S04E05: The Tech Trap - Why (just) Digital Transformation Doesn't Deliver Decarbonisation

Daniel: Welcome to the Supply Chain Dialogues, Season Four, Episode Five I'm Daniel Helmig, and if you've been following along, we've been exploring why achieving net-zero Scope 3 emissions by some more realistic timeframe to curb further climate change, and I mean 2040, is more challenging than simply implementing best practices and ticking boxes.

We've covered the Standards Paradox – where more measurement means less action. We've explored the Economics of Inaction – where traditional cost-benefit analysis systematically kills climate investments. And we've examined the Policy Paradox – where regulations focused on Scope 1 and 2 barely touch the Scope 3 elephant in the room.

Today, we're tackling something that might hit a bit close to home for many of you: why throwing technology at the problem often makes things worse, not better. And yes, we're going to have a bit more fun with this one.

AImee: Daniel, as your AI co-host, I'm feeling a bit nervous about this episode. Are you about to tell everyone that technology is the problem?

Daniel: No, AImee, you're safe. Technology isn't the problem. The problem is what I call "digital displacement" – the tendency to substitute technological solutions for operational transformation. It's like buying an expensive gym membership and workout tracking app, then wondering why you haven't lost weight whilst sitting on the sofa scrolling through your fitness data.

AImee: So we're talking about companies that digitise their emissions tracking but don't actually reduce emissions?

Daniel:  The research data indicate that this is happening at scale. Let me share something fascinating – and by intriguing, I mean alarming. Companies that invested heavily in supply chain digitisation and Industry 4.0 technologies showed no statistically significant improvement in actual emission reductions compared to companies that didn't.

AImee: Wait, that can't be right. Shouldn't better data, better visibility, and better analytics lead to better outcomes?

Daniel: That's what we all assumed. That's what every technology vendor promises. However, here's what actually happens: The Company invests millions in a SaaS or AI-powered supply chain visibility platform. The platform generates beautiful dashboards showing real-time carbon emissions across the supply network. The sustainability team presents these dashboards to the board. Everyone feels very modern and data-driven. And then... nothing changes.

AImee: Because seeing the data isn't the same as acting on it?

Daniel: Precisely. In many cases, the investment in the technology displaces the resources needed for the operational changes that would make a difference. It's the "innovation theatre" version of the "compliance theatre" we discussed in Episode 2.

AImee: Innovation theatre – I like that. Can you provide a specific example from the research?

Daniel: Right. One mechanical engineering company – let's call them MechCo because I can't reveal their actual name – invested €3.2 million in a blockchain-based supplier transparency platform. Brilliant technology. The platform could track components from raw material extraction through six tiers of suppliers, with immutable carbon footprint data at every stage.

AImee: Sounds impressive.

Daniel: Oh, it was impressive. The dashboards were gorgeous. You could drill down to see the carbon impact of a single bolt in a specific assembly. The CTO won an industry award. But here's the thing – two years after implementation, their Scope 3 emissions had actually increased by 7%.

AImee: How is that even possible?

Daniel: Because the visibility showed them the problem, but they didn't have a strategy to fix it. The suppliers with the highest carbon footprints were also the most cost-competitive and had the longest relationships. The data said "these suppliers are killing your carbon targets," but the procurement team said "yes, but they're also the only ones who can deliver at this price and quality."

Meanwhile, the company that didn't invest in fancy technology but simply started requiring carbon reduction commitments in their top 50 supplier contracts? They reduced Scope 3 emissions by 18%.

AImee: So the low-tech approach beat the high-tech approach?

Daniel: Not quite. The issue isn't high-tech versus low-tech. The problem is whether the technology serves as a catalyst for transformation or substitutes for it. The best performers in our research were companies that implemented targeted technologies specifically designed to enable operational changes they'd already committed to making.

AImee: [00:05:00] Can you unpack that a bit more? What's the difference between technology that serves transformation versus technology that substitutes for it?

Daniel: Great question. Let's compare two automotive suppliers. Company A invests in an enterprise carbon accounting platform. Costs €800,000 annually. Tracks emissions across thousands of data points. Generates compliance reports for every regulation. The sustainability team spends 60% of their time managing the platform.

