Carbon Management Solutions
An In-Depth Guide
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What are Carbon Management (CO2) solutions
Carbon Management (CO2) solutions are designed to assist companies in reducing their carbon footprint. Platforms that offer carbon management solutions will usually begin with data intake. This data can then be enhanced by the solution with data coming directly from companies along the value chain to identify emissions hotspots.
The amount of support a user needs in this process determines the solution provider they choose. Platform support can range from basic coverage of emissions to granular insights depending on user needs.
Since CO2 management is a relatively new concern for many companies, implementing a carbon management solution can be beneficial for internal and external success. Many organizations might struggle to track emissions themselves due to a lack of in-house expertise, time constraints or the cost of hiring specialized staff. A CO2 management platform can thus be used to provide valuable insights and best practices, delivering the necessary guidance and support without the expense of a full-time hire.
Platforms that offer carbon management solutions will often begin by calculating a company’s current footprint based on various methodologies (depending on the data that is available, the solution’s capability, etc.). Following that step, solutions will provide insights to users about where they can reduce emissions. The compliance and regulations that a company has to adhere to will impact the recommendations provided to them. For instance, companies within the EU’s jurisdiction have stricter regulations (than in the US for example) and will have to adjust their carbon tracking and management accordingly. Most of these platforms are well-versed in the variety of regulations that exist and will provide the necessary tracking and recommendations to ensure compliance.
Emissions are categorized into Scope 1, Scope 2 and Scope 3 according to the Greenhouse Gas (GHG) Protocol. Scope 1 emissions are those directly controlled by a company, such as those from its own facilities and vehicles. Scope 2 emissions are associated with the energy purchased by the company, like electricity for its buildings. These, therefore, are theoretically possible to track in-house (though, as previously mentioned, many companies do not have the bandwidth to do so).
Scope 3 emissions, however, are more challenging to manage. These are indirect emissions that occur in a company’s value chain, including both upstream and downstream activities, and are not directly produced by the company itself. This makes them harder to track and manage because the company has limited visibility and control over the production processes of its suppliers.
Looking at procurement’s role and impact in CO2 management, tracking upstream Scope 3 emissions involves collecting data from suppliers, which can be complex due to the extensive and layered nature of supply chains. As more suppliers provide their emissions data, the total scope of emissions identified grows, often revealing additional emissions from further down the supply chain, a concept rather like the un-layering of Russian nesting dolls. Despite these challenges, understanding and managing Scope 3 emissions is crucial for a comprehensive approach to reducing a company’s overall carbon footprint. Scope 3 emissions in the upstream have been identified as the majority of emissions for industrial companies (as stated by the McKinsey report on sustainability in the supply chain).
As such, partnering with a carbon management solution provider allows for more effective tracking and reduction of emissions, especially Scope 3.
How Carbon Management solutions factor into the S2P process
The management of CO2 emissions impacts the S2P processes at almost every step. For example:
- CO2 solutions play a dual role in sourcing, functioning both as an input and an output. As an input, CO2 considerations should be integrated into the Rfx selection process, influencing award decisions. Additionally, sourcing processes themselves contribute to carbon management by including emissions data in supplier quotes. This information can later be utilized to calculate overall emissions, thereby enhancing the carbon management strategy.
- eProcurement, like sourcing, is affected by emissions in both input and output. For example, CO2 can be displayed during requests to show the CO2-friendliness of a specific product, so carbon-neutral products can be favored or prioritized, etc. In short, CO2 information can drive responsible buying. Then, based on the PR/PO/invoice, CO2 accounting can take place.
- For supplier management, CO2 emissions platforms inform companies of suppliers’ product, location and ethics as well the potential carbon impact after selection. Some platforms will support suppliers in reducing their carbon footprint as well.
So, while carbon emissions tracking is not a core part of the S2P process, it is important to the overall compliance practices of any procurement department.
Why Carbon Management solutions are important
CO2 emissions affect both personal and planetary health, contributing to global warming which leads to melting glaciers, rising sea levels and increased chance of natural disasters (like hurricanes, cyclones and flooding). Due to the rising temperatures on land and in the sea, some animal and sea creature habitats have become uninhabitable, pushing them to migrate differently and increasing extinction risks.
In light of this, carbon management regulation has become increasingly important and strict. Federal organizations (such as The Securities and Exchange Commission (SEC) and the EU require companies to report their carbon emissions along the value chain. Tracking and investigating ways to reduce emissions can help companies in their search for alternative suppliers or transportation methods, and can also help identify cost savings.
Implementing a carbon management solution that contains expert knowledge of industry standards and benchmarks can be invaluable to an organization’s success in its decarbonization journey. These solutions can also be extremely helpful for organizations new to the industry standards.
How do I know my organization is ready for a Carbon Management solution?
