73% of their total corporate emissions, and other tech giants reported similar numbers.
Transitioning to a sustainable supply chain is not an easy journey, but it is something that Schneider Electric has experienced, having made that trip successfully ourselves. We have been recognized as a leader in this space, being voted the Most Sustainable Corporation in the World in 2021 by Corporate Knights and the Best Global Sustainable Supply Chain Organization at the Global Sustainable Supply Chain Summit 2021.
We have reduced our supply chain’s carbon emissions by more than 100,000 tons over the past three years. By the end of 2020, 80% of Schneider’s operations were powered by renewables, enabled by Schneider’s technologies. We are currently working with our supply chain department to reach our goal of net-zero carbon emissions (including suppliers) by 2050.
A roadmap to a sustainable supply chain
There are enough benefits — economic, social, and environmental — to convince any forward-thinking company to pursue sustainable supply chain management. But many companies are still pondering how to start their journey. Here are five steps towards sustainability to guide your efforts.
Step 1: Identify supply chain sustainability metrics
Leaders in your organization for sustainability, procurement, and supply chain management should convene to engage in a formal planning process around supply chain sustainability. The first step is to select the sustainability metrics that will undergird the plan. The specific metrics you choose to track should reflect your organization’s priorities for supply chain sustainability. A wide array of sustainability metrics apply to manufacturing and shipping the components of a data center and data center construction. As we have discussed, metrics related to embodied carbon are an important pillar of supply chain sustainability. Still, you can also consider metrics associated with the handling of waste, water conservation, or even labor standards in manufacturing.
Step 2: Establish benchmarks for current performance
Once you have decided what metrics you wish to track, you will need to research and analyze your current supply chain to establish baselines for your existing operations. To measure reductions in embodied carbon, energy use, or any other metric, you need to know your starting point. This process may require expert consultants who can create accurate estimates for these figures based on your business, or perhaps direct engagement with suppliers.
Step 3: Set goals and timelines
With a baseline established, you can now set specific goals related to each metric you selected in Step 1. Each goal should be specific and time-bound. For instance, you could commit to reducing the Scope 3 emissions associated with your upstream supply chain by 50% by 2030. The ambition of your goals should reflect the urgency of the problem you are trying to solve, but should also be achievable. This is the time to work through the practical strategies you intend to employ to reach each goal.
Step 4: Document supply chain sustainability policy
Once complete, your metrics, goals, and strategies should be documented in a Supply Chain Sustainability policy. This policy should make the obligations that you place on each of your suppliers clear. Figure out what actions each of your suppliers need to take, or what targets they need to hit, to support your overall goals.
Step 5: Engage suppliers
The overall goal of this process is to bring your suppliers along and encourage them to green their operations. It’s more cost-effective to invest in helping each supplier comply with the requirements you set out in Step 4 than to seek alternative suppliers. Depending on the needs of your suppliers, you can help them benchmark their performance on your metrics, train them on strategies and tactics for improvement, and give them guidance on tracking and reporting on their numbers going forward.
Next steps in engaging suppliers to reduce emissions
Further explore strategies to partner with suppliers in Chapter 5 of the Sustainability Challenge eguide. This new eguide offers practical insights to help data center operators and colocation providers engage with suppliers and vendors on sustainability efforts. It will take a closer look at tactical steps to curb emissions with a wider lens on the supply chain. We encourage you to use this resource to refine your own sustainability strategy.