Supply Chain and Transport

How to harness the power of purchasing to reduce emissions 

Members of the First Movers Coalition meeting President Joe Biden to discuss reducing emissions

The First Movers Coalition is a powerful 'buyers' club set up to tackle emissions in eight of the hardest-to-abate industrial sectors. Image: Volvo

Andrea Fuder
Executive Vice-President; Chief Purchasing Officer, Volvo Group
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Supply Chain and Transport

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  • Purchasing departments in major companies have considerable power to help reduce indirect emissions.
  • Companies can make more impact by forming 'buyers' clubs' such as the First Movers Coalition.
  • Partnerships with both the public and private sector can also foster innovation and speed up the transition to green technology.

To keep global warming to no more than 1.5°C we need to reduce emissions by 45% by 2030. This will mean creating sustainable supply networks, and here the purchasing department has considerable influence, as it can steer financial flows towards sustainable solutions. At Volvo Group, for example, over 70% of our value comes from the supply network. So how can we harness this purchasing power to create real change?

The simplest answer is in buying products and services that are more sustainable. But some of the solutions we require are still in development or prototype phases. What can we do to encourage our suppliers to develop these solutions?

Transforming the supply chain

Indirect 'Scope 3' emissions account for 70% of the carbon footprint of many organizations. At Volvo Group, reducing indirect emissions means working with partners to decarbonize our supply network, shifting to fossil-free materials, working with circular business models and recycling, and ensuring the use of renewable energy in the process and production of materials. We also need to consider what happens to our products after we sell them, ensuring that charging infrastructure and access to sustainable energy solutions are in place.

Indirect 'Scope 3' emissions account for 70% of the carbon footprint of many organizations.
Indirect 'Scope 3' emissions account for 70% of the carbon footprint of many organizations. Image: Volvo

We need to have open dialogue, share visions and values, and build our supply network with those who align with our view of the world. This must happen across the entire chain and not stop at our Tier 1 suppliers – of which we have more than 50,000. There is no quick and easy way of getting everyone on board, especially when you work with thousands of supply partners.

A powerful 'buyers' club'

Purchasing teams from some of the largest organizations in the world have come together to exert their influence. The First Movers Coalition (FMC) is a flagship public-private partnership set up to tackle eight of the hard-to-abate industrial sectors – aluminium, aviation, chemicals, carbon removal, concrete, shipping, steel and trucking – which currently account for 30% of global emissions, projected to rise to 50% without urgent action.

More than 50 companies and countries make up the FMC, of which Volvo Group is a founding member. They are part of a ‘buyers club’ with a collective worth of around $8.5 trillion. All have pledged to purchase a proportion of the materials or long-distance transport they require from supply partners offering zero or near-zero solutions, to create a guaranteed early market and send a clear signal of the need to commercialize emerging clean technologies.

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In aluminium, for example, which accounts for 2% of global emissions, companies including Ball Corporation, Novelis and Volvo Group have pledged that by 2030 at least 10% of their primary aluminium purchases will have near-zero carbon emissions. There is a similar target placed on steel. These pledges can only be achieved by purchasing advanced technology that in many cases is not yet commercially available. Commitments such as these will create a market tipping point that accelerates the affordability of clean technologies and drives long-term transformation.

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Partnerships for change

The existing form of partnership, where we collaborate only through our traditional supply network, is not enough. We also need a new, much broader form of collaboration, one in which we work together with players outside of our industry to learn and inform each other during the transformation process.

Volvo LIGHTS (Low Impact Green Heavy Transport Solutions) is one such example which demonstrates the power of partnership to fast-track green innovations from concept to commercialization, in this case in the transport sector. The initiative brought together government bodies, manufacturers, non-profit organizations, education providers and funding institutions to develop a solution to create a zero-emission goods movement from the Ports of Long Beach and Los Angeles to four freight handling facilities in disadvantaged communities. The project received public and private investment – including funding from the California Air Resources Board (CARB).

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What's the World Economic Forum doing about the transition to clean energy?

Through the programme, Volvo Trucks North America, South Coast Air Quality Management District (AQMD) and 12 other organizations designed and implemented a blueprint for the complete ecosystem needed to successfully deploy commercial battery-electric freight trucks into the market at scale, from the vehicle technology and infrastructure to skills requirements and training.

Volvo Trucks was able to deploy its first Class 8 Volvo VNR Electric trucks to fleet operators to collect real-world operating data and customer feedback ahead of its commercial release, learning valuable lessons that benefit other companies and communities around the world.

Global purchasing teams have big budgets and the potential to exert their influence on indirect carbon emissions. As we stand on the precipice of irreversible climate change, they can wield that power for good. By driving milestones this decade, through investment, collaboration and cross-industry partnerships across the ecosystem, we can and will deliver a sustainable, decarbonized future.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Supply Chain and TransportClimate Change
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