Three Steps to Preparing for Scope 3 Carbon Emissions in the Food Supply Chain

by | January 16, 2024

Achieving Scope 3 emissions reduction targets and working toward a net-zero carbon footprint in the food and beverage industry involves comprehensive changes to supply chains. Forward-looking companies are increasingly embracing the importance of measuring and, in the long run, reducing emissions beyond their direct operations (Scope 1) and indirect energy use (Scope 2). As most of us are already aware, Scope 3 encompasses emissions that are not produced by a given company itself, but that result from activities both up and down the organizations total value chain, creating a much more complex picture for measuring, monitoring, reporting and ultimately changing the organization’s total carbon footprint.

Importantly, however, Scope 3 emissions are becoming less a matter of a given organization’s commitment to climate impact, and more a matter of regulatory requirement. With passage of the Climate Corporate Data Accountability Act in October of 2023, the State of California became the first state in the US to lay out requirements for companies meeting certain revenue requirements to begin reporting Scope 3 emissions data beginning in 2027. In recent years, California has shown a growing willingness to move faster (and in some cases, further) than Federal regulators in the US on issues spanning food safety, additives regulation and more. Often, California’s regulators have followed the lead of emerging European Union regulation, and the climate act is no exception, mirroring in many respects the outlines of the EU’s Corporate Sustainability Reporting Directive (CSRD), though under the California act, the revenue threshold for corporations subject to the requirements is somewhat higher.

The net impact is that at least for larger companies, the need to capture and disclose Scope 3 emissions is becoming a near-term reality. That means that it’s not too early for brands and manufacturers to be thinking ahead toward ways in which supplier networks may need to change, as those disclosures inevitably turn into actual net carbon reduction goals. Following are three potential areas where brands may see changes to their procurement processes, as supplier qualification takes on additional dimensions directly related to sustainability. Preparing for these areas may help companies be ahead of the curve as attention inevitably shifts from carbon reporting to carbon reduction in the supply chain.

Sustainability audit and certification participation

There are multiple potential strategies for suppliers to apply in creating more sustainable operations. Serious research and development is ongoing in areas such as water footprint reduction, waste reduction and upcycling, renewable and reusable packaging, and sustainable cultivation practices. The trick is in determine how best to draw all that disparate information around supplier capabilities and initiatives into a usable format. Fortunately, a growing ecosystem of auditors, certifying bodies and sustainability intelligence providers is developing around this problem, making it far easier to companies to aggregate the supplier sustainability data they’ll need to guide key sourcing decisions going forward.

Supplier performance

The need for brands to work closely with suppliers to exchange complex and often sensitive information around upstream supplier networks will likely drive some real changes to how brands and suppliers interact. Brands and suppliers are going to have to work out how to create professional trust and partnership in the midst of what will undoubtedly remain a volatile and fast-moving global industry. A crucial part of that equation for brands and manufacturers will be the ability to look at supplier partners from a 360-degree perspective. It will not be enough to evaluate suppliers in terms of a narrowly defined set of ESG parameters without also looking at FSQA performance, manufacturing practices, financial metrics and product performance, all the way down to the material compliance at the individual lot level. Done well, a robust supplier scorecard methodology will allow brands to quickly identify top performing partners worthy of strong, ongoing investment, while moving just as quickly to identify the partnerships that may not justify that level of engagement.

Innovation in product formulation

With 65% of brands in a recent TraceGains survey indicating plans to increase product innovation in the coming year, new product development remains important for a host of familiar reasons, from changing consumer preferences to unstable material costs. But with sustainability becoming an increasingly important part of the conversation, R&D teams will likely have a big role to play in long-term carbon reduction.

Examples abound, but the ongoing shift from animal-based materials to plant-based ingredients illustrates the task facing R&D organizations. With studies suggesting that plant-based products can have half the carbon impact of animal-based alternatives, the plant-based trend extends well beyond alternative proteins and meat substitutes. The carbon economics of traditionally animal-based ingredients such as gelatins may also drive product reformulation in important, if less obvious ways. Alongside potential product reformulation in the interests efficient manufacturing, storage and product life extension, long-term carbon footprint reduction will likely have food scientists hard at work in coming years.

Digital acceleration

As sustainability requirements increasingly become part of the day-to-day reality for food and beverage manufacturers and brands, those requirements will inevitably become an important part of specification development for ingredients, raw materials, packaging, and finished goods. From the gradual elimination of specific materials and components with high net-water and carbon profiles, to shifting storage and packaging requirements reflecting potential changes in material properties or product shelf-life, it’s about to become more important than ever to keep track of specification versions and variants, especially for organizations with a complex manufacturing value chain. TraceGains Specification Management is the proven industry standard for digital specification management, letting teams not only track both ingredient and finished good specs, but also ensure that associated items and formulas stay in sync. With seamless supplier and co-man collaboration built in, Specification Management frees teams from the paper chase and lets them focus on moving forward.

Specifications should create clarity and speed for teams and partners alike, accelerating your path toward greater sustainability. Request a demo to learn more.  

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