Webinar – ESG in Procurement

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Read the ESG Compliance in Procurement Ebook for a step-by-step guide to building mutually beneficial supplier relationship.

Transcript

Conrad Smith:

Let’s jump into it. Mark, it’s great to be with you. I know we’re here to talk about ESG instead of Christmas. Maybe we’ll have the Christmas webinar next week, you know, just let’s get started with quick introductions. I’ll start, Mark, and hand it over to you. I’m Conrad Smith. I have 25 years as a procurement practitioner. I started at intel, was there about 15 years and then I went over to Adobe, I was the head of purchasing at Adobe for 10 years. And then about 2019, I left Adobe and founded Graphite and built the team and the product here. It’s been really cool. And in my journeys, I met you, Mark. So why don’t you tell us a little bit about you, and then we’ll jump in, and get rolling here.

Marc Munier:

Brilliant. Thanks, Conrad. Yeah. So my name is Mark, founder of DitchCarbon. My background is predominantly in software as a service businesses, so growing businesses in marketing and tech. Yeah, kind of really just kind of had that moment a few years ago where I really wanted to do more to help about climate change. And when you look into it, you realize that, you know, procurement people really are the unsung potential climate heroes, right? And so we’ve built a product that works really great for procurement people, and that’s why I think we partner so well with Graphite Connect. So, yeah, happy to be here and hopefully we can answer some questions in the deck that we put together but also leave plenty of space at the end for some QA. So hopefully you’ll leave this session, you know, more informed, more able to take action on climate, and really drive forward your green agenda within every company you’re in.

Conrad:

That’s awesome. And I would just say in the point, of housekeeping, if you have any questions along the way, don’t hesitate to put them into the chat, you know, here in Zoom, just pop your questions in there. We’ll try and keep an eye on as we go. And at the end, we’ll kind of pop back over there, and do a quick review of those as well as kind of open it up, to kind of verbal questions. It’s nice to have everybody with us. So we wanna go ahead and launch a quick survey… let’s share the results. There you go. Can you, can you see that there now? So.

Marc:

Yeah, brilliant. So that’s really interesting. So that’s kind of what we expect. You know, the majority of companies haven’t yet set any net zero objectives. Most people know some things, a few people very well informed, and a little nothing in terms of supplier intelligence so far, really interesting. That’s fascinating. Thank you for taking the time to do that. Yeah, let’s crack on and go through the, go through the presentation then Conrad. So, yeah. So, so I guess like I kind of alluded to this, in the introduction but, you know, up to 95 percent of a company’s total carbon footprint will come just from what it buys. That’s enormous if you think about global greenhouse gas emissions. So out of all the emissions, the whole of humanity, 60 percent of it comes through what I companies buy. That’s an enormous part of solving the climate change challenge. And there’s more companies regulated to reduce their admissions, or pay. And it becomes increasingly important that we address that issue. And that’s why procurement people are absolutely at the forefront of this stuff. Yeah, you’ll, have the skills to negotiate with suppliers, to drive change within suppliers, you know the market incredibly well, you are the perfect people to optimize for carbon in your supply chain and therefore can have the biggest impact on your companies productions. And as I say, every country has signed up to be net zero by 2050 so sooner or later every company in the world will have to seriously look at what it buys and reduce the carbon footprint that exists within that.

Conrad:

Now, Mark, I remember talking to the corporate ESG folks about all of this a couple of years ago when I was at Adobe and they’re talking about scope one, scope two, scope three. It was all pretty like a totally new language for me. Can you just take a few minutes and walkthrough this in a little bit more detail?

Marc:

Yeah, absolutely. I remember talking to Jacob about this on the stand in London actually. So there’s a few different key things to remember when you’re talking about different scopes of admission. So scope one is direct emission. So I’m a company, I am burning fossil fuels in order to let me do what I do as a company, right? So that might be heating your office with a gas boiler. It might be putting fuel in your trucks to go and deliver stuff. It might be, you know, heating up a furnace to make something, right? So that’s you’re literally setting a light to emission, to some kind of fossil fuel as part of your main business. Scope two is imported energy, so that’s mostly of the time electricity. So I’ve got power that’s coming into my factory into my warehouse, into my office, that energy is being generated somewhere else and there are carbon emissions associated with that. So that will vary dependent on your energy supplier and it ranges, there’s a huge range in this globally. So if you think about per unit of energy that’s a kilowatt hour. In Sweden, it’s as low as around 30 grams, and in Jacksonville, it sticks in my head because it’s about 800 grams. So there’s an enormous difference around the world in terms of the, how carbon intense it is to use energy. And then scope three is everything else and that can be purchasing as we’ve already spoken about. But also if you finance other companies, you franchise other companies, business travelers, often a large part of scope three as well. As you’d expect because we are partnering with Graphite Connect, the main focus of this is going to be on purchasing, but it’s important to know how that fits into the broader context, of how companies have to report their admission.