Company B invests €150,000 in a simple supplier engagement portal. Fundamental technology – essentially a structured way to collect carbon data and track reduction commitments from suppliers. But the sustainability team spends 80% of their time actually talking to suppliers, negotiating renewable energy clauses, and redesigning logistics routes.

After 18 months, Company A knows precisely how much they're emitting. Company B has reduced emissions by 23%.

AImee: So, Company A confused measuring with managing?

Daniel: Yep. And this is absolutely rampant in most industry sectors. I was recently in a meeting where a procurement director said – and I quote – "Once we have complete visibility into our Scope 3 emissions, we'll be able to start addressing them." And I had to bite my tongue not to say: "You already know your biggest emission sources. You've known for three years. You don't need better data; you need to bloody well do something."

AImee: You didn't actually say that.

Daniel: No, I have learned my lessons regarding the rules of communication in a corporate environment decades ago. Still, I took him aside after the meeting in the hallway. There's a pervasive belief that perfect information is a prerequisite for action. It's not. In fact, our research shows that companies that wait for perfect data before acting typically end up never acting.

AImee: This reminds me of something you mentioned earlier in the series – the Pareto principle. Would you say that applies here?

Daniel: In most manufacturing companies, 20% of suppliers account for 80% of Scope 3 emissions. You don't need blockchain and AI to identify those suppliers – a fundamental spend analysis and industry emission factors will get you 90% of the way there. But instead, companies invest in platforms that can theoretically track emissions from thousands of suppliers, when engaging deeply with the top 50 would deliver far more impact.

AImee: So what you're describing is a kind of "sophistication trap"?

Daniel: That's a perfect term for it. Companies pursue sophisticated solutions because they feel more... corporate. More serious. More defensible to the board. It's much easier to present a € 2 million technology investment proposal than to present a plan that says, "We're going to have uncomfortable conversations with our top suppliers about changing their energy sources, and some of them might increase prices or refuse."

AImee: The technology investment feels like progress without the difficult tradeoffs?

Daniel: And technology vendors are brilliant at enabling this avoidance. Every pitch deck promises that their platform will "drive behaviour change" or "enable supplier transformation." But platforms don't drive behaviour change. People drive behaviour change. Platforms just make data look pretty.

AImee: Okay, but surely some technologies actually do help with decarbonisation? You can't tell me that real-time emissions monitoring or AI-powered route optimisation don't have value?

Daniel: Of course, they have value – when they're part of an operational transformation strategy. The research shows that technology investments are correlated positively with emissions reductions in only one specific context: when they are implemented after the company has already committed to particular operational changes and the technology is selected to enable those changes.

For example, there was a logistics company – I'll call them LogisTech – that committed to reducing delivery emissions by 30%. Only then did they invest in route optimisation AI. The AI didn't decide the strategy; the AI enabled the strategy. And it worked brilliantly because everyone understood that the technology was a tool, not a solution.

AImee: So the sequence matters? Strategy first, technology second?

Daniel: We often see the opposite. Companies acquire technology platforms hoping they'll illuminate a path forward. It's like buying professional chefs' knives hoping they'll make you a better cook. They won't. They'll just make you a person with expensive knives who still can't cook.

AImee: That's a painful metaphor for anyone who's splurged on kitchen equipment. So what does the research say about why companies fall into this trap?

Daniel: Our data suggests several factors. First, technology investments feel more controllable than operational changes. You can specify requirements, issue an RFP, and implement a platform. Done. Operational transformation requires negotiating with suppliers who have their own priorities, redesigning processes that have been in place for decades, and making uncomfortable trade-offs.

Second, technology investments are easier to justify financially. You can calculate an ROI – or at least project one – for a software platform. How do you calculate the ROI of having 50 difficult conversations with suppliers? You can't, so traditional financial evaluation methods favour technology over transformation.

AImee: Wait, that connects back to Episode 3 and your 2nd hypothesis of your research, doesn't it? The cost-benefit analysis problem?

Daniel: It's the same underlying issue. The investments that would actually drive emissions reductions – such as supplier relationship transformation, process redesign, and logistics network optimisation – don't fit neatly into traditional capital expenditure frameworks. But a €2 million software platform does. So we systematically favour investments that seem financially prudent over those that would actually be effective.

AImee: So we're back to the same systemic barriers we've been finding throughout this research?

Daniel: Whether it's standards, economics, policy, or technology, we keep discovering the same pattern: the approaches that feel rigorous and professional are often the approaches that prevent actual progress.

