New regulations and heightened investor interest have brought tackling Scope 3 emissions to the forefront of many companies’ sustainability strategies in recent years. But while organisations generally have a lot of control over their emissions in Scopes 1 and 2, influencing those created by suppliers can be a much greater challenge.
That’s especially the case for smaller suppliers, which may struggle to navigate the complexities of sourcing renewable energy through power purchase agreements (PPAs), due to a lack of purchasing power, knowledge gaps and limited capacity to handle the administrative elements of the process.
Recognising the need to support them through the process, GSK and a number of industry peers, brought together by Schneider Electric’s supply chain decarbonisation programme, identified an opportunity to collaborate on a scheme to educate their suppliers and help them negotiate PPAs.
What is Energize?
Supported by 19 sponsor companies in the pharmaceutical industry, Energize provides guidance and training to suppliers to help them manage the PPA process. Those involved also have the opportunity to join regional cohorts of suppliers, which negotiate joint agreements with energy providers to secure possibly more competitive energy prices on PPAs although the real benefit is providing suppliers an avenue to pursue PPAs when otherwise they wouldn’t be able to due to volume constraints. Participants also receive education and support around Energy Attribute Certificates (EACs).
Energize is managed by global energy services and automation provider Schneider Electric and a robust digital and programme management team, which takes the lead on providing the training and organising the buying cohorts, the first of which was launched in late 2022. The programme is overseen by a governance committee, with representatives from each sponsor company. This group meets every month, monitors the performance of Energize and sets the direction for its future. A team of 10 from Schneider supports day-to-day activities and major events while additional staff provide support when needed – for tech upgrades and marketing needs, for instance.
Getting suppliers involved
Energize is open to both pharmaceutical sponsors and their suppliers seeking to reduce their Scope 3 emissions, with an intent and commitment to making bold climate action. Any supplier can participate as long as they supply to one or more of the sponsor companies.
Suppliers are encouraged to get involved through a mixture of top-down messaging campaigns, as well as engagement at category manager level.
Campaigns including emails, live webinars, one-on-one virtual sessions, group virtual sessions and live industry events, highlight the importance of cutting emissions to the sponsor companies’ overall strategy and invite them to be a partner in supporting that, as well as highlighting the benefits available to suppliers through collaborating with their peers and securing PPAs.
Recently, Energize has also started to work with the Pharmaceutical Supply Chain Initiative and the Convention on Pharmaceutical Ingredients to leverage their channels to promote Energize via articles and social media.
Meanwhile, category managers at GSK are encouraged to highlight the opportunity with suppliers and support them in signing up to the programme at their monthly progress review meetings.
Educating suppliers about PPAs
Suppliers have access to an online knowledge portal, created by Schneider, which contains information about how PPAs work and renewable energy more generally, to help them navigate the complex landscape.
This addresses key questions, including:
- What are the fundamentals of renewable energy procurement?
- How can suppliers unify to secure competitive energy prices while demonstrating climate leadership?
- When applicable, how can an organisation explore a PPA, either individually or alongside other participating suppliers via a buyer’s cohort?
Schneider also delivers tailored webinars and one-on-one training to help suppliers understand key considerations and renewable energy market factors they should be aware of when accessing opportunities.
The training series is comprised of around 10 foundational sessions, which start with renewable electricity basics and then progress to more technical information around executing PPAs. As the programme matures, Energize plans to incorporate other topics into the education offerings, such as tax equity investment as a vehicle for renewable electricity procurement.
Education series are delivered live, in the spring and the autumn. Recordings of all sessions are also available online, on-demand for suppliers.
Supporting suppliers in buying renewable energy
In addition to the training and education side of the programme, suppliers also have the opportunity to join collaborative cohorts to jointly secure PPA deals. They are joined in these by the partner companies, an opportunity for them to demonstrate they have “skin in the game” and create a sense of partnership.
Energize has formed three regional cohorts to date – one in North America and two in mainland Europe. This model allows each cohort to source renewable electricity that complies with market boundary standards and enables cohort members to make renewable electricity purchasing claims.
After discussing suppliers’ needs, Schneider goes to market with an RFP or RFQ, collecting a number of proposals from renewable energy providers. It then presents these to each cohort for their members to assess. Suppliers are collectively in a cohort so are going to market with an aggregate volume of electricity. However, they have each signed an individual contract with Schneider Electric that enables SE to provide advisory services to them, and they will each sign an individual/bilateral PPA contract with the developer. This construct means that suppliers do not have an ongoing contractual relationship or obligation to one another.
For those that do not consider PPAs to be a suitable option, Schneider also supports in the sourcing of energy attribute certificates (EACs), which can be a simpler option for those who don’t purchase large amounts of electricity and wish to make an impact more rapidly.
What are EACs?
Energy attribute certificates represent the environmental attributes associated with 1MWh of renewable electricity added to the grid. For every MWh of renewable electricity that is produced, one energy attribute certificate, or EAC, is produced.
EACs are essentially a “receipt” for renewable electricity production. As such, EACs underpin all renewable electricity production and are the accepted way to track and trade renewable electricity. EACs can include renewable energy certificates, Guarantees of Origin, and more, which underpin global renewable energy markets and have been used as a recognised industry standard for renewable energy purchasing and environmental claims.
Results and next steps
Energize has established a firm foothold, attracting and educating a substantial number of suppliers on the importance of renewable energy
- 482 suppliers are currently registered for Energize.
- 169 companies and 350 individuals have attended live education sessions.
- 199 suppliers have engaged in education, including online education resources.
- 13 suppliers have joined cohorts that have kicked off, as well as four sponsors
Energize now plans to continue growing and rolling out new cohorts in more geographies.
Renewable procurement by cohorts will help suppliers address their Scope 2 emissions and will help sponsors address both their Scope 2 and Scope 3 footprint. The sponsor companies are also looking at new opportunities to bring on board partners beyond the pharmaceutical industry.
Advice for others
The team behind GSK’s involvement in Energize shared the following advice for companies looking to work with suppliers on renewable energy:
- Collaboration is key: This challenge is being faced by companies across the board and cannot be solved by one organisation acting alone. Working together with suppliers, industry peers and beyond will be vital to making progress.
- Localisation matters: The different energy market conditions, legal frameworks and cultural context suppliers are operating in has a major bearing on the support they need and the opportunities available. Programmes need to be tailored to their local environment to have the best chance of success.
- See things from the suppliers’ perspective: Suppliers are facing heightened demands from their customers for information and participation in sustainability programmes – which can often mean having to complete the same task several times over. By working with industry peers, organisations can simplify this process and secure support from suppliers by making their lives easier.