CHALLENGE: Scope 3 data accuracy lives or dies by SME taxonomy quality. Until SMEs submit structured, standardized taxonomy-aligned data, LME emissions models will remain overly assumption-driven, error-prone, and difficult to defend in front of regulators and investors.
SOLUTION: Large and medium enterprises (LMEs) can address poor small and medium enterprise (SME) taxonomy in their extended supply chain by implementing strategies that standardize data, enhance integration, and support SME capabilities, thereby mitigating the 15-25% reduction in ProcureTech ROI and related impacts on Scope 3 data gathering and reporting (e.g., 20-30% data accuracy reduction, 15-25% compliance risk increase). These strategies focus on overcoming SME challenges like inconsistent categorization, limited technical resources, and integration issues, while aligning with LME procurement and sustainability goals.
COMPLEXITY:
- While LMEs are under increasing pressure to ensure taxonomy alignment throughout their supply chains, and some are taking steps to support SMEs, no robust data indicates that a majority or even a significant percentage of LMEs are systematically working with their SMEs to address poor taxonomy issues. The available evidence suggests that such collaboration is still the exception rather than the rule, with most SMEs left to navigate taxonomy challenges on their own
- Investing time and resources to help small and medium enterprises (SMEs) in their extended supply chain clean up or fix poor taxonomies can yield significant benefits for large and medium enterprises (LMEs), such as improved ProcureTech ROI (15-25% reduction mitigated), enhanced Scope 3 data accuracy (10-15% improvement), and reduced compliance risks (15-25% decrease). However, this approach also has notable downsides, including financial costs, operational burdens, and potential competitive disadvantages, particularly when SMEs supply multiple LMEs, including competitors. (See Table Below)
WHAT IS THE REAL SOLUTION: How does an LME find a balanced solution between addressing SME taxonomy issues in their extended supply chains while offsetting the competitive risks highlighted above?
Large Multinational Enterprises (LMEs) can balance SME taxonomy alignment with competitive risk mitigation by adopting tiered strategies that combine targeted collaboration, proprietary safeguards, and industry-wide advocacy. Below is a structured approach informed by regulatory frameworks, risk management principles, and SME heterogeneity.
PROCURETECH SOLUTION PROVIDER ROLE: How can ProcureTech solution providers help LMEs to address the above SME taxonomy issues (See Table Below)?
TODAY’S TAKEAWAY: SME taxonomy issues impact far beyond Scope 3 reporting and reverberate through all areas of the LME procurement and supply chain practice. The above isn’t intended to provide definitive answers or solutions but to stimulate further discussion.
30
BONUS INSIGHTS: A few case studies indicate that the above approach has experienced success (See Table Below). I will dig deeper into these case studies as well as others and write about them in future posts.
30
Procurement Insights
The Complexities Of Procurement and Supply Chain That No One Seems To Talk About
Posted on May 27, 2025
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CHALLENGE: Scope 3 data accuracy lives or dies by SME taxonomy quality. Until SMEs submit structured, standardized taxonomy-aligned data, LME emissions models will remain overly assumption-driven, error-prone, and difficult to defend in front of regulators and investors.
SOLUTION: Large and medium enterprises (LMEs) can address poor small and medium enterprise (SME) taxonomy in their extended supply chain by implementing strategies that standardize data, enhance integration, and support SME capabilities, thereby mitigating the 15-25% reduction in ProcureTech ROI and related impacts on Scope 3 data gathering and reporting (e.g., 20-30% data accuracy reduction, 15-25% compliance risk increase). These strategies focus on overcoming SME challenges like inconsistent categorization, limited technical resources, and integration issues, while aligning with LME procurement and sustainability goals.
COMPLEXITY:
WHAT IS THE REAL SOLUTION: How does an LME find a balanced solution between addressing SME taxonomy issues in their extended supply chains while offsetting the competitive risks highlighted above?
Large Multinational Enterprises (LMEs) can balance SME taxonomy alignment with competitive risk mitigation by adopting tiered strategies that combine targeted collaboration, proprietary safeguards, and industry-wide advocacy. Below is a structured approach informed by regulatory frameworks, risk management principles, and SME heterogeneity.
PROCURETECH SOLUTION PROVIDER ROLE: How can ProcureTech solution providers help LMEs to address the above SME taxonomy issues (See Table Below)?
TODAY’S TAKEAWAY: SME taxonomy issues impact far beyond Scope 3 reporting and reverberate through all areas of the LME procurement and supply chain practice. The above isn’t intended to provide definitive answers or solutions but to stimulate further discussion.
30
BONUS INSIGHTS: A few case studies indicate that the above approach has experienced success (See Table Below). I will dig deeper into these case studies as well as others and write about them in future posts.
30
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