The next frontier of decarbonisation is our supply chain and energy trading
We target 50% emissions reduction in our supply chain and energy trading by 2032 and will reach net zero by 2040 in our entire carbon footprint – a decade earlier than required by science. This will require collaboration with our suppliers and profound innovation across all levels of our supply chain.
For most sectors, emissions indirectly linked to their company make up the majority of their carbon footprint. This is typically also the case for energy companies if they trade fossil fuel-based energy or have a large portfolio of construction projects. Both are true for Ørsted.
In 2019, our indirect emissions made up 34,604 ktCO2e. The majority comes from the use of energy traded in wholesale markets, followed by emissions from our offshore wind supply chain, and then the supply chain from our combined heat and power plants. Our target is to reduce emissions from our supply chain and from energy trading by 50% by 2032.
Reduce trading of fuel-based energy
Ørsted is bound by several long-standing gas purchase agreements, some of which were signed in the 1980s with the Danish Underground Consortium (DUC). And with the gas company Gazprom, we have a long-term supply contract that expires in 2031.We’ve decided to gradually reduce our gas trading towards 2032. As a consequence, we’ll neither renew nor enter into new long-term gas purchase agreements. We’ll also increase the renewables share of power we trade.
Focus on reducing supply chain emissions
Reducing supply chain emissions will become a focal point of our decarbonisation activities as Ørsted continues to build renewable energy at large scale and reach net-zero emissions by 2040 in our entire carbon footprint.
Manufacture of offshore wind farm components, and fuel-linked emissions from vessels used to transport and install these components, are among the most carbon-intensive activities in our supply chain. These are highly energy-intensive due to the mining and processing of steel, copper, aluminium, and other raw-materials needed to produce them. And so are the manufacturing processes for turning these into wind farm components.
Therefore, from 2020, we’ll work closely with our top strategic suppliers, who account for more than 50% of our procurement spend, to:
Levers to decarbonise Ørsted’s offshore wind supply chain
Initial engagement with suppliers will focus on:
How will Ørsted work with suppliers?
We will engage in dialogue with our top strategic suppliers to understand the maturity of the technologies needed and, based on our combined knowledge, develop a roadmap that over time can deliver the carbon reductions needed. While some suppliers are very mature in their decarbonization journey, others are only starting out, and we will design our engagement to be supplier specific.
What are the main challenges?
Many of the low-carbon technologies
needed to decarbonise our supply
chain are not yet cost-efficient or
available at scale. We want to generate
the demand for low-carbon solutions,
and work with our suppliers to
drive scale and cost reduction in a way
that delivers the right decarbonisation solutions fast and in a cost-effective
way. As we depend on the market to
meet our objectives, collaboration will
be key to succeed.
What’s in it for our suppliers?
We have highly capable suppliers in
our industry. Many of them are very
familiar with the innovation journey required
and they know that innovation
towards still more sustainable solutions
will enable them to stay relevant
and competitive in the future