Supply chain case studies

How CDP supply chain members are tackling emissions in their supply chains.

Ajinomoto

Product innovation, supplier collaboration and consumer engagement to tackle the environmental impact of food packaging

The Japanese food, chemicals and pharmaceuticals corporation, Ajinomoto, operates 118 plants and employs over 30,000 people, selling its products in more than 130 countries worldwide. However, by far the biggest source of environmental impact related to the company’s operations occurs upstream in the supply chain.

Purchased goods and services account for over half of the group’s total Scope 1, 2 and 3 emissions, producing the equivalent of 7.7 million tonnes of carbon dioxide in 2016. Most significant within this category are the purchase of the raw and processed materials that go into manufacturing Ajinomoto’s own products, as well as the packaging materials that are used to contain and protect them.

By working to take action on the impact of these materials, Ajinomoto is therefore able to have a far greater potential positive influence than by focusing just on its own Scope 1 and 2 emissions, which together make up just 17% of the company’s total. This part of the supply chain is also where the majority of water and deforestation issues can arise, giving increased reason for action.

One of the areas where the company has been making good progress on sustainability recently is in packaging. This has upstream impacts from the production of packaging materials – particularly plastic, paper and cardboard – alongside downstream impacts from product logistics and post-consumer waste. In 2016 the manufacture of packaging for Ajinomoto’s products required 235,000 tonnes of raw material input, including 45,000 tonnes of plastic and 139,000 tonnes of paper and cardboard.

The business has taken a collaborative approach to create change, bringing together key stakeholders on a regular basis through events, including the Ajinomoto Group Food Conference and a Packaging Designers’ Liaison Meeting. The company also closely works with government and local authorities, particularly in Japan, to help overcome technical, legal and behavioural barriers to increasing the rate of packaging recycling.

As a company with a strong focus on R&D, one of the biggest areas of success for Ajinomoto has been through packaging innovation and redesign. To ensure a consistent approach is taken across all group companies Ajinomoto launched an updated environmental assessment procedure to be used before releasing any new or revised product. This involves going through two separate exercises: using an environmental assessment checklist , followed by scoring containers and packaging against the company’s own Eco-Index assessment table.

The checklist takes into account product design issues such as: ensuring material use is reduced, and wherever possible compatible with reusing or recycling; the sustainable procurement of materials; designing for loading efficiency in distribution; helping to reduce food loss; and promoting environmental consumer behaviour through labelling.

Packaging is then scored across a variety of points-based assessment criteria, such as whether it extends product shelf life, improves loading efficiency or has lower greenhouse gas emissions. This index is regularly reviewed and updated to ensure that it is driving positive outcomes, with the most recent revision launched in April 2017.

One example of this approach being put into practice is with Ajinomoto’s Blendy bottled coffee products. Ajinomoto AGF worked alongside the company’s packaging supplier, Toyo Seikan Group, to pioneer technologies that take post-consumer plastic bottles and recycle them into heat-resistant PET resin. Thanks to this work Ajinomoto has become the only company worldwide to sell drinks in 100% recycled heat-resistant PET bottles, reducing the use of virgin plastics from fossil fuels by around 2,000 tonnes a year.

A number of other innovations are being adopted, working alongside suppliers such as Acteiive Corporation, Dai Nippon Printing, SATO Green Engineering and Toyo-Morton. These include the use of plant-based bioplastics, which can make up more than a quarter of the packaging for some products, as well as using plastics that are able to absorb and lock away carbon dioxide during incineration.

To demonstrate the environmental credentials of its packaging Ajinomoto has developed the Aji-na Eco and Hotto-suru Eco labels, which are used to communicate to consumers the positive changes made by the company. These are often used to highlight improvements that may not be superficially obvious, such as the switching to certified sustainable timber and recycled paper, reducing the amount of packaging or removing an internal tray. They also encourage more environmentally-friendly behaviours, by making it clear that the product can be easily separated when recycling, or making it clear that containers can be refilled and reused.

Through its efforts to improve the sustainability of its packaging Ajinomoto has already made substantial strides in reducing upstream material use, helping to reduce supply chain greenhouse emissions, water use and deforestation. It is also having a positive impact in tackling downstream consumer food waste and packaging waste. The business intends to continue these efforts over the coming year, as part of its ongoing commitment to the environment.

