With innovative initiatives, Honda ups the ante to green its supply chain: “It’s a global issue”

Edison Energy recently sat down with Austin Stephen, Senior Supply Chain Sustainability Analyst at Honda, to discuss the auto manufacturer’s increasing efforts to helps suppliers decarbonize.

Last year, Honda announced its vision to reach carbon neutrality for all its products and corporate activities by 2050. The concept behind this vision is to reduce CO2 emissions based on the targets laid out in the Paris Agreement to keep temperature rise below 1.5ºC.

Honda has long been a first mover across sustainability initiatives. In 2019, the global automotive manufacturer entered into two long-term virtual power purchase agreements (VPPAs) for 320 MW of renewable power capacity from Oklahoma and Texas.

The purchases, brokered in partnership with Edison Energy, provide enough wind and solar power to cover over 60 percent of the electricity Honda uses in North America and will fully offset the remaining carbon-intensive electricity Honda gets from the grid for its manufacturing plants in Ohio, Indiana, and Alabama.

To help meet its 2050 target, Honda is aiming to green its supply chain. This will be driven by the company’s Supplier Scorecard, which scores suppliers on their sustainability and energy requirements. These include reporting greenhouse gas (GHG) emissions annually, sourcing or generating onsite renewable energy, and implementing a 10-year CO2 reduction plan towards achieving two percent absolute annual emissions reductions.

Honda recently released its comprehensive Sustainability Framework, which evaluates suppliers in the areas of ethics, diversity, environmental governance, health and safety, social responsibility, and trade compliance on a scale of gold, silver, and bronze.

The initiatives are all part of the Green Excellence Program, a partnership between Honda and Edison Energy, which helps suppliers identify and move energy efficiency and renewable energy projects to implementation.

“Honda’s Supplier Scorecard is kind of the channel of communication between Honda and our supply base, so it’s a way for us to provide feedback to them on their sustainability activity and all those areas of the framework,” said Austin Stephen, Senior Supply Chain Sustainability Analyst, Honda Development & Manufacturing of America. “It’s a comprehensive framework based on our internal guiding principles. We wanted to reduce confusion and to make sure we’re not creating non-value-added work for our suppliers.”

Organizations’ supply chains often account for more than 90 percent of their GHG emissions, according to the U.S. EPA. Over the last decade, major organizations across diverse sectors have developed GHG inventories, instituted annual GHG-accounting practices, and succeeded in reducing their own Scope 1 and 2 emissions. These entities are now looking for ways to measure and lower GHG emissions across their supply chains.

“The Supplier Scorecard is a way for our suppliers to understand how they compare to their peers as well,” Stephen said. “And, as the name suggests, it’s basically a dashboard that provides a score to our suppliers on each of those areas of sustainability for that specific year, so it’s just a way for us to provide more detailed and more frequent feedback to our suppliers on where our goals are and where their activity lies.”

Rapid, deep cuts to value-chain emissions are the most effective way of limiting global temperature rise to 1.5°C, according to the Science Based Targets initiative (SBTi). This is the central focus of the SBTi’s Net-Zero Standard, which covers a company’s entire value chain emissions, including those produced by their own processes (Scope 1), purchased electricity and heat (Scope 2), and generated by suppliers and end-users (Scope 3).

While reaching net zero for Scope 1 and Scope 2 emissions is challenging, achieving net zero for Scope 3 emissions adds an additional layer of complexity, particularly for energy intensive industries.

“It’s been a challenge,” Stephen said. “This is such a new area for businesses, so there are not a lot of processes in place or historical knowledge or data. The most significant challenge we’ve seen in reducing supplier emissions has been those short-term goals. We’ve got this long-term goal of carbon neutrality by 2050, and some of our suppliers actually have more aggressive long-term goals. But it’s been difficult for us to say, ‘we need you to take these small steps to achieve that really aggressive goal of carbon neutrality.’ In many cases, the suppliers haven’t determined how their short-term goals align with Honda’s long-term goals. In addition to that, every supplier is different, every supplier is at a different point in their journey, so it’s a challenge to make sure we’re providing our supplier base with the support at the right time and the right levels.”

Honda continues to ramp up efforts to provide education, resources, and detailed expectations to their suppliers.

“We’re hoping that other OEMs are working on something like this because it’s not only a Honda issue,” Stephen said. “It’s a global issue, so we want to make sure we’re supplying as much support in this area as we can. We’re ready to provide a significant amount of support to those suppliers so that they are able to pursue their sustainability strategies.”

Click here to learn more about how Edison Energy is working with Honda Automotive to help you resolve the key challenges of cost, carbon, and the increasingly complex choices in energy today.