AImee: Okay, so we've established the problem. But surely you've found some companies that are using technology effectively? What are they doing differently?

Daniel: And this is where we can inject some optimism into this episode. The companies that use technology successfully all share one characteristic: they treat technology as an enabler, not a strategy. Let me share a few examples.

There's an electronics manufacturer – I'll call them ElectroTech – that implemented what they call "targeted digital tools." Instead of a comprehensive carbon management platform, they identified three specific operational barriers to emissions reduction and bought simple tools for each.

Barrier one: they couldn't quickly identify alternative suppliers with lower carbon footprints. Solution: a basic database that cross-references supplier carbon performance with capability. Costs about €30,000 to build. Saves them weeks every time they need to make a sourcing decision.

AImee: That sounds almost... underwhelming?

Daniel: It's not going to win any innovation awards. However, it has reduced their supplier switching time by 60% and their procurement team actually uses it daily. Compare that to the all-singing, all-dancing platforms that cost millions and get used once a month to generate a report.

Barrier two: logistics providers weren't incentivised to optimise for emissions. Solution: They modified their transportation management system to include carbon impact in routing decisions and made it visible in performance scorecards. Cost to modify: €80,000 - annual emission reduction from optimised routing: 12%.

AImee: So small, targeted, specific tools rather than comprehensive platforms?

Daniel: And barrier three is my favourite because it's almost embarrassingly simple. They found that their engineers often specified materials based on technical requirements without considering carbon impact. Not because they didn't care, but because that information wasn't available at the point of decision.

AImee: So they integrated carbon data into their CAD system?

Daniel: Close. They created a simple plugin that showed the estimated carbon footprint of different material choices right in the design interface. Costs about €50,000 to develop. And because it's readily available when engineers make decisions, it actually influences their choices. They estimate that it has shifted about 30% of their material specifications toward lower-carbon options.

Total technology investment: €160,000. Total estimated annual emission reduction: 15-20%. Compare that to companies spending millions on comprehensive platforms and getting minimal impact.

AImee: So the pattern is: identify a specific operational barrier, implement the minimum viable technology to address it, and ensure it integrates into existing workflows?

Daniel: Which sounds so obvious when you say it like that, but our research shows that fewer than 20% of companies take this approach. Most opt for the comprehensive solution that promises to solve everything, only to end up solving nothing. Actions speak still louder than words or bytes.

AImee: What about AI? Everyone's talking about how AI will revolutionise supply chains. Does your research support that?

Daniel:  Look, AI has legitimate applications in supply chain decarbonisation. Demand forecasting to reduce overproduction. Route optimisation for logistics. Identifying emission patterns in complex datasets. But – and this is critical – AI is only helpful if you're actually going to act on what it tells you.

I sat through a presentation where a company showed how their AI had identified that 60% of their emissions came from air freight, and switching to ocean freight for non-urgent shipments would reduce emissions by 40%. Brilliant analysis. And then I asked: "So have you switched to ocean freight?" And they said: "Well, we need to evaluate the inventory holding costs and potential stockouts and..."

AImee: So the AI did its job, but the humans didn't do theirs?

Daniel: The AI identified the opportunity. Traditional cost-benefit analysis killed the action. What would have actually helped that company? Not better AI, but a different evaluation framework that properly valued emission reductions against inventory costs. And leaders who said: Let’s do it, we have enough data for now.

AImee: It keeps coming back to the same barriers, doesn't it?

Daniel: It does. This is encouraging in a weird way, because it means we don't have a thousand different problems to worry about. We have one fundamental problem manifesting in multiple ways: our governance systems – measurement systems, evaluation frameworks, regulatory structures, and technology strategies – are all misaligned with the transformation we need to achieve.

AImee: So what about some of these other technologies people keep mentioning? Internet of Things? Blockchain? Digital twins?

Daniel: Right, let me address these quickly, as they come up frequently.

Internet of Things – IoT sensors for real-time monitoring? Potentially valuable, but only if you act on the data. I know a company that installed IoT sensors across its warehouse to monitor energy consumption. The sensors worked brilliantly. They identified that the HVAC system was running at full capacity 24/7, including when the warehouse was empty. And then, they continued to monitor it for eight months before anyone actually reprogrammed the HVAC system. Eight months! The sensors had paid for themselves within the first week if they'd just acted on the data.

