Accelerating Supply Chain Decarbonization

Achieving meaningful emissions reductions requires procurement teams, in collaboration with others, to embed climate considerations into their purchasing decisions. In this section, we provide actionable insights to comprehensively evaluate three types of lower-carbon procurement options, using steel and aluminum as examples, and navigate the risks and opportunities of near-zero emissions products.

What options are available?

When sourcing lower-carbon products, companies may face a complex landscape of product options with varying carbon performance and implications for reduction strategies. Exhibit 11 describes green procurement options for steel and aluminum in three tiers, reflecting products and technologies with increasing difficulty of adoption and greater emissions reduction potential.

Standard-certified products often come from suppliers certified by industry-specific standards. While they may not involve ambitious reductions, they provide consistent sustainability performance benchmarks, reducing due diligence risks for buyers.

Company-specific low-carbon brands, including both virgin materials and high recycled content products, are typically sourced through supplier offerings or customer specifications tailored to a buyer’s climate goals. However, emissions performance and reduction claims often vary, making it hard for “apples-to-apples” comparisons; thus, companies often need to specify nuances in contracting. For example, when sourcing high recycled content aluminum, companies often include specific terms on emissions thresholds for primary metal, scrap type, and scrap emissions calculation methods. Exhibit 6 reviews the key considerations companies should follow when assessing green product claims, providing a reference when integrating green procurement into contractual language.

The most advanced tier involves suppliers’ capital investment in retrofits or new technologies. Your company may undertake a different decision-making process for these options as they come with higher costs, longer timelines, and delivery uncertainties but offer first-mover advantages in scaling low-carbon technologies.

How to consistently evaluate them

Evaluating procurement options that incorporate GHG reductions or new technologies presents challenges due to uncertainty and evolving regulations. Because of this, traditional procurement criteria may be insufficient in meeting these new requirements, and companies may have to integrate climate factors into decision-making. Exhibit 12 outlines key considerations we collected for common procurement options, which your company can prioritize based on their its ambitions, reduction strategies, and risk appetite. Instead of relying on a single large project, many companies choose to adopt a diversified approach balancing readily available low-carbon products (virgin or recycled) with cost-effective GHG reductions while exploring advanced options for first-mover advantages and long-term partnerships.

In the near term, procuring scrap-based products is the most cost-effective pathway for many companies. It plays a significant role in enabling a circular model and maintaining its climate advantage over lower-carbon virgin materials. However, availability of recycled content is limited, and rising demand will drive up costs and competition, resulting in a need to increase collection and recycling rates to meet the growing demand for recycled aluminum. In the meantime, we must simultaneously address emissions from primary production, which is an essential lever for achieving net-zero.

Advanced purchases involve high-risk, high-reward investments where your company can have credible reductions representing the deepest decarbonization potential but also carry higher costs and uncertainties, such as technology and ramp-up risks. To secure a future supply of net-zero materials, companies are increasingly recognizing the need to invest early and share risks with suppliers, ensuring the timely development, deployment, and scale-up of breakthrough technologies.

Green procurement initiatives come with a range of risks, from supplier commitments and fluctuating supply of recycled content to volatile commodity prices, evolving carbon policies, and uncertainties in net-zero technologies. Exhibit 13 maps key risks in net-zero technology projects from a developer’s perspective.

Some of these risks are more relevant for buyers while others are more for suppliers. For example, the primary concerns for buyers lie in performance risks about the ability of near-zero products to meet quality, reliability, and emissions reduction expectations. Suppliers, on the other hand, face more technology and ramp-up risks, navigating uncertainties in scaling readiness and delivering projects on time and within budget. Some risks, such as policy uncertainty and market volatility, impact both parties, requiring collaborative mechanisms to share risks for mitigated exposure.

