GREENING THE SUPPLY CHAIN
Turning your attention – and applying pressure – to suppliers’ sustainability efforts
For the avoidance of doubt, as lawyers like to say, companies can eliminate their corporate travel emissions in only one way, and that’s not to travel.
Although that has happened during the coronavirus pandemic, business trips are not about to cease permanently. Even a slew of professional service firms which have made public net zero emission pledges in recent months have committed to reduce their travel-related emissions by, typically, 30 per cent to 35 per cent from 2019 levels – certainly not 100 per cent.
But once companies have cut emissions by cutting their demand, is there any point in going on to address supply as well? Can a company’s choice of, and engagement with, travel suppliers contribute in any meaningful way to tackling the climate crisis?
There is even an argument that a few token environmental questions in a request for proposal deflects companies’ responsibility for reducing their travel-generated pollution from themselves to their suppliers. In that case, is attempting to green the supply chain futile at best, counter-productive at worst?
Absolutely not, according to those in travel who have engaged deeply with sustainability issues. “Managing demand is more important than managing suppliers but yes, it is still worthwhile,” said Daniel Tallos, travel buyer for a large retail industry company.
Supplier engagement makes total sense for two key reasons, Tallos and other travel managers and sustainability experts maintain. The first is that some supplier choices are genuinely less polluting than others. The second, perhaps overlooked reason, is that corporate customer pressure forces suppliers to go greener.
However, pressure of this kind is likely to succeed only if suppliers detect sincerity from their customers. BTN’s survey of travel buyers conducted for this issue, suggests attitudes vary widely. While 14 per cent ask travel suppliers for granular detail about emissions reduction, and another 30 per cent for “some detail”, 11 per cent characterise their requests as no more than “checkbox-type” information requests and 26 per cent say there is no engagement with suppliers on sustainability at all. Nearly a fifth of travel buyers don’t know.
Then there is the question of what action clients take on the information they receive: 31 per cent deploy no sustainability criteria in their supplier decision-making and 3 per cent admit to not seriously considering the answers they do receive. Another 19 per cent say pricing outweighs suppliers’ sustainability records, while 36 per cent say environmental factors are influential only if all other decision factors are equal.
However, 12 per cent of buyers are doing things differently. They say supplier alignment on sustainability goals significantly factors into partner selection.
To make that difference, said Andrew Perolls, CEO of sustainable travel consultancy Greengage, “buying decisions need to balance convenience, cost and CO2.” But companies need to show real intent to convert this neatly alliterative slogan into practice.
For Julia Fidler, senior sustainability programme manager for procurement at Microsoft, that means upending traditional procurement practice and operating a double bottom line: one for financial performance and a second for environmental impact.
“We’ve delivered a signal by sharing that we’re willing to pay extra for sustainable fuel. Our ability to say we have looked at this beyond the normal procurement perspective has had a ripple effect. The interest from our peers and suppliers has been fantastic”
Julia Fidler, Microsoft
MAKING LOWER CARBON BUYING CHOICES
“Before choosing between two airlines, we have to think: ‘do we need to travel?’” said Horst Bayer, founder of TravelHorst Sustainable Business Travel Consulting. “If we decide it is necessary to travel, then yes, we should look at whether one is more environmentally friendly than another.”
Factors which inform this determination are complex. They include aircraft type, engine choice, load factor, fuel selection, route and altitude flown. According to Cait Hewitt, deputy director of the UK-based Aviation Environment Foundation, which campaigns on the impact of aviation on people and the environment, the differences can be huge. “The work most helpful to us is done by The International Council on Clean Transportation, which suggests there can be a difference of 60 per cent on a transatlantic flight from one airline to another,” she says.
Perolls cites evaluations by business travel carbon reporting consultancy Susterra of flight options to Glasgow from London’s five airports. If customers choose London City Airport, CO2 emissions per kilometre can be 43 per cent higher than from Gatwick because of the steepness of the climb on take-off and smaller aircraft types used.
However, obtaining reliable data for buyers to favour airlines which pollute less is difficult, and putting that information in front of travellers is even harder. Lack of data is the story asserted most consistently and with most frustration by every interviewee for this article. “It’s worth trying to do but it’s not information that’s easy to get at the time of booking,” said Hewitt. “It doesn’t seem possible to enter ‘most fuel-efficient airline’ as a search criterion. You might get an airline’s average efficiency but it’s harder on a route basis.”
Lack of visibility is also the most critical challenge identified by Mark Avery, global business services and travel leader for PWC. The firm’s UK travellers reduced travel-related CO2 emissions by 6 per cent between 2007 and 2019 in spite of the business more than doubling in size over that period, but Avery feels he could achieve even more with good data.