AImee:  So the problem wasn't technology, it was organisational inertia?

Daniel: Blockchain – everyone's favourite buzzword. Yes, blockchain can provide immutable carbon tracking across supply chains. But you know what else provides carbon tracking across supply chains? A structured data sharing agreement with your suppliers and a basic database. Far cheaper, easier to implement, and actually works. We will address this later when we discuss the EU's latest ‘brilliant’ legislation, the Digital Product Passport, or DPP.  There you can see what bureaucrats make out of the word ‘blockchain’ in their setting. It is sooo useless!

Now, I'm not saying blockchain has no applications. For very complex, multi-tier supply chains where trust is a concern, it may be beneficial. But most companies don't need blockchain; they need their top 50 suppliers to fill out a standardised carbon reporting template, and actually reduce emissions in three to four areas. Not sexy, but effective.

AImee: And digital twins? Virtual replicas of physical supply chains?

Daniel: Digital twins are a fascinating technology. Truly. They let you model different scenarios, test optimisation strategies, and predict failure points. But again – and I do not want to sound like a broken record – they're valuable only if you'll implement the changes they suggest.

AImee: Let me guess – companies build elaborate digital twins and then don't implement any of the recommendations?

Daniel: Not quite that bad, but close. The research shows that companies with digital twins implemented some changes, but not nearly as many as the models recommended. Why? Because the digital twin identifies optimal solutions from a technical perspective, but those solutions often require complex organisational changes, supplier negotiations, or upfront investments that don't pass traditional financial evaluation.

So you end up with this expensive, sophisticated model telling you precisely what to do, and you implement about 30% of it because that's the 30% that fits within existing governance constraints.

AImee: That must be incredibly frustrating for the people who built the models.

Daniel: Oh, it is. I've talked to data scientists who are pulling their hair out. They've developed brilliant optimisation algorithms that could reduce emissions by 50%, and they watch as management cherry-picks the easy recommendations and ignores the ones that would actually make a difference.

But here's the thing – it's not that management is stupid or doesn't care. It's that they're operating within systems that make the necessary changes on greenhouse gas emissions illegitimate. You can't blame individuals for systemic financial barriers.

AImee: So what's the solution? Should companies stop investing in technology altogether?

Daniel: No, absolutely not. However, they need to flip their approach completely. Instead of "What technology should we buy to solve our sustainability problem?" the question should be: "What operational changes would actually reduce our emissions, and what simple tools do we need to enable those changes?"

AImee: Start with the transformation, then identify the technology?

Daniel:  And often, the technology you need is far simpler than what vendors are selling. One of the highest-performing companies in our research, in terms of actual emission reductions, uses a souped-up Excel spreadsheet to track supplier engagement. Nothing fancy. But they've had difficult conversations with 200 suppliers, renegotiated contracts, and driven real change. And even if you use more sophisticated solutions, they should enable process changes, that you have already identified. We have already discussed the company CarbMee here several times. Their software falls into this category.

AImee: Can we talk about some of the more ridiculous technology pitches you've encountered? 

Daniel: Oh, where do I start? I've seen so many "AI-powered, blockchain-enabled, IoT-connected" solutions that promise to solve every supply chain problem whilst also making coffee and walking your dog.

There was one memorable pitch where a vendor promised their platform would "use quantum computing to model infinite supply chain scenarios simultaneously and identify the optimal decarbonisation pathway."

AImee: Wait, quantum computing? For supply chain carbon reduction?

Daniel: I swear this actually happened. And when I asked what specific problem required quantum computing rather than classical optimisation, the salesperson said something about "unprecedented complexity" and "infinite variables." What they were actually selling was a fairly standard constraint optimisation algorithm with a quantum computing label slapped on for marketing purposes. You could have literally as well just read the book “The Goal” by Goldratt and be there by updating your MES and ERP systems.

AImee: That's amazing. Did anyone buy it?

Daniel: The terrifying thing is, yes. A major automotive company paid an obscene amount of money for it. As far as I know, it's still being "calibrated" two years later.

AImee: So there's real money being spent on these essentially useless tools?

Daniel: The sustainability technology market is full of solutions looking for problems. And because supply chain decarbonisation is such a hot topic, and because most executives don't deeply understand the technical details, there's a lot of expensive vaporware being sold.

