Reducing supply chain emissions is crucial for minimizing corporate carbon footprints. While direct emissions from a company's operations (Scope 1 and Scope 2) are significant, the bulk of carbon pollution often comes from indirect activities across the supply chain (Scope 3). These emissions can account for up to 90% of a company’s total carbon footprint, making them a critical area for decarbonization efforts.
Understanding Scope 3 Emissions
The Greenhouse Gas (GHG) Protocol categorizes emissions into three scopes:
- Scope 1: Direct emissions from owned or controlled sources.
- Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
- Scope 3: All other indirect emissions that occur in a company’s value chain, including upstream and downstream transportation and distribution.
The Impact of Supply Chain Decarbonization
Focusing on supply chain emissions can significantly impact the fight against climate change. Eight value chains—food, construction, fashion, consumer goods, electronics, automotive, professional services, and freight—account for over half of global emissions. Decarbonizing these sectors can lead to substantial reductions in global carbon footprints. Many solutions are already available at little or no cost to consumers, facilitating this transition.
Available and Affordable Solutions
A report by BCG and the World Economic Forum (WEF) reveals that cost is not a prohibitive factor in decarbonizing global supply chains. The study found that up to 40% of emissions in these chains can be mitigated with affordable solutions like circularity and renewable power. Even with zero supply chain emissions, end-consumer costs would increase by only 1-4% in the medium term.
However, the report highlights that decarbonizing supply chains is challenging. Companies often struggle to obtain necessary data and set clear targets and standards for their suppliers. Engaging a fragmented supplier landscape and addressing deeply embedded emissions require collective industry action.
Strategies and Options for Decarbonization
Companies have a range of strategies to decarbonize their supply chains, from low-cost actions such as efficiency improvements and renewable energy adoption to larger investments in fuel switching and carbon capture. Common barriers include a lack of transparency over emissions and insufficient sector support and infrastructure.
The first major challenge is the complexity of greenhouse gas accounting, which can delay obtaining granular supply chain data. Companies should not wait for perfect data but start by addressing major impact categories like supplier energy use and transportation. Additionally, companies often lack a clear roadmap to achieve decarbonization targets. Innovation and scenario planning are essential to bridge this gap.
Best Practices and Case Studies
The BCG/WEF report, "Net-Zero Challenge: The Supply Chain Opportunity," highlights successful case studies. For instance, Carlsberg has developed an advanced supply chain emission calculation model in collaboration with the Carbon Trust. This model uses supplier-specific emissions data and estimates based on material and location-specific factors. Carlsberg encourages its suppliers to commit to science-based targets, with over 110 suppliers already signed up. Conclusion
Decarbonizing supply chains is not just a regulatory necessity but a strategic opportunity. Companies that act now can gain a competitive advantage as the world transitions to a low-carbon economy. By leveraging available solutions, setting clear targets, and engaging their supply chain partners, businesses can significantly reduce their carbon footprints and contribute to global sustainability efforts.
The Leading Companies that Are Decarbonizing Their Supply Chains
Several companies have made significant strides in decarbonizing their supply chains, setting examples for others to follow. Carlsberg, the global brewer, has collaborated with the Carbon Trust to develop a detailed supply chain emission calculation model that leverages supplier-specific data and estimates based on material and location-specific factors. Over 110 suppliers in Carlsberg’s supply chain have committed to science-based targets, helping the company address the 85% of its emissions that are not under its direct control. Similarly, Unilever has committed to reducing emissions across its entire value chain through its Sustainable Living Plan. This includes improving energy efficiency, utilizing renewable energy, and engaging suppliers to adopt sustainable practices. The company aims to ensure all its plastic packaging is reusable, recyclable, or compostable by 2025.
Walmart launched Project Gigaton, an ambitious initiative to reduce one billion metric tons of greenhouse gases from its global value chain by 2030. This involves setting science-based targets and collaborating with suppliers to implement sustainable practices (S&P Global). These examples highlight the tangible actions companies can take to significantly reduce their supply chain emissions and drive towards a more sustainable future.