“One of the challenges with where we are now is how do we help our people make environmentally friendly decisions?” Avery said. “We don’t provide anything at point of sale to help travellers. First, we need to ask ‘do you need to travel?’ but then it doesn’t say ‘these are your choices and their differentiation in terms of sustainability.’ I think we could get 10 to 20 per cent carbon reductions just by getting the right data to share with the traveller at point of sale.
Tallos feels exactly the same pain. “Our travellers are coming to us asking how they can do the right thing,” he said. “We’re not in the right place to help them at point of purchase to make the right decision. We can’t message what is a wiser choice.”
PUTTING THE PRESSURE ON
Avery finds that “getting emissions data from airlines is a challenge.” He presses them for average emissions per passenger per route but it is rarely forthcoming.
Hewitt encourages buyers to keep pestering. “There is almost an immediate response from carriers that it’s too complicated,” she said, “but it would be helpful if travel managers put pressure on airlines to give them the data to make better decisions. It applies pressure on them to upgrade their fleets earlier than they would do purely for financial reasons.”
That’s only one way in which corporate customers can influence their suppliers. Hewitt believes clients should set out the environmental standards they expect of suppliers, for example by urging airlines not to resist being included in global net zero commitments.
Customer pressure also exerts a subtler kind of influence, which is on internal politics within suppliers. “Making connection with sustainability teams at suppliers is vital,” said Microsoft’s Fidler. “It’s almost giving a green light to those teams to go further with their initiatives if they have clients who say ‘this is important’.”
Avery is seeing the influence begin to tell. “We give suppliers feedback on how they compare environmentally to their peers,” he said. “We invite them to speak to our sustainability people about why they have been scored in that way. You can tell how interested they are by their response. We’ve seen the quality of responses improve: We now have sustainability people completing the surveys, not salespeople.”
Supplier engagement on sustainability has the potential to go even deeper than that. One of the most striking examples is the declaration Microsoft made in October 2019 on paying a premium for sustainable aviation fuels equating to the total volume used on all flights undertaken by its employees on flights between the US and Netherlands with KLM and Delta Air Lines. Microsoft and KLM have also committed jointly to other sustainable travel initiatives.
For Fidler, the priority remains avoiding travel where not required, but, she said, that’s not enough. “The elephant in the room is that aircraft are still taking off even if your company’s not on them,” she said. That’s why, in her view, a modern approach to sustainability is to work with suppliers to be less polluting, not to shun them. Helping to finance a move to biofuels is one example of what Fidler calls, “supporting early innovation”.
But how much influence can any single corporate client exert on its own? Tallos wants to see buyers working together, especially through industry associations. “Pressing suppliers to go greener is an impossible quest unless customers take collective action,” he said. “Suppliers’ relative dependence on a single customer is marginal, thus their relative willingness to listen to is also very limited.”
CHOICE OF TRANSPORT OUTWEIGHS CHOICE OF SUPPLIER
However one cuts its, until the means by which aircraft are propelled changes radically, greening the supply chain can only go so far when that supplier is an airline.
“It’s worth trying, although switching to rail will nearly always give you a better outcome,” said Hewitt. “I’ve never seen evidence of a route that is more efficient by plane. Generally, emissions are reduced 90 per cent when travelling by rail rather than air.”
To return to Susterra’s London-Glasgow example, making the journey by train causes emissions of 0.05kg of CO2 per kilometre compared with 0.23kg when flying from Gatwick or 0.33kg when flying from London City, and that’s even before number of passengers (much greater on a train) is taken into account.
But Western Europe, China and Japan are perhaps the only places where rail is a consistent alternative to air, and even then only for journeys of a few hours. On most routes, if travel is deemed necessary, a more sophisticated approach to supplier management remains the only means of reducing environmental impact.
HOTELS: THE PROBLEM AREA
If data opacity makes sustainable procurement hard enough for the airline category, double that and add a nought on the end for accommodation. “Hotels are far more complex than transportation,” said Microsoft’s Julia Fidler. Making like-for-like comparisons between suppliers is fraught with difficulty. For example, newer hotels are more energy-efficient but weighed against that is the energy required to build a new property when established alternatives exist.
As a result, said Fidler, “I certainly don’t know any single accreditation you can apply globally and that you could ask hotels to work towards.”
Nevertheless, Microsoft makes what efforts it can. It shares hotels’ sustainability initiatives with travellers and carries out environmental reviews at chain level. Perhaps most importantly in the short term, Microsoft is trying to fix the data problem by asking hotel suppliers to commit to the Carbon Disclosure Project, whose mission is to persuade suppliers to provide data and set science-based emissions reduction targets.
Daniel Tallos is another buyer stymied by lack of standardisation but trying to effect change, for example by including the Global Business Travel Association’s standard questions on sustainability in his company’s most recent hotel RFP. “We are moving towards a point where, if they don’t answer our questions in a meaningful manner, we won’t work with them,” Tallos said.