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Carbon emissions from corporate supply chains are 26 times higher than their operational emissions, according to a new study.
In 2023, corporates reported their Scope 3 emissions (supply chain emissions) which showed the vast difference, on average, in comparison to their direct operation emissions - Scopes 1 and 2.
Boston Consulting Group (BCG) and CDP joined forces to conduct the report ‘Scope 3 Upstream: Big Challenges, Simple Remedies’ which showed supply chain emissions continue to be overlooked with a sharper focus on measuring Scope 1 and 2 in the manufacturing, retails and materials sectors. Corporates are twice as likely to do this than measure their supply chain emissions.
Of all the companies disclosing their emissions to CDP, the global non-profit running the world’s environmental disclosure system, just 15 per cent have set a Scope 3 target. This is despite the lack of reporting which causes risks for corporates and investors, both of whom are responsible for accountability.
Three significant drivers of action in supply chain emissions:
1. A climate-responsible board (corporates are five times more likely to have a Scope 3 target and a 1.5°C -aligned transition plan with such a board)
2. Supplier engagement (seven times more likely to have a Scope 3 target and a 1.5°C-aligned transition plan. However, only four in ten corporates currently engage with their suppliers)
3. Internal carbon pricing (four times more like to have a Scope 3 and 1.5°C-aligned Scope 3 transition plan
Sonya Bhonsle, director of strategic accounts at CDP, said: “These figures highlight that the challenge of effectively measuring Scope 3 emissions is widespread and spans industries.
“Meaningful strides toward emissions reductions require corporates to evaluate their full supply chain, then raise ambition and take accountability. The first step to driving meaningful change toward a 1.5°C-aligned net zero future begins with disclosure.”
Only half of corporates evaluate the financial risks from upstream emissions when they disclose through CDP with just a third acknowledging the risk to profit.
Less than ten per cent of investors require investees to disclose Scope 3 upstream emissions as part of investment policies, despite the risks. Meanwhile, it’s recommended investors should price in the risks from carbon liability and demand on disclosure for greater transparency.
Diana Dimitrova, BCG managing director and partner, and co-author of the report, said: “The responsibilities and incentives to act on Scope 3 emissions for corporates and investors converge on risk management, and their oversight bodies must push for risk quantification and management.”
Acre’s 2023-24 Sustainability Census shows that across all sectors, respondents are sceptical about their organisation meeting its sustainability commitments within the timeframes set.
When asked about their confidence in their organisation’s ability to deliver against its sustainability commitments within the timeframes set, respondents across all sectors expressed doubts.
This may suggest a misalignment between the individuals setting these targets and those responsible for implementing them.
