With the upcoming European Corporate Sustainability Reporting Directive (CSRD), the current climate crisis, and the over-exploitation of natural resources, environmentally sustainable actions are needed within all industrial sectors and through entire supply chains. Here, Small and Medium Enterprises (SMEs) play a key role as they account for 64% of the total CO2 equivalent emissions within the European Union. However, research indicates that SMEs lack the capabilities needed to counteract this challenge, hence, resulting in an urgent need for research and guidance on how to aid SMEs in the transition toward environmental sustainability. Additionally, due to complex sustainability issues, SMEs must act beyond organizational boundaries and thus initiate strategic actions to mitigate environmental impacts on a supply chain level.
Hence, this thesis seeks to investigate this issue through a participatory design approach in the conduction of a qualitative case study of a Danish manufacturing SME. Based on the theoretical perspectives of Life Cycle Management, Path Creation, and delegation of agency, the organizational capabilities in addressing supply chain (scope 3) emissions have been investigated and strategic initiatives co-developed. Our analysis emphasizes that a hotspot analysis, a supply chain overview, and an understanding of organizational capabilities are prerequisites for SMEs to address scope 3 emissions. To this end, a tool has been developed to aid organizations in prioritizing strategic action based on these prerequisites. Furthermore, it is found that SMEs can take part in facilitating (sustainable) changes in their supply chain through explorative approaches such as the initiation of pilot projects in close collaboration with key suppliers to enable knowledge transfer across organizational boundaries.