Braskem

Addressing environmental challenges from an increasingly diverse supply chain to support business growth in more sustainable product lines

Braskem is the largest petrochemical company in the Americas and the world’s fifth largest producer of basic petrochemicals and thermoplastic resins, operating in 70 countries around the world. It is also one of the few major petrochemical companies to integrate operations across both basic petrochemicals and thermoplastic resins, providing the company with a competitive advantage from increased scale and operational efficiency.

Given the nature of Braskem’s business, it is essential that the company has a secure and competitively priced supply of feedstock for making its core products. It is therefore a key part of the company’s strategy to continue to expand and diversify its feedstock profile, while working on the development of more sustainable technologies and solutions for the plastics supply chain.

In recent years the company has invested significantly into developing alternative feedstock sources that do not involve using virgin fossil fuels. These efforts have focused on two areas: on the one hand scaling up 100% renewable sources of plant-based feedstock; and at the same time building up a supply chain of plastic waste that can then be recycled into new material.

This strategy has been driven in part by Braskem’s recognition of the importance of taking action on sustainability issues, but it also reflects a growing customer demand for more sustainable products. For example, a number of large consumer goods companies have expressed ambitions to adopt more sustainable packaging that contains bioplastic or recycled plastic.

Thanks to the company’s research and development efforts, in 2010 Braskem was able invest in building a US$290 million facility that would make the company a world leader in biopolymers. The plant has an annual production capacity of 200,000 tonnes of polyethylene produced entirely from renewable resources.

This green polyethylene is sold around the world under the company’s I’m green™ brand. The product has also been certified as having a negative carbon footprint, as during its lifecycle the net effect is to sequester greenhouse gases from the atmosphere.

The procurement of agricultural inputs – which currently account for 3% of Braskem’s raw material feedstock – has brought the company a different set of supply chain sustainability challenges, including deforestation and biodiversity issues. As a result of this Braskem has needed to develop and enforce a Responsible Ethanol Sourcing Framework for its ethanol suppliers, to cover a range of sustainable development principles and ensuring good environmental practices.

In November 2017 the company also announced that, working in partnership with Denmark’s Haldor Topsoe, it will build a demonstration plant in Denmark. This facility will produce monoethylene glycol, a key component of PET plastic, without needing to first convert sugar into ethanol. Although process this will initially use cane sugar, it opens up the possibility of having a more diverse supply chain that can use beet sugar, or potentially even second generation sugars made from biomass.

The other major initiative from Braskem, to help meet the growing customer demand for greener plastics, has been a focus on boosting initiatives to produce recycled plastics from post-consumer plastic waste, particularly within Brazil. This has had the additional benefit of helping to promote a more circular economy, growing the amount of recycled input available for future manufacturing.

As well as needing to develop the recycling chain to secure a regular and sufficient source of plastic waste for use as feedstock, avoiding excessive contamination is a key concern as this is one of the main technical problems that affects the quality of recycled products. To address this Braskem created the Wecycle platform, looking to increase the value of post-consumer plastic waste by building partnerships with Braskem clients, recyclers and brands to find better solutions for them that promote the use of recycled plastics.

Wecycle provides audit processes and quality assurance for recycled plastic materials, providing manufacturers with confidence to make greater use of it. It also works with businesses including Brazil’s largest retail chain, GPA Group, to support greater levels of consumer recycling.

Alongside this, Braskem has created the Ser + Realizador programme to support key waste management cooperatives in Brazil’s recycling supply chain, at the same time as helping to strengthen its own supply of recycled raw material input. This provides training and environmental education to waste pickers, as well as management consultancy support to waste-sorting cooperatives.

Through the programme Braskem also provides new equipment for waste pickers and investment for cooperatives to upgrade infrastructure. To date this has benefitted 1,300 waste pickers and 35 cooperatives. Braskem is currently working towards a 2020 target of providing development support for waste pickers in order to help them raise their incomes by 70%. In addition, the company aims to benefit 4,000 workers through training and better work conditions.

