here was a time when you’d manage sustainability in-house. If your assembly line was energy-efficient and your waste
management lean, you were on the right track. But with the UK and EU pushing toward Net
Zero with a raft of regulations, we’re entering a new era in which a manufacturer is no longer judged solely by its products and environmental impact. Instead, it is judged by the carbon intensity of the raw materials it buys, the logistics networks it employs, and the complete lifecycle of its products. It’s a complex and, for many, disorienting change, but there are several solutions to help navigate this new landscape. One of the keys to managing sustainability is the supply chain, where the data is clear. For the majority of manufacturing and engineering firms, Scope 3 emissions – the indirect emissions that occur in the value chain – account for 80% or more of their total carbon footprint. In sectors such as automotive, aerospace, and heavy machinery, this figure can be even higher, making the supply chain the biggest hurdle manufacturing faces.
In the engineering and manufacturing sectors, Scope 3 represents something of a paradox. It is the area where businesses have the least direct control, yet it is where they have the greatest opportunity to drive real sustainable change. But why does the manufacturing sector
struggle more than others? Manufacturing is inherently complex. A single product may contain hundreds of components sourced from a global web of tier-one, tier-two and tier-three suppliers. Tracking the embodied carbon of a specialised alloy or semiconductor requires navigating a fragmented landscape of SMEs, many of which lack the resources to measure their own impact. Traditionally, this has led to a reliance on
emissions factors – ‘spend-based’ modelling, which uses financial data to estimate emissions. While better than nothing, it’s a blunt instrument. For example, it doesn’t reward a supplier for switching to renewable energy; it only reacts
if you spend less money with them. To reach Net Zero, we need activity-based data, i.e., real numbers from real factories.
While some businesses may have focused on sustainability as part of their business model, there’s now a new driver: increasing regulation, namely the EU’s Corporate Sustainability Reporting Directive (CSRD) and the UK’s evolving Climate-related Financial Disclosures. Under CSRD, large companies are already
required to report on their ‘double materiality’, which details how sustainability issues affect their business and how their business affects the planet. Crucially, this includes the mandatory
reporting of all indirect emissions (Scope 3) from across the supply chain. If you are a UK manufacturer exporting to Europe or part of a global supply chain, you are already within the orbit of these laws.
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