For Ilmatar, understanding the supply chains of its subcontractors is an essential part of its sustainability efforts. Additionally, it is an integral aspect of reporting. A recent EMBA development project examined our subcontractors’ readiness to monitor the emissions impact of their operations.
As a key conclusion of our Procurement Manager Tuukka Kraft’s Executive Master of Business Administration (EMBA) research, clear and measurable requirements from customers can enhance subcontractors’ motivation to develop more sustainable solutions.
Readiness to Monitor Supply Chain Emissions Varies
According to Tuukka’s research, most of Ilmatar’s subcontractors have already made progress in emissions accounting, with many adhering to ISO 14001 standards and actively participating in various international emissions reduction initiatives. However, differences remain in companies’ readiness and strategic approaches to reducing emissions.
Among them are “gems” capable of tracing their carbon footprint all the way to the beginning of the supply chain. However, a significant portion of companies face challenges due to a lack of resources and expertise in reporting. “Sustainability efforts require time and deep engagement,” Tuukka notes.
Transparency in information sharing is crucial, yet it is often lacking across the entire supply chain. Verifying the accuracy and reliability of the data provided by subcontractors requires good dialogue between companies and a strong commitment from both parties. Sustainability audits can help assess the starting level of prospective suppliers.
“However, a system based solely on individual audits is not a sustainable long-term solution. Instead, open and continuous information sharing should become standard practice,” he continues.
Sustainability vs. Price Competition in Procurement Decisions
Ilmatar achieved a positive climate impact in terms of CO₂ emissions in 2024. This means that the climate benefits of our operations (carbon handprint) outweighed the CO₂ emissions generated by our activities (carbon footprint). Ilmatar’s emissions stem 98% from the construction of renewable energy facilities and the materials used in power plants.
For example, when constructing a single wind turbine, the steel structure alone accounts for up to 41% of the turbine’s carbon footprint. Since steel production generates significant CO₂ emissions, one solution could be green steel, produced using renewable energy. “This way, both the manufacturer and the customer benefit,” Tuukka states.
Ilmatar aims to promote sustainable choices throughout its procurement chain. If price competition overrides the prioritization of sustainability, subcontractors have limited incentives to develop sustainable solutions. However, Tuukka believes that subcontractors will ultimately benefit from their sustainability investments:
“A subcontractor’s motivation to track its carbon footprint is strongly tied to corporate image and competitive advantage as a responsible operator. Major industrial players want to demonstrate their commitment to sustainability, and Ilmatar can drive this forward by requiring more responsible practices, such as the use of green steel in turbine structures. Initiating such changes requires an initial balance between cost considerations for both buyers and suppliers,” Tuukka explains.
While Ilmatar’s operations have a positive climate impact and our production delivers more clean energy to replace fossil fuels, there is still much work to be done in reducing total emissions within our procurement chain. For this reason, Ilmatar believes that moving forward, it is crucial to strengthen responsible procurement efforts in even closer collaboration with suppliers.