As regulations are becoming increasingly numerous, and stricter, implementing carbon management solutions in advance of their introduction can keep a company a step ahead.
Companies may consider carbon management solutions for external and internal reasons. From an external perspective, a company might be concerned with compliance issues. For instance, companies located within the EU are subject to stricter regulations which require them to report on and reduce greenhouse gas emissions. Outside of the EU, other regulating bodies include, but are not limited to, The Environmental Protection Agency (EPA), The Securities and Exchange Commission (SEC) and The Non-Financial Reporting Directive (NFRD). So it’s especially important to use a solution provider that keeps up-to-date with changing regulations in order to avoid fees and fines.
From the internal perspective of image and branding, customers are becoming increasingly concerned with where and how the products they buy are being sourced. Investors and competitors recognize this and are putting money into CO2 solutions. So working towards carbon neutrality can not only fit market trends but attract more customers.
C-suite individuals have also begun to recognize the cost savings that can be gained from carbon footprint reduction. Renewable energy sources like solar, wind, hydro and geothermal power tend to have high start-up fees, but once implemented use less energy and thus lower the cost of energy bills, and ultimately production costs.
Some signs that it’s time to step in with a carbon management solution might be:
- Your organization needs to be compliant with existing CO2 regulations
- … or CO2 regulations that will impact you are in the works
- Your organization needs to stay up-to-date with changes in regulations
- Your company has reduction targets that you contribute to
- Your customers are pushing for emissions reduction
- You need to identify emissions hotspots and ways to reduce them
Common features of Carbon Management technology
Carbon management technology will incorporate several aspects of data intake and analysis.
Data Collection
- Solutions will provide a platform for users to upload their data. Many platforms will provide integration options with supplier management portals to allow them to upload their data as well. This will come into play during the next step.
Carbon Accounting
- There are different approaches to carbon accounting depending on the granularity of data available, the amount of time to dedicate to the task and the desired level of accuracy and granularity.
- Spend-based: This method uses secondary data i.e., financial data such as invoices, travel expenses, etc. Emissions are then calculated by multiplying spend (currency amount) by an emissions factor (x kg of CO2 per EUR or USD). The benefits of this approach are that the information is readily available and doesn’t require much data collection. It is a great exercise for identifying emissions hotspots. However, it isn’t the most accurate as spend is not directly correlated to emissions (price fluctuations impact spend).
- Quantity-based: This process also uses secondary data but is instead quantified by identifying ‘mass’ (quantity of processed goods purchased, distance traveled, or units of product sold) that is multiplied by an emission factor (x kg of CO2 per ‘unit’). It is more accurate than the spend-based methodology because it is directly linked to a quantity but requires the information (qty) to be reported.
- To deepen the scope of carbon accounting, primary data can be collected from suppliers. This will provide more accurate data on emissions compared to the spend- and quantity-based approaches.
- The hybrid approach (secondary and primary data) utilizes data collected directly from suppliers to supplement any missing information from the quantity- or spend-based approaches. When there is a low emission category, spend or quantity based approaches can provide most of the information necessary for calculation, and any missing information can be added on by suppliers. This method provides platforms with the necessary data to make a recommendation.
Analytics
- Dashboard and reports tailored to CO2 including emission breakdowns, actual vs target, financial evaluations, etc.
- What-if analysis
Recommendations
- Suggests value chain options that will reduce carbon emissions, from localizing supply chains to switching suppliers. It may also include product-level suggestions (e.g. switch raw material)
- Recommendations for the buyer side and the supplier side
- Library of best practices
- Benchmarks
Carbon Management use cases
Main use cases include:
- Footprint calculations: used to estimate emissions (using various methodologies and data sources) and identify ‘hostpots.’
- Identify opportunities: used to reduce emissions based on benchmarking and/or best practices.
- Develop a decarbonization strategy and action pipeline: based on the current footprint, identified opportunities and potential target reductions and commitments.
- Collaborate internally and externally on decarbonization actions: to ensure proper and timely execution and report or communicate externally.
How technology supports Carbon Management — Top 4 capabilities
These ‘Top 4’ capabilities have been determined by the Spend Matters TechMatch workbench, derived from 37 requirements scored in the Carbon Management Spring 2024 SolutionMatch solution benchmark. The Top 4 capabilities are the highest-weighted critical capabilities that are central to the displayed solution market benchmark. They have been developed by Spend Matters team of analysts and refined by procurement users in tech-selection projects using our market-proven SolutionMap benchmarking dataset and associated TechMatch decision-making tool.
- Calculation methodology
As discussed previously, calculating carbon emissions is incredibly important to understanding the scope of a business’ carbon footprint. Spend-based calculations use secondary data which requires a lot less effort on the company’s behalf. However, the calculations are limited by the scope of information. Activity-based solutions rely on primary data providing a more proficient breadth and depth of information. Top performing vendors will offer the hybrid approach, using mainly advanced techniques and supplementing with the basic method.
