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Sphera acquires riskmethods to add Scope 3 emissions monitoring

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Blackstone-owned Sphera has acquired riskmethods, a supply chain risk management software company, to add Scope 3 emissions management to its ESG product portfolio.

  • ESG consulting and software services firm Sphera has acquired riskmethods, a supply chain risk management (SCRM) software company.
  • Companies are increasingly turning to SCRM providers to help them meet their decarbonisation commitments.
  • Merger and acquisition (M&A) activity in the SCRM space will become more prevalent as net zero plans prompt companies to prioritise scope 3 emissions.

Sphera provides data and consultancy services to help companies manage their operational ESG risks. The firm was acquired by Blackstone (NYQ:BX) in 2021 for a total of $1.4 billion.

Continuing the chain of M&A activity, Sphera has now acquired German SCRM provider riskmethods, in a deal that will see it expanding its product portfolio to provide scope 3 emissions monitoring and reporting services.

The need for supply chain risk management solutions 

Supply chains are now broadly acknowledged as a critical factor in corporate sustainability, as they have become increasingly vulnerable to ESG risks associated with unpredictable events such as natural disasters, cyber-attacks or geopolitical upheaval.

SCRM platforms, such as is offered by riskmethods, help companies automate the collection and analysis of supply chain data, while also providing integrated tools for the implementation of risk mitigation methodologies.

With a survey by Gartner revealing that companies using technological solutions were twice as likely to successfully mitigate their supply chain risks, the integration of SCRM with Sphera’s existing software-as-a-service model is likely to drive demand for its services.

Increased focus on Scope 3 emissions drives demand for SCRM

Companies are increasingly facing pressure to include Scope 3 emissions within their net zero transition plans. With research from CDP estimating that, as an average across all sectors, scope 3 emissions contribute around 75% of each company’s total footprint, this inclusion is vital in ensuring real progress towards decarbonisation is made.

Reporting on Scope 3 emissions, however, can be challenging. Scope 3 emissions are those generated indirectly throughout a company’s value chain, and are further divided into 15 sub-categories.

Given the complexity of identifying Scope 3 emissions, new technologies can prove useful when it comes to their measurement. They are able to translate vast amounts of data into comprehensive reports, which can then be used to develop decarbonisation strategies, monitor progress towards targets and communicate effectively with stakeholders.

Recognition of these benefits has led to an increase in funding opportunities for technology-based SCRM start-ups, particularly those that have aligned their reporting capabilities with internationally recognised sustainability frameworks such as the Global Reporting Initiatives or the UN Sustainable Development Goals.

One such company is EcoVadis, which closed a $500 million funding round, bringing its total valuation to over $1 billion in June 2022. Eco Vadis is one of many competitors to the newly expanded Sphera, but it differentiates itself by generating value chain data through direct contact with suppliers, rather than from publicly available sources.

As demand for SCRM services increases, a plethora of different technologies and methodologies are likely to emerge. As the space becomes more competitive, larger companies will likely seek acquisition deals to quickly add SCRM to their portfolios.

This being the case, Sphera’s acquisition of riskmethods is likely to become part of a far bigger trend.

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