Setting supplier standards

Paul Suff hears how construction firm Willmott Dixon helped develop a model for reducing emissions in the supply chain

Seven ‘pathfinder’ companies became the first organisations to achieve level one of the Carbon Trust’s standard for supply chain in September 2015. One of those firms was construction business Willmott Dixon.

The company has a long commitment to sustainable development. In 2006, it became the first UK construction firm to establish its own internal sustainability consultancy (Re-Thinking). In 2008, it installed sustainability managers in each of its local construction offices to help embed sustainability and implemented a 10-point plan to drive the concept at site level. And, in 2009, it appointed environmental champion Jonathon Porritt to its board. The supply chain standard continues this engagement.

‘We have a good handle on our scope 1 and 2 emissions, so it’s a natural progression to start looking at scope 3,’ says Michael Cross, principal sustainability development manager at Willmott Dixon. ‘The standard will help us maintain our position at the forefront of sustainable development.’

A massive number

The Carbon Trust describes the standard as the world’s first independent certification to recognise organisations that have put in place a framework to measure, manage and reduce carbon emissions across their supply chain.

Darran Messem, managing director of certification at the trust, explains why the new certification was developed: ‘In most sectors, the direct environmental impacts of an organisation are dwarfed by the carbon emissions relating to the products and services in their supply chain. As leading businesses get better at reducing carbon emissions in their own operations, they recognise the responsible thing to do is to focus their efforts on where they can have the greatest impact.’

Willmott Dixon reflects this. The company’s supply chain emissions are a massive number, says Cross. Scope 1 and 2 emissions, which are those from its own vehicles and processes, fuel combustion and purchased electricity, made up only around 1% of the company’s carbon footprint in 2014. The remainder, scope 3 emissions, include those from upstream transport and distribution, purchased goods and services, and waste from operations. The standard covers upstream suppliers – the emissions associated with the production and transportation of purchased raw materials and goods. It requires companies to complete a ‘hotspot’ analysis of its suppliers, prioritising for engagement those that are big emitters. The analysis is the first level of the standard.

Pinpointing major emitters

In 2014, Willmott Dixon spent more than £1 billion on goods and services. A desk study by Cross and his team revealed that the money was spent with almost 1,200 suppliers. Cross acknowledges that the company did not have most of the data required by the standard on emissions from its upstream suppliers. ‘We looked at the supply chain standard outcomes and submission requirements and we didn’t know the answers,’ he says.

The team applied the tried and tested Pareto principle (also known as the 80–20 rule), whereby a limited number of activities or causes can generate 80% of the issues, to pinpoint those suppliers accounting for most of its upstream emissions. The scrutiny revealed that 16 suppliers accounted for the top 20% of Willmott Dixon’s scope 3 carbon footprint in 2014, with 97 suppliers responsible for half. It also found that three sectors contributed more than 60% of emissions.

Cement, lime and plaster was responsible for more than 40% of the footprint, by far the largest source of emissions, and 30% of which was accounted for by just 140 suppliers. Cross says Willmott Dixon is now working with different parts of the business to draw up a plan to engage a number of key cement, lime and plaster suppliers, which together account for 10% of the footprint, as part of stage two of the standard. This stage focuses on engagement and developing a baseline for emissions reductions. Over the next nine months, the company aims to reach suppliers representing at least 15% of the company’s scope 3 emissions.

Calculating carbon emissions for the different supplier and product categories identified in Willmott Dixon’s supply chain was challenging, says Cross. He used the Defra carbon conversion factors for company reporting, but describes the process as akin to putting round pegs in square holes. ‘The factors are not designed for the construction industry. There is no obvious factor for a roofing contractor, for example,’ he says.

Driving down emissions

Cross says procurement teams at Willmott Dixon will be one of the driving forces in reducing supply chain emissions: ‘They have the relationship with the suppliers and are better placed to have the conversation. We just need to provide them with the information to engage suppliers on carbon emissions.’ The company’s sustainable procurement policy already outlines how it aims to influence the right choices in order to reduce the consumption of primary resources, and to use materials with fewer negative impacts on the environment.

Willmott Dixon reported last year that it had reduced its carbon intensity – emissions relative to turnover – by 30% between 2010 and 2014, double the target set by its carbon management plan. Cross believes Willmott Dixon’s experience of reducing its own direct emissions will be crucial in helping suppliers to drive down theirs. ‘They might not know where to start and we will be able to help,’ Cross says. ‘It’s quite timely, as many will be covered by ESOS [energy savings opportunity scheme] and will have identified where energy savings can be made.’

Willmott Dixon’s long term objective is to encourage other companies in the construction industry to tackle their emissions. ‘The more organisations adopting the supply chain standard and other sustainability initiatives, the more productive our collective supply chain becomes,’ he says.

‘Pathfinder’ companies I

ABP Food Group, Aviva, Central England Co-operative, Deloitte UK, Nationwide and PwC UK were also pathfinders for the Carbon Trust standard for supply chain, in addition to Willmott Dixon. The trust says each of the seven companies, which started using the standard in early 2015, have procurement spends that are measured in hundreds of millions or billions of pounds, so were ideal for piloting it. ‘This purchasing power gives those organisations an opportunity to have a positive influence outside their operational boundaries, through engaging with key suppliers to get them to reduce their own carbon emissions,’ it says.

