Spearheading that effort is Telenor Procurement Company (TPC), that handles all procurement for Telenor companies globally, and we spoke to CEO Thomas Skjelbred about how we will be playing our hand in this game.
Telenor is currently doing several things to reduce the emissions related to our business. Which of these has the largest potential impact?
Thomas: We have two overarching priorities. We take responsibility for our so-called scope 1&2 emissions that we to a large extent control ourselves. Scope 1 emissions are direct emissions from owned or controlled sources, and scope 2 emissions are indirect emissions from the generation of purchased energy. For us, the main thrust is sourcing renewable electricity. At Telenor, our preferred way of doing that is entering into Power Purchase Agreements, which we hope will incentivize development of new solar and wind farms. However, our biggest carbon footprint is in emissions from our supply chains i.e., emissions generated by the production of all the stuff and services that we buy. These are called Scope 3 emissions. So, the biggest impact we can make is to reduce our Scope 3 emissions. But we cannot just ask our suppliers to “fix our problem” without demonstrating that we are taking meaningful steps to address our own emissions first.
And how do we prove to the world that we’re actually delivering those emission cuts?
Thomas: By setting science-based targets. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – which means limiting global warming to well below 2°C above pre-industrial levels – and pursuing efforts to keep the threshold at 1.5°C. To achieve this, a company’s greenhouse gas emissions must typically be halved between 2020 and 2030, and then drop to net zero by 2050. The Science Based Targets initiative, SBTi, is an organization that validates that a company has set credible climate emission targets that are compliant with the 1.5C ambition. They define and promote best practice in emissions reductions and net-zero targets.
As a large procurer of goods and services we have significant leverage. Is this about us throwing our weight around and scaring the living daylights out of our suppliers?
Thomas: This is not about scaring anyone at all. It is about acknowledging that Telenor is an attractive customer, and that we have an opportunity to influence our suppliers to do their part in saving the world form global warming. If some suppliers get scared, it’s probably because they are not taking their role seriously yet – and that is OK. But 80% of all emissions and 90% of Telenor’s scope 3 emissions come from our supply chain and the goods and services that we buy. Connectivity will be a backbone in the digital society, and if the people who buy our services want to be carbon free, then we must be carbon free, and our supply chain must be carbon free. That is why we have our scope 3 target and why we rely on our suppliers to join the effort. We have two ways to achieve this – we can influence current suppliers to set and pursue SBTs, and/or shift more of the company spend to suppliers that already have and pursue SBTs.
TPC/Global Procurement has so far been concerned with ensuring that Telenor retains its edge in procurement, and that we get “competitive rates” on everything we need. How are you adapting to this new remit?
Thomas: Clearly, we may experience situations where requirements to select a climate-friendly supplier could reduce the number of qualified suppliers and therefore competition. But we have made sure that we have ways to deal with exceptional cases where there may be unacceptable negative consequences e.g., financially. This is the same approach that we use when limiting suppliers based on their compliance with our ABC requirements. We have spent more than a year informing suppliers and their top management about where we are headed and what we will expect from them, giving them plenty of time to adapt. And we are not alone. Our work involves a structured way of interacting with suppliers in a cross-functional way across the group with sustainability teams, local and global procurement teams all making efforts in the same direction and educating and supporting suppliers.
How are we approaching our suppliers with this message – and will the follow-up be mostly about carrot or stick?
Thomas: Both. We have made SBT compliance mandatory for suppliers with a specific spend threshold and we will increasingly prioritize SBT compliant suppliers. In the coming years the aim is to shift the spend to SBT compliant suppliers, and hopefully this will inspire more suppliers to sign up. Those that don’t will be at a disadvantage. Our door will remain open to all suppliers that make the effort to limit global warming and we will be there to guide them.