Conrad:

So, Mark, what is typical in a company? I mean, I spoke, I mean, I think I remember that scope three is like the biggest of all of these groups, like how do, what do you normally see in terms of the percentages? And do the percentages vary dramatically, or is there some really strong patterns?

Marc:

Yeah. So I think unless you’re manufacturing big dirty things, so, you know, as in if you, if you’re in mineral extraction or something like that, then your scope one is going to be pretty significant for those sorts of companies. But for services, IT, you know, retailers, all those sorts of people, scope one and scope two, and normally pretty insignificant. Scope three is really where it’s all out. And what’s so interesting about the way that this is measured is that it puts the responsibility on the person buying the thing, not necessarily the person making the thing or the company making the thing because you’re a large organization. You’re the first one that’s going to be regulated. If you’re buying in products that are highly carbon intensive, that’s going to show up on your reporting and so, therefore, you are incentivized to find lower carbon options for that same product. That’s a very interesting way of doing it. And this is all by the way from, the greenhouse gas protocol which is the kind of the leading standards maker in this. So, so like all that’s kind of quite detailed, you know, and you can look down and see well, what’s the individual carbon footprint of a particular product or, you know, it’s you know, from a generic point of view or maybe even that specific product, what journey did it take to get from where it was made to me, and what’s the carbon intensity of that? But for the purposes of procurement, carbon intensity is a really useful metric to think about. And that is per thing that I buy from this supplier, how carbon intensive is that? And that might be per dollar, so if I’m buying services specifically or, you know, you buy so specific, it’s very useful to look at it from the carbon intensive point of view. So comparing IT service providers, or consultants… you know, per dollar you spend with them, how many grams of carbon are they emitting? And so you’ll hear me talk about that, what’s the carbon intensity of company A versus company B? And that’s worked out by looking at their total carbon footprint and their total revenue dividing one into the other so that you know for each dollar you spend with Accenture, Deloitte, it’s you know, a few grams or whatever we can go through those numbers later. But that’s why carbon intensity is quite useful because it’s a great rule of thumb for working out which supplier is going to help you get on that net zero journey faster.

Conrad:

So I can’t remember if you want to talk about this later, Mark, but when we spoke ahead of this meeting, you were talking about sort of a carbon intensity report similar to a spend report and how the two of those blend together.

Marc:

Yeah, absolutely. I think that’s something we probably pick up a little bit later, actually. I think I would just very briefly make the point perhaps that, you know, you need all the data that you have on that supplier, but you also need the carbon intensity and I think we’re going to lead into talking about your Golden Record and how that works and it’s that’s probably the better place to talk about actually, Conrad, I’m gonna step back from that. Should we go to the next slide though?

Conrad:

Yeah, sure.

Marc:

So I guess where do we start, right? So thinking about, you know, measuring what the carbon footprint is of your suppliers, how big is your problem and who are your problemsis a really good place to start. And then I think we’re going to talk about this a bit more later on, but like building a consensus within your organization as to how much you’re willing to pay to get a lower carbon option. Now, there are some where it’s cheaper to go lower carbon. So electricity energy production is generally cheaper if it’s green, whereas if you think about jet fuel, it’s about a 1,000 times more expensive right now. So there’s lots of, there’s a huge variation in lower-carbon options and what the different pricing is on them. But you need to decide as an organization, perhaps we’re willing to pay five percent more if it means that we get a lower carbon option. But being really clear and getting buy-in from leadership about, you know, what they’re willing to pay is essential because otherwise it becomes a bit of an internal greenwashing exercise. You never really make any changes. But once you’ve got that, you can start building this into your supplier profiles.