These combined efforts are allowing Braskem to expand its sustainable product lines and drive future business growth. As result of these efforts the company has recently been able to launch 100% recycled polypropylene and polyethylene resins produced entirely from recycled big bags and sacks.

Hewlett Packard Enterprise

Using a science-based approach to target setting and capability building to drive supply chain emissions reductions

Hewlett Packard Enterprise (HPE) is one of the world’s largest IT companies, providing customers with a range of technology and solutions including servers, storage, networking, cloud services, software and finance.

The company noticed a clear trend, with corporate and public sector customers demonstrating increasing levels of concern about the environmental impacts of the products and services they purchase. Therefore an important part of the company’s strategy for future business growth involves strengthening its reputation as a trusted sourcing partner for these organisations.

HPE is achieving this by embedding the highest levels of sustainability and responsibility within core customer offerings. This involves implementing innovations that result in energy and resource efficiency, both in product design and HPE’s own operations. At the same time, a serious emphasis has been placed on reducing upstream environmental impacts through systematic engagement with suppliers.

The biggest area of focus is on the energy performance of HPE’s product portfolio. The company is aiming to radically improve this, with the aim that by 2025 it can improve energy performance by 30 times when compared to 2015 levels. This addresses the fact that close to 60% of the full value chain greenhouse emissions currently associated with the business come from the energy required to power its products.

However, the majority of the remaining value chain emissions occur within the manufacturing supply chain. Significantly, as product energy efficiency improves and electricity grids become lower carbon over the next decade, the overall proportion of total emissions accounted for by manufacturing is expected to increase. Reducing the emissions intensity from making its products has therefore become the major area of focus for sustainability efforts within HPE’s supply chain.

To set its ambition the company decided to use an objective external benchmark, so that HPE can be sure it is doing what is genuinely necessary rather than what is readily achievable. It is doing this by taking into account what the best available climate science says will be necessary within the IT sector to achieve the ambitions of the Paris Agreement of keeping global warming well below 2°C compared to pre-industrial levels.

To deliver on this, HPE has set itself the goal of achieving an absolute reduction in its manufacturing-related supply chain emissions of 15% by 2025, which is in line with climate science. And this has been coupled with an engagement target for its supply chain, aiming to also have suppliers representing 80% of the company’s total manufacturing spend set science-based targets for their own operations by 2025.

By becoming the first company in the world to attempt such an ambitious and comprehensive supply chain engagement programme based on climate science, HPE is developing a new model for engagement built around making the most of the strongest levers it can use to influence suppliers.

The most obvious of these levers is procurement spend. By clearly stating that by 2025 80% of HPE’s manufacturing spend will go to suppliers with science-based targets in place, this creates a long-term commercial incentive for suppliers to set their own targets.

This requirement now sits alongside existing greenhouse gas disclosure expectations that already exist within the company’s social and environmental responsibility scorecard, which directly influence procurement decisions. And to ensure good data quality suppliers are also asked to verify their emissions, following CDP verification requirements.

But HPE has gone beyond just using spend, proactively working to demonstrate to suppliers the positive economic benefits from taking climate action and build their capabilities. Working alongside experts and NGOs – including the CDP supply chain program – the company helps drive best practice and disseminate content that supports suppliers in managing climate risks. It also helps them build a strong internal business case, for example through highlighting that according to CDP data the average internal rate of return for investments on emissions-reduction activities is nearly 40% in the IT sector.

HPE is working with partners to develop practical tools that suppliers can use to set and achieve their own science-based targets, putting the company on track to be the first in any industry to create customised science-based targets for suppliers. HPE will also provide them with tailored feedback and support, as well as webinars on renewable energy procurement and factory automation. This is helping suppliers overcome some of the complexities involved in target-setting, measuring ongoing progress and achieving reductions.

Alongside this HPE is using accountability and supply chain transparency as a lever for action. Since 2007 the company has published a list of its suppliers. As part of this list, HPE is going one step further and becoming the first company to now publicly track individual suppliers’ progress on greenhouse gas management, as well as the setting and achieving of science-based targets.

These combined efforts are being put in place to help increase the chances that HPE’s suppliers will adopt robust targets and follow through on their implementation. If they do, the impact could be considerable. The company estimates it will help suppliers avoid approximately 100 million tonnes of greenhouse gas emissions – the equivalent of taking 21 million cars off the road for a year.