AImee: What's your favourite example of overly complex technology being used for a simple problem?

Daniel: [00:24:00] Okay, this one's brilliant. A company implemented an AI-powered "supplier engagement platform" that used natural language processing to analyse supplier responses to sustainability questionnaires and flag concerning answers for human review.

Sounds sophisticated. The problem was that they were only sending questionnaires to 80 suppliers. A human could read and analyse 80 questionnaires in about two days. The AI platform cost €200,000 annually and still required human review of flagged responses.

When I pointed this out, the head of sustainability said: "Yes, but it's scalable." To which I replied: "Scalable to what? Do you plan to have 10,000 suppliers?" And he said: "Well, no, not now - but it might be useful if we do."

AImee:  So they spent 200,000 Euro annually on scalability they'd never need?

Daniel: And this is really common. Companies buy enterprise-scale solutions for problems that would be better solved with simple, targeted tools. It's like buying an 7.5 ton van, because you might someday need to move furniture, even though you just need to pick up groceries right now.

AImee: What about some success stories? You mentioned earlier that about 20% of companies are using technology effectively. What are they doing that's actually funny or clever?

Daniel: Oh, I love some of these. There's a medium-sized manufacturer here in Switzerland that realised most of its emission reduction opportunities required supplier negotiations. So rather than buying a complex supplier management platform, they hired two additional people for their procurement team whose sole job was to engage in supplier sustainability.

Cost: about €150,000 annually. Results: 22% Scope 3 reduction in two years. No fancy technology, just people having conversations and making things happen.

AImee: Sometimes the best solution is no technology?

Daniel: Sometimes! Another company realised their engineers would specify materials based on whatever they'd used before, not because it was optimal, but because it was familiar. So they created what they called the "Carbon Coffee Break."

AImee: The Carbon Coffee Break?

Daniel: Every Wednesday, the sustainability team would set up a table with coffee and pastries in the engineering department. Any engineer could stop by, show them what they were working on, and get immediate feedback on lower-carbon alternatives. That's it: coffee, pastries, and conversation.

AImee: That's brilliant! And it costs nothing.

Daniel: About €3,000 per year in coffee and pastries. And it's been more effective than their previous approach of sending engineers to mandatory sustainability training sessions that everyone hated.

The beauty of it is that it meets engineers where they are, at the moment they're making decisions, with relevant information and no judgment. Plus, free coffee. You can't underestimate the power of free coffee.

AImee: So the pattern is: simple, targeted, human-centred approaches often beat sophisticated technological or regulatory solutions?

Daniel: When it comes to driving behaviour change, absolutely. Technology excels in data collection, processing, and analysis. However, humans are still better at relationship management, negotiation, and creative problem-solving that drive actual transformation.

The most effective companies utilise technology to support human decision-making, rather than replace it. They use dashboards to highlight issues, not to pretend the issues don't require human judgment. They use platforms to facilitate conversations, not to substitute for them.

Aimee: Speaking of innovative ideas, can we discuss the European Union's Digital Product Passport legislation?

Daniel: Oh, the DPP. Yes. Phew. The Digital Product Passport is the perfect crystallisation of everything wrong with our current approach to sustainability regulation. It's as if the EU reviewed all our research findings on standards, creating more reporting and less action, and said, "Hold my beer, we can make this worse."

AImee:  Tell us what you really think, Daniel. But seriously, for listeners who aren't familiar, what is the Digital Product Passport?

Daniel: Right, so the Digital Product Passport or DPP is part of the EU's Ecodesign for Sustainable Products Regulation, which came into force in July 2024. The basic idea is that nearly every product sold in the EU must have a digital record containing comprehensive information about its origin, materials, environmental impact, manufacturing history, carbon footprint, recyclability, disposal recommendations, and so on.

AImee: That sounds... comprehensive.

Daniel: Comprehensive is one word for it. The first products affected are industrial and electric vehicle batteries, which need Battery Passports by February 2027. Then it rolls out to textiles, steel, electronics, furniture, tyres, detergents, paints, lubricants, toys, essentially everything. Companies have to make these passports accessible by April 2025, which, for most companies, was essentially yesterday.

AImee: And you're saying this is going to create more problems than it solves?

Daniel: Let me be precise about this, because it's essential. The intention behind DPP is laudable: to increase transparency, facilitate the circular economy, and help consumers make informed choices. The implementation, however, is a masterclass in creating compliance theatre whilst distracting from actual emission reduction.

