Towards decarbonisation of the supply chain

Towards decarbonisation of
the supply chain

The climate change and the progressive rise in the Planet's average temperature make decarbonisation not only a challenge, but a primary objective for the Aerospace, Defence and Security sector as well.

Causes and effects of climate change are illustrated in the IPCC (Intergovernmental Panel on Climate Change) report, which explains the multiple and, in many cases, already evident consequences of climate change for the environment and human activities.

The drivers of sustainability

Regulatory impulse

The European Union's approval of the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive) regulations requires the development of a business model based on the integration of sustainability into business processes and governance.

The new regulations make the entire value chain the focus of impact assessment.
Rating agencies and finance

Banking institutions and investors are increasingly demanding and attentive to the ESG performance of companies.

These are monitored by rating agencies through assessment models that help provide financial stakeholders with the robustness of companies' ESG commitments and performance.

Good performance facilitates access to better credit terms.
Client requirements

Leonardo’s clients demand an increasing attention towards sustainability requirements.

In tenders and, more generally, in corporate strategies leading to the selection of a supplier, elements and actions related to sustainability are becoming increasingly central, thus representing a decisive factor for increasing competitiveness.

The first step in defining a decarbonisation strategy is to measure its own carbon footprint along the entire value chain, through data collection and calculation of related emissions.

The international standard that suggests guidelines and methods for calculating an organisation's GHG (Greenhouse Gases) emissions is the GHG Protocol. This protocol categorises the emissions of companies and organisations into three categories:

Scope 1 and 2

Scope 1

Greenhouse gas emissions produced directly by the company, for example:

-  Blast furnaces and combustion of various kinds
-  Combustion company vehicles
-  Release of highly climate-changing gases (F-Gases) into the atmosphere

Scope 2

Emissions that the company produces indirectly, related to the use of purchased electricity, or district heating, which in their use by the company does not cause emissions, but has caused them during production.
Scope 3 upstream

Emissions produced indirectly by the upstream supply chain:

-  Purchased goods and services
-  Capital goods
-  Fuel and energy related activities
-  Transportation & distribution
-  Waste generated in operations
-  Business travel
-  Employee commuting
-  Leased assets
Scope 3 downstream

Emissions not associated with the company, but which affect its value chain and for which it is indirectly responsible.

-  Transportation & distribution
-  Processing of sold products
-  Assets leased downstream
-  Use of sold products
-  End of life treatment of sold products
-  Investments
-  Franchises

For Leonardo, emissions from the supply chain have a very significant impact, accounting for about 42% of total emissions. It is therefore essential to set targets in this area and to involve suppliers in the implementation of the Group’s decarbonisation strategy.

Leonardo's Carbon Footprint 2023

5%

Scope 1 and 2 activities

42%

Scope 3 upstream activities

53%

Scope 3 downstream activities

To demonstrate the solidity of its commitments, Leonardo developed decarbonisation targets based on the Science Based Target initiative (SBTi) methodology. SBTi is a global initiative that promotes the adoption of decarbonisation targets consistent with the IPCC's indications to contain global average temperature rise within +1.5°C.

New decarbonisation targets

Scope 1 e 2

Reducing by 53%

direct and indirect emissions due to operations and energy consumption by 2030 (compared to 2020)

Scope 3 upstream

Involving 58%

of suppliers, in terms of volume of produced emissions, in developing science-based decarbonisation targets by 2028

Scope 3 downstream

Decreasing by 52%

CO2e equivalent emissions per flight hour by 2030 (compared to 2020)

To achieve the supply chain decarbonisation goals, it will be essential to set up ever-closer forms of collaboration with suppliers, such as medium- to long-term partnerships, to develop new competencies, and to define and implement a plan of actions to be monitored regularly, articulated on three levels:

MEASURING

Set up calculation tools, collect primary and secondary data, verify data quality, consolidate and calculate Scope 1, 2 and 3 emissions

DEFINING TARGETS

Define targets for the reduction of Scope 1, 2 and 3 emissions through energy efficiency, renewable procurement, supply chain engagement

ACT

Implement actions, monitor, and report progress according to SBTi guidelines

Leonardo will be at its suppliers' side, supporting small and medium-sized companies along the way, offering tools to develop the necessary skills and enhancing the commitment and results of suppliers in the new business assignment phase.

Manlio Cuccaro - Chief Procurement, Services & Operations Officer, Leonardo

Leonardo is pursuing an ambitious plan to reduce its climate footprint. Manlio Cuccaro explains that the goal is not only aimed at reducing internal emissions, but also at reducing emissions outside the company perimeter, known as the Scope 3 emissions, by collaborating with suppliers and by decreasing the impact due to the use of products by customers.

Giacinto Carullo - Chief Procurement & Supply Chain Officer, Leonardo

The target set by Leonardo and approved by the Science Based Targets Initiative for Scope 3 Upstream, i.e. the supply chain, requires 58% of suppliers, measured in terms of emissions, to set science-based decarbonisation targets by 2028. Giacinto Carullo explains the common challenge faced by the company and its supply chain.

Paolo Rostirolla - Vice President Supplier Sustainability & Development, Leonardo

What will we have to do to achieve by 2028 the supply chain decarbonisation target set by Leonardo and approved by the Science Based Targets Initiative? Paolo Rostirolla answers this question, describing the programme of initiatives developed by the company and differentiated according to supplier maturity and size.