The final lever of influence for HPE is to engage its peers in collective action. By taking a leadership position, the company aims to catalyse the IT industry and other large corporations to make similar commitments. Partnering with BSR and POINT380, HPE is currently developing a white paper and open resource guidance that will help to solidify standards around supplier engagement on greenhouse gas reductions more broadly.

HPE believes that encouraging its suppliers to set challenging targets and build their own internal sustainability capabilities will have a positive ripple effect upstream through the supply chain, beyond its direct suppliers. And when customers use HPE’s energy efficient technology, manufactured in factories with science-based targets, they will cut downstream emissions, achieving more with less environmental impact.

Kellogg Company

Developing a climate-resilient agricultural supply chain that supports the 2°C Paris Agreement goal

Kellogg Company is one of the world’s largest food businesses, selling its products across 180 countries. It is the world’s largest manufacturer of cereals, the leading producer of frozen foods in North America, and since acquiring the Pringles® brand in 2012 is the second largest producer of snack foods globally.

As a global food company, the largest source of environmental impact in the company’s value chain is agricultural production. Kellogg recognises this sector faces sustainability challenges – particularly climate change and water scarcity – that are expected to increasingly impact the industry over the coming decades.

At COP21 in Paris, Kellogg formally announced that it would align its own emissions reductions with a below 2°C pathway, becoming one of the first global companies to commit to Scope 1, 2 and 3 science-based targets. This involved setting the goal of reducing its own Scope 1 and 2 emissions by 65% by 2050 on an absolute basis compared to 2015, alongside a challenging Scope 3 target of achieving a 50% reduction by 2050 from the same baseline.

These goals are the evolution of previously identified targets and foundational work already in progress. Kellogg acknowledges that no one company can do this alone, and has consulted with trusted NGOs and partners including Antea Group, World Wildlife Fund, World Resources Institute, CERES, Sustainable Food Lab and CDP to solicit expert feedback during the target-setting process and to assist with early implementation.

One of the challenges with being among the first companies to set goals is getting an accurate baseline for 2015 Scope 3 emissions. To obtain the baseline, Kellogg is collaborating with CDP through their Supply Chain programme to collect high-quality primary data from direct global suppliers to gather three years of data. Although the company is making progress – by reaching 65 percent of supplier spend in 2017 – the process continues to be refined and improved.

In the meantime, Kellogg is taking action to drive improved sustainability practices across its entire value chain.

Kellogg has identified 10 priority ingredients – corn, wheat, rice, potatoes, sugar beet, cocoa, sugar cane, vanilla, palm and fruit – that together account for the majority of its supply chain. However, the company’s direct suppliers are not the growers of these ingredients, they are the millers and processors of crops. This means that Kellogg itself is typically operating one or two steps away from farmers and farm-level impacts.

Therefore, Kellogg works to set policies and develop initiatives that engage its direct suppliers on sustainability issues such as climate and water. The company also seeks ways to work with its suppliers to help farmers improve their agriculture practices. Today, Kellogg is actively engaging with over 70 major suppliers of its priority ingredients, ensuring they are measuring their environmental impacts, driving continuous improvement and investing in farming communities.

Kellogg is also involving itself in initiatives to identify and advance approaches for promoting climate smart agriculture, working with NGO partners and participating in international and regional working groups, as well as multi-stakeholder initiative. The company recognises that its ambitious goals come with common challenges, so working collaboratively is an important part of adapting to changing industry dynamics.

Many of the company’s direct efforts are enabled through the Kellogg’s Origins™ Programme. The programme provides farmers with support to help them adopt sustainable practices and build resilience to the impacts of climate change. This includes increasing yields, optimising fertiliser use, reducing water use and emissions, and improving soil health. It also supports farmer and worker livelihoods through training, improving market access, and making finances available. This global programme is directly benefitting nearly 300,000 farmers, including some farmers that are not in Kellogg’s direct supply chain.

Kellogg is proud of its progress to date, but recognizes that achieving its targets can be a challenging process. Since the announcement of its commitments, Kellogg’s progress to reduce energy and greenhouse gas emissions from manufacturing per metric tonne of food produced has been slower than expected.