- GHG granularity
Calculating GHG emissions can require a lot of information that may not be easily accessed. The dataset is based on more basic information such as spend and the Bill of Materials (BoM). More specific data is calculated from emissions, the environmental impacts of extraction of raw materials, location, machines used, etc. The top performing vendors have granular data models that allow customers to calculate emissions as accurately as possible.
- Analysis and reporting
Carbon management vendors offer a range of analyses to identify emission categories and provide visual representation of their carbon spend. Average performing vendors provide basic templates to report GHG emissions and can be further filtered into category, region, supplier, etc. Top performing vendors tend to have comprehensive templates which cover a more extensive number of emissions and drivers accompanied by analytics capabilities. For example, certain solutions allow customers to build new KPIs and scorecards that include GHG and other metrics to measure progress against targets and integrate GHG in other reports and analyses.
- Opportunities and recommendations
Many solution providers will offer carbon emissions and spend saving opportunities. Average providers can identify opportunities based on industry or category emission averages. These will be expressed via templates or suggestion plans. Top performers provide customers with tailored analysis and recommendations based on their actual footprint, granular community and benchmarks, etc. Some providers focus on benchmark recommendations while others present decarbonization solutions.
Why selecting Carbon Management technology can be difficult
Choosing a solution can be difficult for a variety of reasons, but below we have highlighted the most important factors to consider when selecting a carbon management platform:
Evolving regulations: Understanding buy-side requirements and corresponding capabilities to ensure compliance can be difficult. On top of that, the regulatory landscape is constantly changing without consistency in international and standardized accounting approaches. Choosing a solution that will stay on top of the regulations and contact you with each change is an important consideration when selecting.
Changing market: Figuring out what each vendor actually covers (such as footprint, target setting, decarbonization, etc.) in an evolving market can be challenging. Assessing emerging offerings and identifying leaders with innovative ideas to keep pace with market changes can significantly influence platform selection, presenting both risks and opportunities.
The right analytics: Considering each solution offers a different analytical focus and tool, selecting a solution can prove to be a daunting task. This is why identifying a company’s area of opportunity to improve and create business value is incredibly important before solution selection occurs.
How Spend Matters can help you select Carbon Management technology
Spend Matters supports granular knowledge of the procurement process and the solution providers that help it function. Spend Matters provides zero pay-to-play, brutally honest coverage of these solution providers, market trends and developments that affect product, finance and the supply chain. We also support solution providers through projects and advisory that can help them improve their market knowledge and access.
We can help you identify which solutions will enable you to:
- Estimate emission footprints related to the purchase of goods and services (e.g., Scope 3 emissions)
- Prioritize areas for decarbonization, levers and actions throughout your supply chain
- Set emissions-reduction targets, collaborate with suppliers to reach them and report on progress to diverse stakeholder groups
Discover Carbon Management vendors
These are the vendors we are currently covering, or will soon cover, and which include support for Scope 3 (some do more). Visit their vendor directory pages on Spend Matters for a quick vendor overview, demographic information and relevant articles, including vendor analyses.
| Solution Provider | What it does |
|---|---|
| AnyData Solutions | While AnyData targets primarily spend analytics, supplier management and contract management, it also offers ESG tracking capabilities. The solution can assign conversion factors to spend to determine carbon outputs, supporting users’ carbon management needs. |
| Anvil Analytical | Anvil Analytical is a SaaS product offering a range of solutions. It addresses pain points surrounding visibility of spend, savings opportunities realization, visibility of carbon and risks into the supply chain, alongside the lack of visibility of inflation and spend outside of contract. |
| apexanalytix | apexanalytix covers multiple areas, focusing on financial risk and fraud detection solutions for supplier management. In 2023, it acquired ESG Enterprise, and is now able to collect evidence from a supplier, validate it, and present organizations with a true view of its supply chains’ ESG factors. |
| BCG | BCG supports clients in adjusting their business principles to adhere to ESG regulations. Consultants support companies in identifying climate innovation areas and where clients can choose green alternatives. Through its CO2 AI solution, companies can assess their carbon emissions hotspots. |
| Carbmee | Carbmee is a start-up focused specifically on carbon footprint calculation and managing emissions reduction plans with suppliers. The solution is capable of calculating Scope 3 emissions using a bottoms-up approach (material-based method) or, where supplier data/knowledge is insufficient (e.g., unknown mass of a specific item/good), makes recommendations based on plausible averages, which can later be overridden by users as needed. |
| Certa | Certa provides many solutions that target ESG through third party risk, supplier, and contract management. It supports data intake which allows the platform to identify Scope 3 emissions hot spots. It also focuses on risk mitigation as an organization and uses its knowledge to supplement ESG improvements. |
