Driving supply chain decarbonisation through better partnerships

While many companies have made great strides in addressing their scope 1 and 2 emissions, scope 3 remains a huge challenge for most. But the planned implementation of a new policy could provide a strong driver for scaling up efforts on these value chain emissions and collaboration will be the key to success.

I chatted to Cressida Curtis, Group Director of Sustainability at Wates, to find out how they are preparing.

The UK is set to implement a Carbon Border Adjustment Mechanism (CBAM) from January 1, 2027, which will aim to level the playing field for domestic producers by ensuring certain imported goods pay a carbon price equivalent to what would be paid domestically.

The UK CBAM aims to prevent what’s known as "carbon leakage," where efforts to reduce emissions in one country lead to an increase in emissions elsewhere, by ensuring imported goods pay a carbon price equivalent to domestic production.

Businesses importing goods into the UK from countries with lower or no carbon prices will be required to pay a levy on imports under the UK CBAM, which will initially cover carbon-intensive products such as iron, steel, cement, and aluminium as well as some precursors and downstream products. 

A similar mechanism is set to be launched in the EU in January 2026.

The introduction of CBAM looks poised to be a game changer for scope 3 emissions because it introduces accountability for the embedded emissions in imported goods, provides a need for greater transparency of these emissions, and encourages companies to engage with their suppliers to reduce them.

There will be a strong impetus for those companies that source materials or components from outside the UK (and EU) to work closely with upstream suppliers to encourage them to reduce the carbon intensity to keep costs down. 

I started by asking Cressida about the scale of the challenge on scope 3 emissions:

“Increasingly stakeholders want much more from us, and the urgency of the climate crisis and the role our sector plays in this means we have no choice but to take action now. But we must acknowledge that the sector and our supply chains are already challenged. While navigating significant financial challenges, we’re also being asked to do more: build more homes; deliver net zero; achieve better quality; attract more talent. 

“But confirmation of the CBAM is a watershed moment that forces us to pause and reassess. Our shared supply chain must thrive if we’re to deliver the high-quality homes, schools, factories and labs our nation needs. But we also need to decarbonise.

“Scope 3 represents almost 99% of Wates’ emissions. It’s honestly the whole ball game on embodied carbon, and we can’t do anything meaningful about it until we fundamentally alter the way we engage and – crucially - support our supply chain,” Cressida says.

It strikes me that this will require a quite fundamental evolution in the relationships we have with suppliers and what we require from them. How are you helping them navigate this?

“We have to alter our approach – and this will drive progress across a range of sustainable development goals, not just those relating to carbon. 

“Maintaining a transactional approach won’t deliver the innovation and healthier margins we need in the sector, and it won’t attract the talent we need for the sector to thrive. We have to develop partnerships, where we align on objectives and prioritise mutual respect to deliver huge benefits.

“At Wates, we’re re-setting our relationships with major suppliers, recognising the expertise they bring to any contract and the benefits of working alongside them as partners. As well as being an investment in the long-term health of the supply chain, we see this as critical to accelerating progress on sustainability."

But what does this look like in practice?

“On decarbonisation, we are introducing two key ‘asks’ of those we partner with. Firstly, we ask that they set a science-based target (SBT), so we can see they are decarbonising, and secondly, that they develop Environmental Product Declarations for their products, so we increasingly have actual emissions for the products and materials used on our sites.

“But we are also providing something in return. As part of our wider supply chain strategy, we’re investing in relationships with the suppliers who commit to delivering the broader standards we agree. On sustainability, we run events to help them understand how to develop SBTs, buddy them up with those who have done it already and point them towards resources such as Supply Chain Sustainability School for detailed support. Importantly, we also ensure Divisions know which suppliers are putting SBTs in place so those who take action get a direct commercial benefit."

Is there scope for greater collaboration on this between tier 1 contractors, in the spirit of supporting a shared supply chain?

“Absolutely, the supply chain is a shared resource, so on decarbonisation we are actively looking for competitors in the sector who want to join forces around this. If we speak with one voice on what’s required we can make it simple for suppliers and accelerate overall progress."

As I reflected on this conversation, it struck me that collaboration is the ‘secret sauce’ here, as is so often the case. We know that we cannot address complex sustainability issues in isolation, which is why we have what I often describe as the most important of the UN Sustainable Development Goals (Goal 17: Partnerships for the Goals), because it underpins all of the other goals. So, it is great to see leadership from within the sector on this issue that is so rooted in a partnership approach.