This is a result of several factors. Impacts from climate change can increase emissions. For example, droughts have limited clean hydropower output, and lower oil and gas prices encourage utilities to use more fossil fuels in some markets.Additionally, as the company continues to grow, more energy is needed to produce food for its expanding portfolio.

To address this, Kellogg is focusing on reducing emissions through increased use of renewable electricity, engaging in partnerships like RE100 to bring more renewables to local grids, and driving down the cost of green power for everyone. In 2017, Kellogg achieved 20% renewable electricity levels through contracts with local utilities and third party electricity providers in Europe and the United States. Detailed progress on these efforts will be reported in Kellogg’s 2017 Corporate Responsibility Report.

Kellogg continues to build supply chain relationships and implement plans that will deliver continuous improvements towards helping to achieve its goals. Through these efforts, Kellogg aims to play a major role in building a resilient, low carbon value chain that will help promote food security and support the company’s own sustainable growth for the future.

METRO

Working collaboratively alongside key suppliers to find ways to multiply impact through influencing customer choices and behaviour

METRO is a leading international company specialising in wholesale and food retail. The company operates in 35 countries and employs more than 150,000 people worldwide under the brands METRO/MAKRO Cash & Carry and Real hypermarket, as well as associated delivery services and digital initiatives.

Through its wholesale business, METRO is one of the most important global intermediaries between major FMCG companies and other organisations. It has 21 million professional customers across 25 countries in Europe and Asia. These include restaurants and hotels, catering and hospitality businesses, smaller independent retailers, offices and public sector institutions.

The most significant environmental impact associated with a retail businesses typically occur upstream or downstream of that company’s own operations. These primarily relate to raw materials and the manufacturing of products sold in stores, as well as the way they are used and ultimately disposed by end customers.

METRO has introduced a sustainable sourcing policy, along with a range of sustainable procurement criteria and goals – particularly around its own-brand products. Nevertheless, the company recognises that in many cases its key branded suppliers are better placed to act on upstream impacts.

METRO’s most important direct suppliers are major global consumer goods businesses, who collectively produce a large proportion of food and non-food product ranges sold in the company’s stores. So whilst the company actively works to support its smaller suppliers on sustainability, METRO has taken a different approach to working with its larger suppliers.

Many of METRO’s largest suppliers already have in place their own advanced sustainability strategies, making substantial efforts to influence their supply chains and innovate product design in order to reduce negative environmental impacts.

METRO has therefore found ways to leverage its own position within the supply chain to help deliver positive sustainability impact downstream of its business. This has been achieved by working closely with these large suppliers to increase sales of more sustainable products and promote messages that drive better customer behaviour.

This approach has been put in action through the METRO Water Initiative, a global commercial campaign to raise awareness on water conservation. This reflects the fact that water scarcity and pollution have become a massive concern all over the world, with the consequences already being felt in a number of METRO’s key countries, such as Turkey, China and India.

When METRO developed this initiative, the company was not sure about the willingness on collaboration of its suppliers. However, when asked they were surprisingly eager to collaborate, seeing the initiative as an effective way to deliver on their own sustainability targets. The initiative now involves twelve major FMCG suppliers – Henkel, Unilever, P&G, Colgate, L’Oreal, Mars, Barilla, Coca-Cola, PepsiCo, Danone Waters and Diageo – that each have their own ambitions around influencing customers to use water more responsibly.

The product categories manufactured by these companies – for example those used in laundry and cleaning, bathing and personal care – are directly related to the overwhelming majority of water consumption in private households. An important part of the initiative is therefore working with these suppliers to grow the market in order to offer more sustainable products.

This collaboration involves jointly developing marketing and communication campaigns that encourage the sales of products containing fewer polluting chemicals, or require less water usage. The initiative now operates across more than 20 METRO Cash & Carry countries, with teams able to adapt their approach to suit their own local circumstances and culture.

METRO Water Initiative also encourages suppliers to put in place special promotions around products that may not be directly associated with unsustainable water consumption, but where sales can be used to automatically provide donations to NGOs working on water issues.