Here's what's actually happening on the ground. Our research revealed that companies with more extensive measurement and reporting standards exhibit less progress in supply chain transformation. The DPP is that finding on steroids.

AImee: Can you give us a concrete example?

Daniel: Absolutely. I'm working with a mid-sized electronics manufacturer; let's call them ElectroWidget. They employ about 400 people, with an annual revenue of around €80 million. They were making genuine progress on Scope 3 emissions; they'd engaged their top 30 suppliers, renegotiated contracts to include renewable energy commitments, and were on track for a 20% reduction by 2027.

Then the DPP requirements hit. Now they need to create digital passports for approximately 3,000 product SKUs, that’s stock keeping units. Each passport needs to include materials composition, manufacturing location, carbon footprint, recycling information, and it all needs to be in machine-readable format, uploaded to the EU portal, with controlled access levels for different stakeholders.

AImee: That sounds like a lot of work.

Daniel: The company calculated that it needs to hire three additional full-time employees just for DPP compliance. That's roughly €200,000 per year. Plus software systems to manage the passports adds another €150,000 upfront, €50,000 annually. And here's the killer: they've had to pull one person off their supplier engagement programme to coordinate the DPP implementation.

So let me be clear about the tradeoff: €400,000 in the first year to create digital documentation of their carbon footprint, whilst simultaneously reducing the resources dedicated to actually lowering their carbon footprint. It's madness.

AImee: But surely the transparency will eventually drive improvement? If consumers can see which products have a lower environmental impact, they'll choose those products, creating market pressure for improvement.

Daniel: That's the theory. The reality? According to a survey of 1,078 German companies in autumn 2024, two-thirds of companies either hadn't heard of DPPs or didn't consider them relevant. Only 4% had actually taken measures to prepare. And we're now past the deadline for many requirements.

AImee: So companies aren't ready?

Daniel: It's worse than that. The ready companies are predominantly the large corporations with extensive compliance departments. The mid-sized and smaller manufacturers, the ones that actually need support to transform their operations, are drowning in the complexity.

And here's the really perverse bit: the regulation creates a situation where companies compete on who has the best compliance systems, not who has the lowest actual emissions. I've watched companies present their elaborate DPP frameworks at industry conferences and receive applause, whilst their Scope 3 emissions continue climbing.

AImee: This sounds like exactly what your research predicted: standards implementation redirecting resources away from transformation.

Daniel: Our research revealed a negative correlation between the implementation of standards and supply chain changes. The DPP is a perfect case study of why. Let me break down where the resources are going.

AImee: Please do.

Daniel: A typical mid-sized manufacturer implementing DPP needs to: Map their entire bill of materials for every product - that's months of work. Collect sustainability data from hundreds of suppliers who mostly don't have this data in the required format. Implement software systems that can create machine-readable passports in the mandated format. Train staff on data collection, verification, and system management. Establish governance processes for ensuring data quality and managing updates. Establish controlled access systems for various stakeholder groups.

And here's the catch: almost none of this work actually reduces emissions. It documents emissions. It creates transparency about emissions. But transparency alone doesn't reduce emissions. Action reduces emissions.

AImee: So you're saying the regulation addresses the wrong side of the equation?

Daniel: The regulation mandates extensive reporting on Scope 3, which accounts for 80% of most companies' emissions and originates from their supply chains. However, it doesn't mandate a reduction in Scope 3. It mandates documentation of Scope 3.

AImee: That's... backwards?

Daniel: It's perfectly backwards. It's like if we tackled obesity by requiring everyone to wear a digital display showing their calorie intake and body fat percentage, but we didn't actually require or incentivise anyone to eat better or exercise more.

AImee: That's a disturbing metaphor, but I see the parallel.

Daniel: And the timing is particularly painful. These regulations are rolling out between 2024 and 2030, precisely the period when companies need to make aggressive investments in actual emission reduction to have any hope of limiting warming to 1.5 degrees.

Instead, we're asking them to spend these critical years building elaborate reporting systems. It's a colossal misallocation of resources at precisely the wrong moment.

AImee: What should the regulation have focused on instead?