ABP Food

ABP is one of Europe’s largest food processors and the processing and supply of beef is a major part of its business. The company receives supplies of beef from more than 35,000 farmers across Europe, from smallholders to commercial producers.

The standard requires businesses to engage suppliers for the long term, and ABP has developed a number of initiatives to do so. A ‘low cost’ programme for farmers supplying fewer than 300 cattle a year includes supplier outreach and communication, such as a website and forums, as well as encouragement to join sustainability schemes, such as Origin Green. Engagement with larger suppliers is through bespoke approaches and multi-supplier workshops and forums.

Aviva

Aviva provides insurance and investment for around 34 million customers in 16 countries. Its indirect emissions come from its business operations, such as from the procurement of ICT equipment and professional services, as well as from the fulfilment of general insurance, car and property claims, such as automotive repairs.

The company has introduced a sustainable claims process, which aims, through collaboration with suppliers, to find alternative and more sustainable ways to meet insurance claims. One example is restoring rather than replacing stained carpets, avoiding the emissions related to the production, transportation and fitting of new carpets. Other initiatives include setting sustainability expectations with suppliers, such as requiring datacentre providers to use a certain amount of renewable energy.

‘The standard for supply chain provides assurance to our stakeholders, and at the same time drives us forward to improving the sustainability of our business, and products and services, in collaboration with our suppliers,’ says Tom Spink, group procurement director at Aviva.

Central England Co-operative

Central England Co-operative has more than 400 outlets across the Midlands and East Anglia. The business has introduced a number of supply chain commitments into its policies for procurement, corporate responsibility and the environment. This includes having a clear preference for suppliers that have made credible environmental reduction commitments when purchasing goods not for resale.

Paul Garton, energy efficiency programme manager, says these initiatives have had positive impacts on indirect emissions, such as selecting domestic suppliers to avoid additional transportation emissions, purchasing green electricity and selecting responsible suppliers for waste management.

‘Pathfinder’ companies II

Deloitte

Professional services business Deloitte employs more than 14,000 staff in the UK and the majority of its indirect carbon emissions are related to employee travel, IT equipment and telecommunications services, and hospitality services, such as hotels and catering.

Gavin Harrison, head of environment, says that achieving the standard has helped Deloitte to build a framework for its sustainable procurement activities, prioritising existing suppliers to work with to reduce emissions. Tenders for new services ask all potential partners to adopt the principles of Deloitte’s sustainable procurement policy, and companies are asked specific questions on their current performance through a sustainability questionnaire.

Nationwide

Nationwide has more than 14 million members. Its supply chain carbon emissions come from the provision of ICT systems and services, as well as postal and telecommunications services, that enable it to handle data and communicate with customers.

Its supply chain focus is, therefore, on engaging with ICT providers to minimise their emissions, as well as to promote lower carbon transport options to reduce emissions in supplier fleets. Under its supplier code of conduct, Nationwide requires shortlisted suppliers to complete an environmental sustainability oversight questionnaire to help it understand how that supplier manages the carbon footprint from its own operations and supply chain.

‘The standard provides external recognition of our achievements to date, but more importantly provides specialist support and guidance into our supply chain analysis and future plans, providing real benefits towards reaching our long term sustainability goals,’ says Jenny Groves, director of branch and workplace transformation.

PwC

Professional services firm PwC regards its procurement spending in areas such as IT, facilities and hospitality as a way to incentivise better sustainability performance among suppliers. It has put in place a detailed supply chain sustainability programme.

This includes asking its top 100 or so key suppliers to report their greenhouse-gas emissions via the CDP (formerly known as Carbon Disclosure Project) supply chain module. PwC believes this encourages them to measure, manage and reduce the footprints associated with services they provide. The company has also hosted sustainability supply chain forums with key suppliers, engaging them on carbon reduction and to share best practice.

The supply chain standard – how it works

The Carbon Trust standard for supply chain has three levels of certification: measure and prioritise; engage and baseline; and reduce and expand.

Reduce and expand

Engage and baseline

Measure and prioritse

1. Measure and prioritise

Minimum requirements:

• policy or a public statement documenting the organisation’s commitment to supply chain carbon/energy management and reduction;
• accountable committee and/or individual responsible for supply chain carbon/energy management and reduction;
• good understanding of its direct suppliers, by spend and industry;
• procurement policy with guidelines on preferentially procuring from suppliers with good energy/carbon credentials;
• complete a ‘hotspot’ analysis of the supply chain; and
• identify the organisation’s significant suppliers.

2. Engage and baseline

• achieve 60% in the qualitative (governance, measurement and implementation) questionnaire weighted for level 2;
• demonstrate engagement with significant suppliers for emissions measurement and reductions; and
• determine a robust baseline for reductions, based at least partly on primary data.

3. Reduce and expand

• achieve 60% in the qualitative questionnaire weighted for level 3; and
• demonstrate engagement with significant suppliers.

At each subsequent recertification, the organisation must fulfil each of the above requirements as well as demonstrate expansion of the reduction engagement to:

• a different subset of suppliers;
• more suppliers; and
• different resources.

To achieve the standard organisations need to complete a detailed hotspot analysis to identify the most significant areas of carbon emissions in their supply chain. This is used to determine a quantitative baseline for emissions reduction and prioritise suppliers for engagement. To retain the standard organisations must demonstrate evidence of supplier engagement, demonstrate reductions in specified parts of their supply chain, and then expand their approach to engage different areas or suppliers.