How can we decarbonise our supply chains?

By 2040, we aim to have net-zero emissions across our entire value chain. With plans already in place for phasing out fossil fuels from our energy generation, operations, and sales, the main challenge now is reducing our supply chain emissions.

And the challenge is twofold. Firstly, we have limited influence on those emissions as they come from our suppliers, our suppliers’ suppliers, and so on. Secondly, the emissions are linked to sectors that are hard to abate, such as offshore logistics, steel, and other heavy manufacturing sectors. Therefore, our success depends on succeeding with others. In the realm of decarbonisation, there are no competitors, only partners.

Working strategically to decarbonise our supply chain

Through our supply chain decarbonisation programme, we engage with our strategic suppliers, who account for more than 65 % of our total procurement spend. We work with suppliers across our offshore and onshore portfolios of wind and solar assets, and we primarily focus on our offshore wind supply chain as offshore wind is currently our largest business area and the source of most of our supply chain emissions. We have three main focus areas for this work.

1. Disclose emissions and set science-based targets

Measuring emissions across scope 1, 2, and 3 – the emissions that come from a company’s own operations, the electricity it purchases, and its value chain – is a prerequisite for informed target setting and action planning. Since the launch of our programme in early 2020, our suppliers have strengthened their measurement and reporting of emissions data; in 2021, 97 % of our strategic suppliers disclosed their emissions data to the CDP, and 26 % had either set or committed to set a science-based emissions reduction target. Prior to the launch of the programme, only 36 % reported to the CDP, and no one had set a science-based emissions reduction target.

Decarbonising with Siemens Gamesa

“In 2021, we moved our net-zero emissions target forward by a decade”

Jonas Pogh Jensen
Global Sustainability Specialist, Siemens Gamesa

Establishing good accounting practices is a journey and can be continuously refined. Supplier data is often of uneven and inadequate quality. That is why we use the CDP supply chain programme as a tool to help disclose emissions in a uniform and standardised way across the industry. We are also in dialogue with supplier quality, health, safety and environment (QHSE) managers on improving data quality.

To track emissions performance across our supply chain towards 2040, we are currently developing a ‘levelised CO2' model. The model will enable us to track our performance by combining supplier CDP data with generic carbon data from life cycle analyses of offshore wind farm components.

The towers at our wind farm Walney Extension in the UK are 120 metres high, and the 51 wind turbines generate enough power for 330,000 homes. The towers are installed with the help of a crane on the jack-up vessel and the hands-on help of several wind technicians standing by on the transition piece.

2. Use 100 % green electricity

Green electricity is a readily available solution for reducing emissions. We have set the clear expectation for our strategic suppliers to use 100 % green electricity in the manufacture of wind turbines, foundations, cables, substations, and other components by 2025.

There are different ways of covering your electricity consumption with green electricity, which, in turn, have different climate effects. One such solution is to purchase green electricity certificates. These certificates represent the positive environmental and social benefits of one megawatt-hour of green electricity generated by a renewable energy provider and are sold separately to the power itself. The certificates allow the bearer to claim a ‘unit’ of greenness even if they haven’t used that green power. Other solutions exist that more clearly contribute to realising new green electricity capacity, such as smaller on-site green electricity assets or power purchase agreements (PPAs) tied to green energy projects, whose realisation depends on securing financing.

Therefore, we have introduced green electricity guidelines to clarify what we expect from suppliers in 2025, as well as our current expectations.

3. Optimise vessel fleets and develop road maps to power vessels with renewable energy

In the long-term, we rely on breakthrough technologies for reducing most of our supply chain emissions, especially for offshore logistics and steel. Steel manufacturing happens further down our supply chain, and we therefore take additional measures to find solutions to this challenge.

Within offshore logistics, we ask our suppliers to develop road maps to transition to green energy. More short-term solutions include optimising transport routes and using sustainable biofuels. We have established sustainability criteria for the biofuels we source, which we have shared with our suppliers to inspire their work.

Not all biofuels are equally sustainable, and, from a life cycle perspective, fuels from crop feedstocks carry the risk of indirect land use changes and low greenhouse gas (GHG) savings. For this reason, our sustainability guidelines prioritise certified sustainable biofuels produced from waste feedstocks that also meet relevant thresholds for GHG savings.

Decarbonising with Van Oord

“Shipping is one of the hardest sectors to decarbonise, partly because vessels have a lifespan of 30 years”

Theo De Lange
Director, Van Oord Offshore Wind

In addition, we joined the Getting to Zero Coalition to collaborate across sectors on launching commercially viable net-zero emissions vessels by 2030. One of our strategic focus areas is to become a global leader in renewable hydrogen and green fuels, which are key to decarbonising vessels and heavy manufacturing, and we already have a pipeline of projects that we will deliver with key partners to accelerate this.

Our road map to net-zero steel

At Ørsted, steel accounts for nearly half of the life cycle emissions from our offshore wind farms, which is why it remains a key focus of our decarbonisation efforts towards net-zero by 2040 – even though our steel production occurs further out in our supply chain. In 2021, we developed a systematic road map with three strategic areas of action to help accelerate a transition to green steel:

1. To lower emissions from production, we currently encourage steel suppliers to pursue incremental efficiencies, e.g. through more efficient processes and/ or reducing the share of coking coal. In 2022, we will also be collecting emissions intensity data to document the effects. According to the World Economic Forum’s Net-Zero Steel Initiative, incremental efficiencies can bring about 15-20 % emissions reductions. 

2. In the medium term towards the 2030s, we are leveraging our expertise in designing offshore wind foundations to integrate circular approaches, where material is reused or recycled. Over the years, we have reduced the amount of steel used in our foundations, and in 2022, we will assess options for further circular levers across the life cycle, such as higher levels of scrap (recycled) steel in our projects.  

3. Reaching net-zero steel in the long term relies on breakthrough technologies. According to the Net-Zero Steel Initiative, breakthrough technologies such as renewable hydrogen and green electricity in production have the potential to realise up to 99 % of emissions reductions in the long term by displacing more traditional, fossil-intensive production processes that rely on the use of blast furnaces.

Decarbonising with Bladt Industries

“Low-cost green steel requires everyone to step up”

Anders Søen-Jensen
CEO, Bladt Industries

Our current activities and commitments

We are helping to pave the way for a scale-up of breakthrough technologies like renewable hydrogen. Since steel is such a critical part of many sectors’ supply chains, we are leading cross-sector efforts to create early market demand for these technologies as founding members of the Climate Group's SteelZero initiative and the World Economic Forum's First Movers Coalition.

We have also committed to procuring 100 % net-zero steel by 2040, and 50 % from suppliers with SBTi targets or low-carbon technologies by 2030. In addition, we have an interim commitment to make at least 10 % of the volume of all steel procured per year have near-zero emissions by 2030. Finally, we want to grow our current pipeline of projects in renewable hydrogen through ambitious partnerships on breakthrough technologies.

The way to net-zero steel

1 Net-Zero Steel (2021)
2 Ellen MacArthur (2021): Completing the picture: How the circular economy tackles climate change
Building an offshore wind turbine

Reaching net-zero emissions by 2040

By 2040, we aim to have net-zero emissions across our entire value chain – and our target has been validated by the Science Based Targets initiative.