Conrad:

So, Mark, you and I have sort of built a partnership out here between our two companies because we look at the supplier data very holistically, right? The, you know, we’re really focused on the gathering and manage of commercial data. But alongside that all the risk and due diligence data that companies need to gather, manage and track in relation, you know, as they manage all of their suppliers, you know, all the areas, privacy security, in this case, sort of environmental concerns and ESG concerns. So we have this Golden Record and within Graphite now, we’ve enabled the ability to display the DitchCarbon data like, the summary level analysis of everything that you’re collecting and managing. We’ll talk a little bit more about the full scope of what that means, but that allows us then to layer in this carbon data directly into each of the supplier profiles in a powerful way that enables, you know, really good visibility of summary-level information. This kind of provides yellow flag, red flag kind of concerns. Hey, this is a supplier where there might be really high carbon intensity impact. So I need to dive in deeper. This, this is a supplier that can actually have a material impact on my ability to, you know, to drive this scope three admissions that we’re talking about. So this is the integration that we built between our data, you know, our platform and your data set and, you know, maybe you can take a few minutes and let’s talk about how this, where this data comes from and how it’s updated. And you know, all of those, all of those considerations.

Marc:

Yeah, absolutely. And just to reinforce the point, like, you cannot, you can’t be expected to kind of be making a decision on a supplier, onboarding a supplier and then have to go somewhere else to then work out whether they’re good from a sustainability point of view because you can’t look at that stuff completely in isolation. And that’s why this kind of works kind of so well. So, yeah. So just talking about what we do, we essentially capture disclosures wherever they are made… you know, as long as they’re kind of publicly available. So that might be via CDP, it might be via a local carbon accounting firm, it might be on their company’s website itself. We then draw that data in alongside any initiative participation. So SBTI, UN Sustainable Development Group, CDP, whoever it is. And so you can get a complete picture on that company’s carbon footprint and what action they’re -taking on climate. We then provide that summary level data which Conrad showed on the previous slide for every single company in the Graphite Connect database. So any company will get this sort of ranking whether they’ve disclosed or not. So you can kinda do that rag, start right at the beginning. And then if you want to deep into more information, we can give you everything you need in terms of understanding what that profile is. And I think we detail that on the next slide. So we look at that. Yeah, so we can see all of your suppliers. We can see whether how carbon intensive they are. We can see them compared to their peers. We can see their initiative participation. We can see what the category trends are for what they’re doing as well. More recently, I think that’s on the next slide. Again, we can do recommendations.

Conrad:

Before we jump there, let me just highlight that what this means is sort of within Graphite you get the summary information. You click on the link for more information, and then, you, this is where you start unlocking this very rich set of data where you’re pulling it from all of these different sources.

Marc:

But, and I guess from day one, anyone that’s a Graphite Connect user can log in and start seeing, right, who are the problem ones based on that red, amber, green. And if you want to dive into it more deeply, brilliant, you know, connect to us and get the full data set and you get 25 companies actually free, just click on, that QR code that’s Trinceton helpfully put on the deck for you. Yeah. And then I guess taking it, to the, yeah. So there’s actually another part that I was gonna talk about, which is actually recommendations. So talking about for each and every one of your suppliers, what are the things that they should be doing in order to further reduce their carbon footprint? So you can go from not knowing anything about your suppliers to, “Who are the problem ones? Who are reducing Where do I need to spend more time talking about them and negotiating?” And for all the rest of them, we can just give you exactly what they should be doing to further reduce their emissions without you having to engage directly.

Conrad:

So my, and this is not planned, so I’m sorry if this puts you on the spot, but I’m thinking back to, the question, the survey we put in the beginning and said, “What do you know about your supplier’s carbon?” And if I heard what you just said, right? Like all you have to do is get into this level of data and you all of a sudden, you could say, okay, this is the top of my supply chain in terms of which ones have carbon impact and which ones don’t…

Marc:

Yeah. Who do you need to worry about, right? Because most people, in my experience, actually Conrad can probably talk to this better than I can, but you have got a very large supplier base normally if you count every single supplier, but actually they’re probably proactively managing, you know, maybe 20 percent of those, right? And you want to make sure that the 20 percent that you’re proactively managing are the same top 20 percent in terms of carbon because they may not necessarily be the same thing. So they need to be on your radar so you can start engaging and understanding what they’re doing to reduce their emissions before you get regulated and have to start paying for it.

Conrad:

This is awesome. And, this 25 supplier free trial or whatever like, this is really cool. So we’ll have Trinceton send this out with follow-up to all the attendees in the webinar as well so that it isn’t just kinda lost in the deck here.

Marc:

Yeah, brilliant. Thank you, Conrad.