A company’s risk appetite depends on various factors, including industry dynamics and strategic priorities. To mitigate those risks while advancing decarbonization, companies can leverage creative purchasing mechanisms:

• Small-batch, conditioned contract — Commonly used by individual companies, it commits to smaller purchase volumes with flexible conditions to ensure products meet fixed considerations like quality, capacity, and timely delivery with a reasonably low-carbon markup. This allows companies to test emerging low-carbon products or technologies without significant financial exposure, providing suppliers with demand signals while giving buyers the flexibility to scale commitment based on product performance, policy evolvement, and cost trends. These contracts are typically short term, as buyers commit to purchasing smaller quantities of product. As a result, higher-per-unit costs may limit immediate cost savings, but the flexibility associated with these terms helps with resilience against market fluctuations. The return on investment associated with these contracts depends on securing favorable conditions and avoiding overcommitment, especially in volatile markets.
• Long-term purchase agreement — Some companies start exploring this mechanism as a natural hedge against future price volatility, policy shifts, and supply chain disruptions. These agreements provide suppliers with financial certainty to justify capital expenditures for deep decarbonization while securing a reliable supply of low-carbon materials for buyers at more predictable costs. As these contracts extend over several years, they typically ensure a stable supply and price structure. This reduces price volatility and allows for better financial planning. Although the initial commitment is higher, there is opportunity for cost savings over time. Companies should be aware of inflexible agreements that may result in losses if the market price of a product drops significantly.
• Group purchase — Facilitated by buyer groups (e.g., FMC), this approach pools demand across buyers to reduce costs, minimize supply constraints, and enhance purchasing power, making it easier to secure lower-carbon products at competitive prices while sharing risks. This also helps suppliers scale production by providing demand certainty. However, buyers may still face price fluctuations due to commodity volatility and market shifts, requiring careful contract structuring to mitigate exposure. This purchasing mechanism typically operates on a short- to mid-term timescale depending on the negotiated agreement length. Generally, there is an immediate cost reduction due to bulk pricing, but complexities with coordination may increase overhead.
• Direct investment — Ambitious buyers may consider engaging in direct supplier investments such as co-financing a net-zero production facility or supporting the scale-up of these technologies. This long-term strategy ensures early access to advanced technologies and helps lock in supply security and stabilize costs, but individual buyers may be concerned over its increased exposure to technology risks and financial commitments. These investments are made with the understanding that they often require years of operation before seeing returns. The initial capital expenditure is high, but there is potential for substantial long-term gains as a result.
• Book-and-claim — Designed for complex, global supply chains, this mechanism allows buyers to support low-carbon production even when direct physical procurement is impractical. Companies with Scope 3 emissions dominated by a few key materials may find this particularly effective in sourcing lower-emissions alternatives while helping suppliers scale production. However, robust standards and registries are essential to maintain credibility and prevent double counting. Since book-and-claim mechanisms separate environmental attributes from physical supply, they operate on an immediate- to short-term basis. These systems result in lower up-front costs and fast implementation but may not provide direct control over supply. In addition, the return may be seen as reputational, as a company can make sustainability claims through book-and-claim, but direct financial savings are more limited.

In practice, no single purchasing mechanism can fully mitigate all risks.  Companies must evaluate their risk appetite, long-term strategy, and flexibility to determine the most suitable approach. A diversified procurement strategy to balance near-term cost-effective options with longer-term investment in deep decarbonization can help manage uncertainty while securing access to low-carbon materials. Sector dynamics also shape which mechanism offers the best balance between cost, supply security, and emissions reduction. Check the examples below representing how climate leaders in different sectors design their procurement strategy.

As a mid-stream packaging company, Ball prioritizes high recycled content as its primary green procurement strategy. To ensure feasibility, Ball collaborates closely with both upstream suppliers and downstream customers, navigating market dynamics to advance sustainable procurement.

Ball engages in collaborative, dynamic discussions with customers and suppliers to explore practical decarbonization pathways shaped by product requirements, customer sustainability goals, and evolving market signals. When customers seek low-carbon product offerings, Ball works closely with them to assess offerings, navigate cost implications (including any potential green premiums), and ensure alignment with product expectations.

This partnership-driven approach allows Ball to integrate sustainability into procurement decisions while advancing its net-zero commitments. In turn, sustainability can enhance brand value and strengthen relationships with environmentally conscious customers.