Supply chains can be a climate game-changer. Here’s why

For leading business executives committed to climate action, there was a silver lining in the dark cloud of 2020. Greenhouse gas emissions dropped for the first time since the Second World War – by about 6-8%. Your company’s emissions probably went down along with everyone else’s.

But most of this has happened for all the wrong reasons, and companies need ways to lower emissions that do not grow out of economic or operational disruption. Our latest analysis suggests that for many, a major opportunity lies in their supply chains.

To date, supply chain emissions (Scope 3 upstream in the language of the Greenhouse Gas Protocol) have not been a major focus for most companies. Most have concentrated on reducing emissions in their own manufacturing plants and offices or resulting from their purchase of third-party electricity and heat (Scopes 1 and 2 respectively). This presents a huge untapped opportunity for climate action.

For many companies – especially those which serve end-consumer markets – 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. Add to this the globalized nature of present-day supply chains, and the potential for impact is enormous: actions taken by companies in one part of the world will result in emissions reductions across borders, often in countries where climate action may not be high on the political agenda (yet).

Learn more: World Economic Forum