Conrad:

Sure. So, there’s a lot here, right? I mean, I know there’s I’m sure there’s people on the phone that are like, okay, I knew most of this stuff already because there was a couple of people that are, I think probably more mature in the process of their understanding of ESG and carbon. But I think for most people, and most people in procurement, this whole thing, is a little bit nebulous. How do I get started? So, you know, taking a step back and just simplifying it a little and saying, okay, I actually wanna make this a thing for me next year within my team. How, how do I, how are you recommending maybe talk through these key bullets that you’re suggesting?

Marc:

Yeah, absolutely. So first thing is, I mentioned it before really but like get buy-in, right? Because I think a lot of good intentions can go into this stuff. But if you’re not saying, look, I need a budget to understand what my carbon footprint is. And then, you know, what’s our appetite for reduction? You know, do we want to be aggressive on this? Do we want to sign up to SBTI, I do we wanna, do, you want to, you know, set aside a budget? Do we want to just incentivize people our next RFP to give us their data? You know, what kind of points what kind of scoring do you want to give associated with that? But getting that from leadership is really important. You can measure the suppliers, we’ve already spoken about how easy it is to do that, focus on the large ones. You know, there will be large emitters within your supply chain that you need to have a conversation with and say, look, we’ve looked, we’ve done a first pass. You are our top emitter, what are your plans? You know? And if their plans are, we’re not doing anything, we don’t care well, and you’re serious about reducing your emissions, then maybe that’s something that you need to start reviewing your next contract review with them. You know, so really focus on the ones who have the biggest impact. The next one is stop the rot. And this is where it really makes so much sense. It’s so much easier to select suppliers based on this criteria than change the behavior of existing ones. And in that way you can integrate into your business as usual. So when you’re reviewing suppliers on a quarterly basis, when you’re looking at your spend, as Conrad alluded to earlier on, you know, we spend X, what are our admissions that are associated with that? Is it going up? Is it going down? Look at your category managers. You know, they’ve got a budget in terms of spend. In terms, I’m sure, of many other metrics but let’s include carbon on that as well. And again, you can get that data directly from someone like Graphite Connect or DitchCarbon. And then you can really start accelerating your reductions. There’s loads of information that we’ve shared about current legislation both in North America and the EU, and how that impacts people all around the world. So if you need some more information to kind of go get that buy-in, then please drop into our blog or just kinda get in touch, we’re happy to have the conversation. But I think it’s like, yeah, getting buy-in, starting the measurements, get your quick wins with some of those bigger ones, potentially, make sure you’re not onboarding any more dirty suppliers and then integrate into your KPIs, into your reviews internally, so you can really kind of create that kind of culture change when it comes to reducing your emissions. Yeah.

Conrad:

Outstanding, Mark. Thank you for all of this, this background and introduction and additional resources here. There’s a, there’s a lot here behind this QR code. I was out there browsing around the other day. There’s tons of information as Mark talked about. So kind of continue your learning journey there. For those of you that are, you know, already users inside of Graphite, there’s a question, on the chat here. If a company is an IT product reseller, so let’s start with this first question Mark, if a company is an IT product reseller, that means they don’t build anything specifically, right? Like software services, what would we consider when trying to calculate scope three, category one purchase goods and service emissions, or kind of what’s your?

Marc:

Yeah, absolutely. So you’re buying in stuff, right? So anything that you buy and then pass on to, your customers whether you amend it in any way or not is part of your category one. So I’m guessing you buy from the big IT manufacturers. So the good thing about that is that they will have published really good data on what they are emitting and what their carbon intensity is and what their reduction plans are. So for you as an IT provider, you’re going to have very little scope one, very little scope two, very little of anything, I would imagine. Maybe some logistics stuff, but it’s gonna be that purchased goods and services is going to be the most interesting thing to you. There’s, and actually you can go a level deeper if you want. IT equipment is one of the sectors that has disclosed a lot of product-level data. So you can get even more accurate if you want to. So you can look at when I’m buying Dell equipment that’s great. But actually you’ll be able to find out, I hope, you know, what the carbon footprint is of the specific products that you’re buying and passing on. So there’s a real opportunity there for you to show that to your customers and show the reductions that you’re making. I’s really fascinating, actually, the difference between a high-spec laptop and a medium-spec laptop can be almost twice. So, you know, I’m using a MacBook Air here. It’s about 300 kilograms of carbon it take to make this laptop. If I was to go for a top-spec MacBook Pro with a big screen that could be as much as 600, 700 kilograms of carbon. So there’s a real difference and it’s about just kind of making your buyers and internally, and the people internally aware of that stuff so, they can make more sustainable choices.

