Supplier cooperation is essential to improving the accuracy of Scope 3 emissions calculations and ensuring the effectiveness of reduction activities. In Category 1 (purchased products and services), which tends to account for the largest portion of Scope 3 emissions, supplier engagement is progressing because suppliers' decarbonization efforts directly impact the buyer company's emissions.
This report explains, with the help of best practices, how buyer companies can calculate feasible reductions in Scope 3 Category 1 emissions and how they should collaborate with suppliers to drive these reductions, including practical engagement strategies.
Background and necessity of supplier cooperation
March 2025SSBJ publishes sustainability standardsIn response to the rising disclosure standards required of companies, Scope 3 emissions are shifting from the calculation phase to the reduction phase, and the sophistication of these calculation methods is directly linked to companies' ESG ratings and reputation. (Related articles areHereIn addition, in EuropeCorporate Sustainability Reporting Directive (CSRD)or,Corporate Sustainability Diligence Directive (CSDDD)Due to these factors, establishing a calculation system based on primary data is becoming an important matter for maintaining competitiveness.
In the initial stages of Scope 3 Category 1 calculations, "payment amount" is generally used as the activity level, and "monetary coefficients" are used as the emission intensity. While this method is easy to use, it has the drawback of not adequately reflecting reduction activities. For example, even if a supplier is engaged in decarbonization activities, the results may not be reflected in the emissions calculation, and if the unit price increases as a result of these activities, emissions will increase.
To resolve this, it is necessary to switch the activity measurement from monetary value to procurement volume, and further change the calculation method to use emission intensity (primary data) for each procured item. Implementing this calculation method is impossible to do in-house; information on emission intensity from suppliers is essential.
Steps in supplier engagement
To effectively collaborate with suppliers, a step-by-step communication and support process is necessary. The following are the basic steps.
Step 1: Sharing policies and goals
First, clearly communicate to your suppliers that your company is working to reduce Scope 3 emissions as part of its decarbonization efforts. It is even more effective to explain that this is a carbon neutrality-based initiative and that it is based on science-based targets (SBTs), and that it requires a commitment across the entire supply chain. At this stage, it is effective to clearly state the message, top commitment, goals, and strategies from the buyer's management.
Step 2: Request for primary data
Instead of starting with all suppliers, it is crucial to select and limit the suppliers that are important to your company, such as those that have a significant impact on your company's GHG emissions and business operations, and begin with heavy-duty suppliers. Request primary data such as specific emission intensity and energy usage, and start calculating emissions using the provided primary data. This will allow buyer companies to reflect the results of their suppliers' reduction activities in their Scope 3 calculations. Furthermore, to ensure that suppliers proceed smoothly with calculating emission intensity, it is important to consider ways to reduce the workload involved in the calculation as much as possible (such as distributing standardized templates for GHG calculations) and provide necessary support according to the circumstances of each business partner.
Step 3: Education and Awareness Support
Many suppliers, including small and medium-sized enterprises, are unfamiliar with calculating required emission intensity, such as calculating the carbon footprint of delivered goods or calculating based on Scope 3 emissions. Therefore, we will build a cooperative system by sharing emission calculation methods and the use of tools through joint briefings and training sessions for suppliers. However, in practice, it is possible that a single briefing session may not be enough to gain the understanding and cooperation of business partners. It is necessary to reflect the importance of efforts related to emission calculation in the level of explanation given and the way the briefing sessions are conducted.
Step 4: Reduction through collaboration with suppliers
We will work with our suppliers to explore ways to reduce the carbon footprint of the products we deliver. It is important to understand where emissions are concentrated—in processes, materials, and energy use—and to work with suppliers to consider reduction targets and measures, then translate these into actionable plans from both short-term and medium- to long-term perspectives.
Practical Examples
Within Japan, we are already seeing examples of leading companies working to decarbonize their entire supply chains.
Case study: LIXIL (Case study for Step 2)
LIXIL Corporation, a leading manufacturer of building materials and housing equipment, is promoting reductions throughout its supply chain by holding joint briefings for approximately 400 suppliers in Japan as part of its awareness campaign for calculating emissions, and by providing Scope 1, 2, and 3 calculation tools to suppliers who intend to start calculating GHG emissions. The company plans to use primary data calculated by its suppliers to calculate Scope 3 emissions and to expand its support for the introduction of renewable energy.
Case study: Otsuka Holdings (Case study for Step 4)
Otsuka Holdings Co., Ltd. has begun supplying renewable energy to its business partners in order to achieve carbon neutrality throughout its entire supply chain. The company is striving to maximize energy utilization efficiency through measures such as centralized procurement of renewable energy and supplying electricity generated within the group to group business sites, thereby promoting both business growth and environmental responsibility. As part of this effort, it has begun supplying renewable energy to its outsourced production partners, working to reduce the environmental impact throughout the entire supply chain.
This case study illustrates how buyers are addressing the challenges of increased workload and costs for suppliers when procuring renewable energy as part of emissions reduction measures by proposing joint procurement.
Reference information:Green Value Chain Platform | Ministry of the Environment
The Ministry of the Environment's "Green Value Chain Platform," an information platform designed to support companies' decarbonization management, features numerous examples of companies taking the lead in Scope 3 calculation and reduction efforts, not just the two companies introduced here. This platform allows users to refer to advanced case studies by industry, and also provides a forum for promoting collaboration and knowledge sharing among companies, as well as supporting joint initiatives. It plays a role in supporting companies by providing the information and tools they need to advance their decarbonization efforts.
Challenges and Future Developments
Supplier engagement aimed at reducing Scope 3 Category 1 emissions is a new challenge for many companies. In the initial stages of these efforts, the following challenges may arise:
- Collection burden (human resources and costs)
- Lack of understanding from business partners who prioritize profit over emissions reduction
- The degree of cooperation is influenced by the dynamics of business relationships.
Calculating emissions based on primary data and implementing reduction measures are activities that place a new burden on suppliers. The ease with which suppliers cooperate depends on their level of support for the initiative and their relationship with the buyer, but it is effective to introduce some kind of incentive system in parallel with the request to make suppliers more willing to participate. Adding it to contract requirements is also effective, but there is a risk of resistance from business partners if it is implemented too quickly without sufficient explanation. Prior to implementation, repeated dialogue and follow-up such as providing support for calculation and reduction are necessary.
summary
Collaboration with suppliers is essential for reducing Scope 3 emissions, especially Category 1 (purchased products and services). Since emission calculations based on monetary value do not adequately reflect reduction efforts, it is necessary to shift to calculations using procurement volume and primary data (carbon footprint). To achieve this, phased supplier engagement is important, and it would be effective to proceed in four steps: ① sharing decarbonization policies, ② providing education and awareness support, ③ requesting primary data, and ④ collaborative reduction activities.
This time, we focused on the request for calculation of the carbon footprint of supplied products and services as part of supplier engagement. Due diligence investigations are also frequently conducted as part of supplier engagement. We will explain this in more detail separately.
Reference materials:A practical guide to engagement for decarbonizing the entire value chain.
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