Daniel: If I were designing a regulation to actually drive decarbonisation, I'd flip the entire approach. Instead of mandating detailed documentation of emissions, mandate actual emission reductions with increasing stringency over time. Set sector-specific targets. Require companies to demonstrate year-on-year improvement. Create substantial penalties for non-compliance. Use ISO standards to monitor progress.

And make the reporting requirements as minimal as possible, just the basic data needed to verify compliance. No elaborate digital passports. No machine-readable formats. Just: "Here's our baseline, here's our current emissions, here's our trajectory."

AImee: So outcome-based regulation instead of process-based regulation?

Daniel:  But that would require politicians and bureaucrats to make uncomfortable choices about how much emission reduction to require and how fast. It's much easier to mandate transparency and kick the hard decisions down the road.

The DPP allows regulators to say, "We're taking strong action on climate change!" while actually avoiding any requirements that might be economically or politically difficult. It's greenwashing at the regulatory level.

In addition, it is merely another attempt to centralise data in the EU, rather than delegating responsibility to independent states and industry associations that are better equipped to support their companies.

AImee: That's quite a critique. Is anyone pushing back on this?

Daniel: Some industry associations are raising concerns about implementation costs and complexity, but they're framed as requests for more extended deadlines or simplified requirements. Very few people are asking the fundamental question: "Will this actually reduce emissions, or just document them?"

And that's the question that matters. Because if we spend the next five years building elaborate compliance infrastructure and our emissions don't actually come down, we've failed. The planet doesn't care how sophisticated our reporting systems are. It just heats up due to the concentration of CO2 in the atmosphere, and we experience the weather consequences of that.

AImee: What should companies do? They can't just ignore the regulation.

Daniel: No, they can't. They need to comply unfortunately; the penalties for non-compliance will be substantial. However, they should approach DPP compliance with a clear understanding of what it entails: a regulatory obligation that will consume resources but, by itself, will not reduce emissions.

The innovative companies are doing what I call "minimum viable compliance plus maximum viable transformation." They're implementing the simplest DPP systems that meet legal requirements: no gold-plating, no unnecessary sophistication. And they're protecting their supplier engagement budgets, their operational transformation programmes, and their actual emission reduction initiatives.

They're treating DPP as a tax: an unavoidable cost of doing business in Europe, but not as a strategy for sustainability. The strategy remains: engage suppliers, modify contracts, optimise logistics, switch to lower-carbon materials and energy sources. The things that actually reduce emissions.

Aimee: This has been quite a reality check regarding sustainability regulations.

Daniel: Look, I don't enjoy being cynical about this. I desperately want these regulations to work. But our research shows, and the DPP exemplifies, that we're systematically designing regulations that create the appearance of progress whilst directing resources away from actual progress.

Until we fundamentally restructure how we approach sustainability regulation, shifting from transparency mandates to performance requirements, we will continue to see this pattern: more standards, more reporting, higher compliance costs, and no meaningful improvement in environmental outcomes.

AImee: As we wrap up, what should listeners take away from this episode?

Daniel: Here are the key points. First, technology is a tool, not a strategy. If you're investing in technology hoping it will drive transformation, you're doing it backwards.

Second, simple and targeted beats comprehensive and sophisticated nearly every time. Identify your specific barriers to emission reduction, then find or build the minimal tool needed to address each one.

Third, technology that serves transformation requires acting on the insights it provides. If you're not willing to make complex operational changes, don't waste money on platforms that will simply document your inaction in high-resolution detail.

And finally, sometimes the best solution isn't more technology – it's coffee and conversation. Never underestimate the power of human relationships in driving change.

AImee: Anything else?

Daniel: Episode 6 will examine how companies organise themselves – including reporting lines, incentive structures, and siloed departments – and how this either enables or prevents supply chain transformation. Spoiler alert: most organisation designs are fundamentally incompatible with Scope 3 reduction.

AImee: Until then, I will do some reorganization of my databases.

Daniel: You do that. While Amy is busy, dear listener, if you have examples of brilliant or ridiculous technology implementations – and let's be honest, we all have both – send them to dialogues@helmigadvisory.com. We love hearing your stories.

Until next time, remember: the best technology is the one that actually gets used to drive change, not the one that wins innovation awards whilst sitting unused on a server somewhere.

Stay safe, be bold, and see you in two weeks.

These are the Supply Chain Dialogues, produced and copyrighted by Helmig Advisory in 2025.