For example, in Pakistan the company has partnered with P&G to sell water treatment powder P&G Purifier of Water, raising money for Health Oriented Preventive Education (HOPE) to provide clean and safe water to disaster-struck communities. This has already helped providing 45 million litres of clean drinking water, supporting around 200,000 people for 4 months.

The METRO Water Initiative has proven to be a success so far, with the company stepping up efforts to grow it even further in 2018 and 2019. This will involve moving it to new countries and a wider range of product categories, such as dry packaged foods and beverages.

Through its work with suppliers on a commercial campaign that also delivers improved sustainability, METRO has found a way to enhance and coordinate the action being taken by several major consumer goods manufacturers that are facing similar challenges. This has a multiplying effect, engaging millions of METRO’s professional customers and cascading impact downstream to their customers and employees.

Royal Philips

Putting in place a systematic approach to supplier development and capability building to drive continuous improvement

Royal Philips is a leading global health technology company, specialising in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, as well as in consumer health and home care products. Many of these products are complex in their design, requiring a huge variety of materials and components for their manufacture. This means the company has a broad set of procurement requirements, which in turn brings a wide spectrum of potential sustainability impacts in the supply chain.

In the past the company had put in place a supplier code of conduct, supported by a monitoring system based on third party audits, with around 2,500 of these conducted since 2006. However, when reviewing this data, it became apparent that many suppliers were just focused on compliance, rather than continuous improvement.

A lot of suppliers seemed to just be applying solutions primarily aimed to address areas of sustainability concern, without necessarily tackling the underlying issues. There was also a tendency for suppliers to shift priorities once they had reached an acceptable level of performance, rather than looking to build on their efforts.

To take action on this and move beyond a mindset that focused on audits, Philips developed a new Supplier Sustainability Performance (SSP) programme. This is used to systematically ensure that all suppliers surpass a minimum threshold of performance standards, putting in place structures for robust monitoring and regular engagement to drive continuous long term improvement.

Philips asks all suppliers to sign up to a code of conduct contained within its Sustainability Agreement, as well as expecting them to comply with certain international management standards, such as ISO 14001 or OHSAS 18000. Core principles are transparently explained in the Philips’ Supplier Sustainability Declaration, which sets the frame of reference for how suppliers are expected to help Royal Phillips deliver on its sustainability strategy.

The company developed a system that allows for differentiated levels of expectations based on relative performance and maturity levels. This recognises that smaller businesses do not have access to the same resources and capabilities as multinational corporations, so may require greater levels of support. Philips takes a flexible approach, determining the level of active engagement it needs to have with suppliers in order to deliver on its objectives.

The status of a supplier is determined by the self-completion of a supplier assessment questionnaire, providing supporting evidence to back up claims. Once suppliers have been rated across nine separate areas of management system elements, resulting in a single weighted score, they are then put into one of four separate SSP supplier categories that determine how Philips will interact with them.

Those that score greater than 90% on their questionnaire after validation are considered ‘Best in Class’. With mature, advanced sustainability programmes they can be used as examples for others to follow. At present they are only required to provide regular self-assessment.

Below them comes the ‘Do It Yourself’ category, for suppliers with good fundamental performance in place, but that are not yet achieving the highest scores. They are supported through peer learning and the sharing of best practices within the supplier network.

Strategically important suppliers who are expected to be within the supply base for an extended period, but do not yet have a good level of sustainability maturity, are put onto a Supplier Sustainability Improvement Plan. This means that Philips will undertake a site assessment understand the actual position the supplier is in, then collaboratively work with them to create an improvement plan. Proactive support and training are then offered to help them deliver on this.

The final category relates to suppliers that may be failing to meet expectations, who are considered through the lens of a ‘Zero Tolerance’ approach. There are certain areas where violations of expected supplier conduct are unacceptable, meaning that companies cannot enter into the Philips supply chain. These include systematically providing fake or falsified records, child labour, failure to comply with regulatory requirements, and causing immediate threat to either human beings or the environment.

When a company is identified as being of a ‘Potential Zero Tolerance’ status then they are asked to: propose a plan of action to mitigate or resolve identified issues; commit to following this through; provide regular updates backed by evidence of improvement; and avoid quick fixes. Where minimum requirements are met the company will then consider suppliers to be of ‘No Zero Tolerance’ status, and as such continue in one of the other SSP supplier categories.