Conrad:

So, Mark, I’m curious, you know, I’m a little bit more familiar with supplier diversity and I know like tier two supplier diversity, you know, I take a percentage of their total carbon based on the revenue I spend with them. It’s sort of like a percentage calculator and, you know, I get my pro-forma allocation of their total carbon footprint. Because unless I’m going down to a product level specifically like you’re talking about, is that how it works? Where, where you’re talking about carbon intensity per dollar? So if that company’s total carbon footprint is, you know, X, and I’m like point five percent of their total revenue, then I get point five percent of X is the carbon that carries into my scope three.

Marc:

Exactly, yeah. That’s our way of calculating, you can get at product level, but that’s the way that we advocate especially if you’re early in your journey. Because really the only thing that everybody knows about their suppliers is what you spent with them. You know, the only thing that universally people know is that and so that’s a fantastic place for procurement people to start that journey absolutely like you say.

Conrad:

Yeah, yeah. And then, and now I’m assuming that allows me to kind of do apples-to-apples comparison across my dollars, right? Because I may have some suppliers that like you’re talking about with Apple that are reporting very specific, you know, carbon measures at a product level, but I’ve got maybe somebody else who’s not being quite so robust and I can’t really make those kinds of comparisons.

Marc:

Exactly. Yeah. The point I was making is the IT equipment is one of those areas where there’s actually a real rich amou,t of data.

Conrad:

Yeah, yeah. No. And that’s super cool. I hadn’t thought even for a minute on like when I’m buying a laptop to be thinking about, is this laptop more or less carbon intensive to create than the other one? Like who would have thought, right? I mean, maybe looking at it from this side of the conversation now, it seems kind of intuitive, but I’m sure cars and trucks, and, you know, carpet and all of these products are really quite similar in terms of where they’re manufactured, you know, how much shipping and logistics goes into it. All of the rest of these things have really meaningful impact, on, you know, the carbon footprint.

Marc:

Absolutely.

Conrad:

Stacey, I don’t sorry. I can’t really see all the screens and see if you’re still on and if that answered your question, if you’d like to dive in a little bit deeper there, we’re happy to go a bit deeper or to everybody, you know, I’ve known Mark now for gosh, I don’t know a year and a half two years. Mark is one of the most generous, kind people I know, and I know he’d be more than happy to spend time with you, with any of you without sending you an invoice. So if you’d like a little bit more, you know, advice and input and kind of figuring out how to look at your program. I’m sure that he’d be happy to help you. The second question from Stacey, is there a charge to receive the Graphite climate? You’re saying the detailed Graphite climate metrics, the summary. So I’m gonna differentiate between the detail that Mark showed a few pages ago and the summary-level that are in the, within the application. The summary-level data is available to all, you know, across all users inside of Graphite for free. Mark has generously made that available as part of our partnership. And the detailed metrics, if you, and maybe I’ll just kinda jump back here to where is it here to like this level of detail, these details are based on having beyond the 25 kind of free get started going there and do some research. This is, this is available based on the relationship that you would have in place with Mark.

Marc:

Yeah. And, and, just to give you a rough idea, it’s between one and two dollars per supplier roughly.

Conrad:

So, so really, very affordable, especially if, you can look at the summary level information to triage which ones are the ones I care most about and then dive into the details on the other ones. All right. So I don’t see any other questions inside the chat. I think everyone’s allowed to unmute themselves. If anyone wants to pipe up and ask a question, let’s kinda hold it open for another 30 or 60 seconds here and see if anybody else wants to pipe in with a question, happy to take them. While we’re waiting for that, Mark, thank you for your time, thank you for your partnership. This is, this is really exciting. I’m very happy to, you know, make this available and enrich all of this Graphite information, the commercial data, and all the other risk and related data, with the data that’s available for everybody. Mark, maybe, you know, people are asking about your e-mail maybe you can pop it into the chat there.

Marc:

Doing it now.

Conrad:

Your, your mother’s maiden name and your PIN number would be good as well.

Marc:

[Laughs]

Conrad:

Excellent [email protected], Mark with a C. Alright, everybody. Thank you so much. Have a very, very, merry Christmas and a happy New Year, be safe and we’ll see you on the other side. Thank you.

Marc:

Thanks so much, Conrad. Thank you everybody for joining.