COMMENT During lockdown, many of us shifted our habits – adapting to restricted freedoms by buying more takeaways, doing more online shopping and generally equipping ourselves for our new-found (and in my case regrettably short-lived) hobbies.
Ever on the move, the sight of delivery vans winding up and down the otherwise empty roads served as a visible reminder that we all rely on complex global supply chains to enable our consumption of goods and services. And yet, despite our reliance on them, many of us know little about how these goods and services arrive at our door.
No more is this true than when it comes to their environmental and social impacts. Within the real estate sector, many companies now have an increasingly strong grasp on the impact of their construction projects, but perhaps less so of the emissions associated with their wider businesses’ non-development-related procurement of goods and services. And in both cases, while measurement has improved, tangible action to reduce procurement-related impacts is sadly lagging. Businesses often find that visibility beyond their tier one suppliers (the suppliers whom companies are in direct contact with) is often limited, hiding opportunities to improve resource efficiency and associated cost savings, and potential environmental and financial risks.
Increasingly we are finding that even those ambitious businesses that have set robust emissions targets, such as through the SBTi framework, are beginning to feel the heat when it comes to delivering on the commitments they have made. Under SBTi, many real estate companies set an ambitious 2030 target for net zero, which is now beginning to feel very close. Such deadlines require immediate action to reduce emissions or risk the potential reputational damage of their commitments not being met.
Mission critical
Evidence suggests that procurement-related emissions for real estate companies account for almost 60% of their total greenhouse gas emissions, if you include all of the goods and services they need to operate on a day-to-day basis, as well as on their construction projects.
As such, genuine and robust action of supply-chain decarbonisation is going to be absolutely critical if the real estate sector is going to make its contribution towards the UK’s progress towards net zero.
So what can we do? In the first instance, getting a clear understanding of how and where emissions are arising in the supply chain is an obvious prerequisite for doing anything to tackle them. Tools such as One Click LCA are very useful in helping the sector to understand those emissions arising from development and there are a range of equivalent tools available that can help on wider business procurement too.
Secondly, it’s essential that business now begins to move beyond just measurement and also considers active management. Principally, this involves engaging with both internal procurement teams and suppliers to develop procurement strategies that are capable of leading to lower impact outcomes.
Closing the loop
Among other things, a well thought-out plan should establish category-specific substrategies, provide for decarbonisation criteria in supplier selection, and build performance requirements into the negotiations and contracts process. At the other end of the procurement process, levers such as beneficial payment terms linked to performance can help reinforce and reward those suppliers that are making the most progress in the area. And to close the loop, this activity should all feed back into the initial measurement process so the gains that have been made can be tracked against the initial emissions estimates.
When reminding ourselves why decarbonisation is necessary, it is important to remember the big picture perspective. Not all businesses have set science-based targets but in signing the Paris Agreement, the UK government effectively has. In the coming years we can therefore expect government to further crank up the legislative pressure on businesses to reduce their emissions.
Those that act now will benefit from increased resource efficiency and cost savings, while helping to mitigate the worst effects of climate change. Those that don’t will expose themselves to accelerating climate risks, with unprepared supply chains that will find it ever harder to adapt. Putting off decarbonisation is no longer an option, therefore improving our understanding of supply chains and their emissions has become a necessity.
It’s hard to kick the can down the road when the road is underwater.
Tom Hill is impact measurement director at Savills
