How to Embed Carbon into Procurement Decisions

Incorporating carbon considerations into procurement is becoming increasingly important. Simply asking suppliers to “do the right thing” only goes so far…

Here are 3 things to consider to effectively embed carbon into procurement:

1. Request Carbon Footprints: Ask your suppliers for the carbon footprint of the products they’re supplying. This ensures transparency and accountability.

2. Incorporate Carbon Pricing: When evaluating suppliers in a tender process, incorporate a carbon price. I listened to an interesting discussion with Oliver Hurrey, Chris Low, and Olaf Stange last week talking about this. In summary, they highlighted that a carbon price should be added to the ‘supplier price’ (see formula in the attached image) to get the 'total cost' used for procurement decisions.

This will require the carbon footprint of the product being offered and a carbon price per tonne (e.g. ETS carbon price).

Suppliers with a high carbon footprint and carbon price will lower their ‘supplier price’ so that their total cost is competitive. Furthermore, this will incentivize these suppliers to take proactive steps in decarbonizing their operations so that they can increase their ‘supplier price’ in future.

3. Leverage Carbon Pricing: By putting a price on carbon, you accelerate the generation of Product Carbon Footprints (PCF) and Life Cycle Assessments (LCA), driving more sustainable practices.

Challenges to Consider: There are hurdles to overcome, such as the need for credible and validated PCFs. Suppliers may also require training before these measures can be fully implemented.

By integrating these strategies, we can move the needle on carbon reduction and create a more sustainable supply chain.