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Decarbonizing the Upstream Supply Chain: How to Achieve Carbon Neutrality

Decarbonizing the Upstream Supply Chain: How to Achieve Carbon Neutrality

Evolving as a carbon neutral supply chain is a part of every business' growth plan and companies are committed to reducing their supply chain carbon footprint. Keep reading to learn more about carbon neutrality, its challenges, and how energy companies can decarbonize their upstream supply chain.

What is a carbon neutral supply chain? 

Carbon neutral, also known as Net Zero Carbon supply chain, refers to the companies that strive to make a continuous and conscious effort at eliminating their carbon footprint. With innovative solutions and technologies, businesses can optimise their complex oil and gas logistics operations and reduce their carbon emissions. Integrated people and material logistics platforms like iLogistics by IBS Software empower businesses in the energy and oil and gas industry to take total control and reduce the carbon footprint of their supply chains.

Challenges in reducing carbon footprint

While carbon footprint supply chain management is becoming a part of many companies' models, certain challenges have come along the way:

1. No uniform carbon-accounting framework

One of the prime roadblocks faced in decarbonizing the upstream supply chain is the lack of carbon-accounting solutions that can accurately assess the C02 footprint. As carbon accounting is done voluntarily and based on rough activity data and average emission factors, the outcome is often inconsistent. This case is most apparent for the Scope 3 emissions.

2. Dependence on supplier's data

Finding product-level emissions data is quite challenging as largely, the focus is on organisation-level or institutional emissions. Granular emissions' data from suppliers' should also be considered to fit the carbon footprint supply chain management model. Unfortunately, there is no easy way to verify data from various sources and it all comes down to the level of trust among value-chain allies to communicate accurate data

3. Higher costs

While achieving zero-carbon goals, it's witnessed that companies, even after pulling all the decarbonization levers, come across a sustainability gap. To bridge it, next level levers are set into motion which tends to be costly and complex.

Some other major challenges with reducing carbon footprint in the energy industry are optimization of the logistics network to reduce GHG emissions, deploying low emission fleet, building accountability among stakeholders, etc.

How to achieve a carbon neutral supply chain? 

Here are four key strategic pillars that can help your organisation achieve a decarbonized upstream supply chain:

  1. Low carbon supply chain business model
  2. Supplier collaboration and industry alliance
  3. Supply chain greenhouse gas (GHG) emissions management strategy
  4. GHG reduction programs

Low carbon supply chain business model

Organisations can move from having their own dedicated logistics to assets to a 'pay as you go' Logistics as a Service (LaaS) model. Partnering with a LaaS provider will help companies manage all their materials and personnel requirements while also reducing emissions and fuel consumption with low carbon route planning, optimising oil and gas logistics costs, and improving asset management and utilisation

Supplier collaboration and industry alliance

One of the best ways to achieve a net-zero future is by collaborating with suppliers and forming industry alliances across the supply chain and logistics industry. These professional partnerships will help your business source sustainable materials and meet your emission reduction targets

  • Partner with industry experts, peers, and policy-makers to establish regulatory foundations for low carbon solutions at scale and accelerate time to market for emissions reduction solutions
  • Include sustainability in tendering and supplier management processes when working with suppliers
  • Deploy new operating and commercial models that boost efficiency, shared value, and sustainability

Supply chain greenhouse gas (GHG) emissions management strategy

You need to create an integrated strategy that not only measures GHG emissions but also includes ways to reduce it by optimising fuel and energy consumption.

The British Standards Institution´s PAS 2060 standard can guide supply chain leaders through a four-stage process to develop a net-zero strategy -

Step 1 - Assess carbon footprint using standardised protocols

Step 2 - Plan for target-driven emissions reductions

Step 3 - Offset unavoidable carbon emissions

Step 4 - Verify through qualifying explanatory statements and publicly disclose your reports

GHG reduction programs

Once your strategic plans are set in place, break it down into structured programs for a systematic, phased, and large-scale transformation of upstream logistics and supply chains.

  • Optimise logistics network hubs and fleet
  • Optimise routing and transportation modes
  • Choose green travel options
  • Switch from air to land or sea transportation
  • Set internal carbon pricing
  • Track annual climate budget
  • Improve energy efficiency and reduce waste
  • Deploy drones and electric vehicles
  • Go paperless and transition to digital supply chains
  • Allocate emissions among participating companies

Energy and resources companies have set environmental, social, and corporate governance (ESG) goals to attract investors, employees, and customers. Now that the industry is facing increased scrutiny over climate change, organisations need to create strategies and plans to meet industry standards and goals. iLogistics, an AI driven and cloud based SaaS platform can help your company accelerate your transition to a carbon neutral supply chain with its cutting-edge capabilities, automation, optimization of multi-modal logistics and onshore and offshore accommodation management, and more. With over 20 years of experience in transforming logistics and supply chain, IBS Software helps customers assess, report, and reduce their direct and indirect CO2 emissions.

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