Just eight supply chains account for more than half of global CO2 emissions. Fully decarbonising these would add just 1-4% to end-consumer costs for many everyday items.
Companies wanting to lower their carbon footprint often concentrate on reducing emissions from their own premises or fleet vehicles (classed as Scope 1 by the Greenhouse Gas Protocol) and their electricity procurement (Scope 2). But for most, a major opportunity also lies in their supply chains. Particularly so for those companies who serve end-consumer markets, as the emissions created in their upstream supply chains far outweigh the emissions from their direct operations.
For a typical fashion or food retailer, for example, only about 5% of its emissions are from direct manufacturing, while emissions generated in the supply chain can be 5-10 times higher.
Pushing for decarbonization among suppliers therefore offers companies like these a chance for impact that far exceeds what they can accomplish in their own operations. In turn, for companies that are part of supply chains, the ability to show low carbon credentials will be increasingly advantageous when bidding for contracts.
After interviewing several dozen global companies that lead the way in reducing supply-chain emissions, the World Economic Forum and Boston Consulting Group identified nine key actions CEOs could take to engage their suppliers and decarbonize their end-to-end supply chain:
(1) build a comprehensive emissions baseline, gradually filled with actual supplier data;
(2) set ambitious and holistic reduction targets, reducing emissions by
(3) revisiting product design choices and
(4) reconsidering (geographic) sourcing strategy;
(5) set ambitious procurement standards and
(6) work jointly with suppliers to co-fund abatement levers;
(7) work together with peers to align sector targets that maximize impact and level the playing field;
(8) use scale by driving up demand to lower the cost of green solutions; and – finally –
(9) develop internal governance mechanisms that introduce emissions as a steering mechanism and align the incentives of decision-makers with emission targets.
Download the report in full from the World Economic Forum.
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