Innovation & Technology

4 Key Reasons to Embed Renewables Throughout Your Supply Chain

It can be challenging to drive sustainable change in a supply chain, but the impact of action far outweighs the risks of inaction. Here's why adopting renewables through your supply chain is the pathway to climate leadership.

Sponsored Content | / This article is sponsored by South Pole | By Patrick Horka | Published 3 years ago | About a 5 minute read

Image: Pixabay/Pexels

2021 is poised to be a year of climate action, as the global economy begins to recover from the COVID-19 pandemic. “Build back better” is not only a catchphrase for a sustainable global recovery, but a real business opportunity which can be unlocked with renewable energy (RE).

As most of the world entered periods of lockdown in 2020, companies continued to make strong commitments to purchasing renewables to power their operations. In 2020, more than 60 new companies joined RE100 by making public commitments to source renewables — with almost half of new members based in the Asia-Pacific region. The collective commitment of all RE100 members is now over 300TWh. To put that in perspective — that’s more than the total electricity demand of Australia.

Decarbonizing your own operations is the obvious place to start when it comes to any sustainability plan. However, when it comes to energy, a business’s own carbon footprint is typically significantly lower than that of its suppliers — suppliers are often based in markets characterized by high grid intensity, and they often consume large volumes of electricity.

Companies get their electricity from renewable sources primarily because of the opportunities to reduce power costs, improve overall risk and meet sustainability targets. With solutions becoming increasingly available (and affordable) across both developed and developing markets, sourcing renewable energy is an effective way to reduce supply chain emissions and achieve climate leadership.

Here are four key reasons why adopting renewables through your supply chain is the pathway to climate leadership:

1. Upstream emissions dwarf that of a company’s direct operations

While sourcing 100 percent RE for business operations is a great and necessary first step; according to a recent CDP report, upstream emissions are on average over 5x greater than those related to a company’s direct operations. The emission reductions delivered by renewable energy are highly attractive, since electricity generation is a big part of GHG emissions. Driving RE through a supply chain will help companies reduce Scope 3 emissions — and suppliers to reduce Scope 2 emissions. Furthermore, science based targets (SBTs) are the industry standard for making verifiable claims; and 94 percent of companies with approved SBTs have included Scope 3 emissions, as this is a big part of the overall emissions.

2. While solutions for sourcing RE are increasingly available in all markets, usage of them in emerging markets can help catalyze their growth in those regions

Between 2010 and 2019, we saw a dramatic fall in solar PV module and wind turbine prices, along with continuing reductions in Balance of System (BoS) costs. With the decreasing cost of technology coupled with new routes to market and the increasing risk associated with fossil fuel generation, the levelized cost of electricity (LCOE) for renewable energy is dropping.

We are also seeing new opportunities to source RE in markets that, up until recently, were considered tricky. For example:

Vietnam is on track to launch an exciting virtual power purchase agreement (VPPA) pilot program — the Direct PPA scheme — one of the first in Southeast Asia.
South Korea recently launched its K-RE100 initiative, which will open the Korean market to corporate PPAs, energy attribute certificates (EACs) and green tariff options.

3. Powering operations with renewables mitigates risk throughout supply chains

Renewable energy is a business and risk mitigation opportunity, which also saves money. When companies are prepared for interruption and disasters that may occur anywhere in their supply chain, they’re better able to maintain their operations and keep serving their customers — even in a time of crisis. Sourcing renewable power directly impacts:

Price risk — by entering into a PPA, companies are able to lock in the cost of energy and avoid peak demand charges and fluctuations in energy prices.
Supply risk — companies that have PPAs in place have a reliable source of power should there be grid disruption.
Climate risk — sourcing renewable power for operations, in particular through the supply chain, can make significant progress on sustainability goals.

4. Be viewed as a leader, not a laggard

Customers, investors and employees now expect companies to make efforts to embrace renewables throughout their operations. The companies that are out ahead of these expectations are viewed as true leaders in sustainability by their stakeholders and attract new demographics.

Here are a few tips on how to get started:

1. Identify the opportunity

Understand Scope 3 emissions and where they take place within business operations.
Drive internal alignment and buy-in by engaging internal stakeholders/decision-makers.
Engage your suppliers — realize that all of your suppliers are not at the same starting point.
Identify key suppliers and prioritize geographies to drive impact.

2. Plan for action

Find experts with local presence who can help develop a RE supply chain roadmap (Various solutions are available to source RE — but suppliers need to understand that implementation varies by solution, availability and complexity).

3. Take action

Certificates can be purchased for quick wins, but climate leadership means continuously improving the business case/stronger additionality claim by engaging in on-site renewables or off-site PPAs.
Leverage industry peers and local expertise to get renewable electricity deals with the best possible conditions.
Track and report progress within your supply chain for stronger accountability.
Share successes and challenges among suppliers to foster knowledge-sharing and participation.

It can be challenging to drive sustainable change in a supply chain, but the impact of action far outweighs the challenges or risk of inaction.

Learn more about how South Pole can help your business, as well as your suppliers, on the renewable energy journey.