| Circularise | Circularise provides a blockchain-based traceability solution that helps companies trace products and materials to verify their origins, certificates, CO2 footprints and other material data. It aims to improve resource use, provenance verification, carbon footprint estimates and impact assessments. |
| Circulor | Circulor is a traceability solution built to track materials that change physical and chemical states and that cannot be either tagged or managed at batch-level. It provides a tool that can attribute carbon use throughout the tracking process. |
| Daato | Daato Technologies aims to streamline the reporting process for companies, especially in the EU, by providing a comprehensive solution for sustainability and ESG management. |
| EcoVadis | EcoVadis emphasizes providing reliable, globally recognized sustainability ratings and insights, enabling all companies to reduce risk, drive improvement and accelerate positive impact on the planet and society. Its solution provides supplier management capabilities in addition to Scope 3 reduction targets. |
| GEP | GEP is a S2P full suite that can also implement a sustainability application called GEP GREEN which supports ESG management, analytics, strategy, development, and internal collaboration. Users mainly will use the solution for initial footprinting exercise to identify CO2 hotspots. |
| Ignite Procurement | Ignite Procurement offers solutions in spend analytics, supplier management, and carbon accounting. It focuses on Scope 3 emissions through the spend-based methodology and supplement with the activity-based approach. |
| IntegrityNext | IntegrityNext provides a supplier monitoring platform that monitors a company’s direct supply base. This data collection gives them the ability to support third party risk solutions and carbon emissions tracking. The platform supports a Scope 3 emissions calculator to help less mature suppliers determine the extent of their indirect emissions. |
| Ivalua | Ivalua offers an extensive set of source-to-pay suite capabilities with a broad range of sourcing and procurement functionalities. Ivalua’s Environmental Impact Center (EIC) focuses on using data to generate emission baselines to help users with emissions reduction initiatives. |
| Ivoflow | Ivoflow is a direct spend management solution that includes a carbon footprint calculator. It leverages data from sustamize, a sustainability platform that helps businesses and organizations reduce their carbon footprint. |
| Kodiak Hub | Kodiak Hub is a solution at the crossroads of supplier management and supplier risk that has use cases for carbon management. While it does not compute carbon footprint, its templates (assessments and KPIs) can be beneficial to organizations looking for an extra push in carbon management. |
| Pando | Pando is an AI-powered platform that assists with freight and logistics needs. It supports manufacturers and retailers in submitting purchase orders, reducing carbon footprint, and reducing freight costs through a unified platform. |
| Procurant | Procurant provides the perishable goods market with a solution to coordination efforts between buyers and sellers to ensure products are arriving quickly and intact. It mitigates travel complexities which help to lower carbon emissions. |
| Requis | Requis is a solution built to primarily support engineering, procurement, and construction management companies to source and buy more efficiently and effectively. It does this through collaborating with companies across the value chain and evaluating the most sustainable methods to carry out business needs. |
| Robobai | Robobai integrates the internal aspects of supplier management, such as their contracts and transactions, with the external aspects such as third-party risk and intelligence feeds. It utilizes this information to support ESG compliance and carbon emissions/footprint tracking. |
| Sievo | Sievo offers a service-based analytics solution, with which it provides data management, meta data management and savings program management. This allows it to blend sustainability, diversity and risk data with a customer’s spend data via third-party partnerships and therefore help customers lower their carbon footprint. |
| Simfoni | Simfoni offers many solutions for spend data and its impact on ESG. By implementing its solution, users are supported in identifying excessive spend and supply chain strategies to reduce carbon emissions. |
| Spendscape by McKinsey | McKinsey’s Spendscape is its tool to support clients and industries to decarbonize. It provides support for different combinable calculation methodologies (spend-based, quantity-based, supplier-specific data), includes an extensive library (IP) of emission factors and levers, as well as marginal abatement cost curve (MACC) that shows the costs or savings expected from different decarbonization opportunities. |
| SupplHi | SupplHi has dedicated itself to providing an abundance of spend data which lends a hand to tracking carbon spend. It is able to support customers in reducing their GHG emissions across manufacturing processes. |
| Sustainabill | Sustainabill focuses on helping companies understand their supply chains, and thus manage risks to achieve social compliance and mitigate climate impacts. |
| Trax | While Trax is a transportation spend management solution, it covers carbon tracking through its platform. This enables customers to calculate their carbon emissions for all modes and regions globally and ensure they comply with the European standard. |
| Vendigital | Vendigital aims to achieve measurable and sustainable cost reduction for clients. Consultants are able to build dashboards that track certain ESF factors, such as carbon emissions over time. |
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Carbon Management in the Content Hub