The introduction of the Supplier Sustainability Performance programme appears to have improved supplier relationships, increasing levels of dialogue and improved transparency. By moving away from audits, which were seen by some suppliers as a drain on their time and money, the new approach is reported to be more like a partnership where suppliers they do not feel they will be punished for what they disclose. In response, they have demonstrated a higher level of commitment and a willingness to engage with their own sustainability performance on a deeper, structural level.

Thanks to successes so far, Philips is now looking to roll out its programme even further, looking to pilot it on a larger scale where it is potentially accessible to multiple organisations using similar supply bases.

Sky

Pioneering a circular economy model by using sustainable product design and reverse logistics to create a closed loop system

Sky is one of Europe’s leading entertainment and telecommunications companies, providing television, phone and internet services to 22.5 million customers across the UK, Ireland, Germany, Austria and Italy.

The company has put in place robust internal procedures to address the environmental and social impacts of its supply chain, actively engaging with all new and existing suppliers which fall within the top 80% of Sky’s total annual supplier spend. As a result Sky is now able to report that 40 of its top 50 suppliers have integrated climate change initiatives into their corporate strategies.

In addition, Sky became one of the first broadcasters to make it mandatory for production companies to measure and reduce their impacts using the UK film and television industry’s albert+ sustainable production certification as part of commissions for Sky.

Sky understands that its main focus for its supply chain sustainability efforts should be on its most material impacts. As a way to help monitor and evaluate these impacts, Sky has been conducting life cycle assessments on its products for a number of years, which are used to drive ongoing improvements in their sustainable design.

This process has revealed that the use of set-top boxes, provided to customers so they can access Sky broadcasting, are one of the most significant sources of greenhouse gas emissions across the company’s full value chain.

Indeed, customers’ use of Sky’s products – which includes broadband routers as well as set-top boxes – accounts for over half of the company’s total scope 3 emissions. And a further 20% of those scope 3 emissions come from purchased goods and services, which includes the manufacturing of that hardware by Sky’s suppliers. Continuously looking at ways to reduce the impact of the set-top box is therefore a priority focus.

The electricity consumption in the use-phase of a set-top box represents the majority of emissions across its life cycle. Sky has therefore been continuously working with suppliers to address the energy efficiency in product design. This is an area where good progress is being made. Coupled with detailed insight into how customers use its products, Sky has further developed three power modes which take advantage of energy efficiencies based on usage patterns.

But looking beyond energy performance, Sky has put a particular emphasis on reducing the embedded emissions related to the production of its set-top boxes. Product life cycle assessments have helped to identify hotspots of emissions, highlighting areas where improvements can be made.
This has led to a reduction in the amount of materials that go into the box itself, as well as helping to remove metal components where lower impact alternatives can be found. Building smaller, lighter boxes has also reduced the amount of packaging they require, at the same time as cutting transport emissions.

Making proactive efforts to engage with manufacturing partners has helped Sky to overcome barriers, where those partners may previously have been concerned that improved sustainability would cost time and money. The company has gone beyond merely auditing its suppliers by providing consultancy support to improve performance and jointly develop strategies to reduce emissions. For example one manufacturer, Zinwell, has invested in a large-scale solar installation for its facility in China, which now provides half of the electricity needed to manufacture Sky’s products.

However, despite all this progress, Sky has now gone one step beyond just looking to reduce impacts. The company is aiming to close the loop with its new Sky Q set-top boxes, which have been designed with the circular economy in mind.

Design improvements have been made to allow boxes to be refurbished more effectively, including the ability to replace parts without dismantling the box. Sky is working with key partners for reverse logistics and distribution, enabling them to carry out product repair and recycling.

These partnerships operate with a zero landfill policy, ensuring that all material inputs are processed in the most effective way possible to retain their economic value. This supports Sky’s commitment to reuse or recycle all products returned to them.

Over the coming years, Sky will continue to take action on its supply chain, as well as helping to perfect its closed loop system. In order to strengthen its efforts, the company is currently focusing on increasing the accuracy of its scope 3 emissions data which will help inform subsequent reduction targets.