McKinsey: How Can Retailers Cut 15% From Scope 3 Emissions?
Retailers could cut their Scope 3 emissions by 15% by 2030 using current technology or by as much as 50% with emerging methods, according to McKinsey & Co's latest report.
Although Scope 3 emissions are tough to address as they occur within the value chain rather than being directly controlled by companies, McKinsey provides a roadmap to make significant reductions.
Understanding Scope 3 challenges
Scope 3 emissions, unlike Scope 1 and 2, are indirect and originate from sources like sourcing, manufacturing and consumer use.
For retailers, these emissions often represent 95% of their total footprint. McKinsey's report highlights that around 80% of these emissions occur upstream in the product value chain, encompassing everything from feedstock production to packaging. The complex nature of global supply chains, with suppliers changing inputs frequently, further complicates efforts to manage and reduce these emissions.
The report uses the beef industry as an example, where the majority of emissions stem from upstream activities like animal feed farming, fertiliser production, and cattle ranching.
To address this, McKinsey suggests measures such as reducing methane emissions, improving agricultural efficiency, and adopting regenerative farming practices.
- Transitioning to clean energy
- Reducing livestock farming emissions
- Adopting regenerative agriculture
- Increasing product and packaging circularity
- Minimising waste and enhancing efficiency
- Cutting transportation emissions
- Shifting from animal to plant-based proteins
Implementing these strategies could reduce a retailer's Scope 3 emissions by 55% to 65% by 2030. Even measures that do not add costs could achieve a 12% to 17% reduction.
Levers for change
The report outlines four key "levers" for retailers to use in reducing Scope 3 emissions:
Cost-effective near-tier levers: These involve engaging direct suppliers and consumers in cost-saving or neutral actions like adopting renewable energy, offering EV charging, and promoting sustainable habits.
Cost-effective far-tier levers: Here, retailers could collaborate with suppliers and industry partners to encourage sustainable practices such as regenerative agriculture and waste reduction, potentially cutting emissions by 11% to 15%.
Costlier near-tier levers: Engaging with suppliers to foster innovation, such as investing in emissions reduction technologies or advocating for public incentives, could make technically feasible interventions more cost-effective.
Cost-prohibitive far-tier levers: Though expensive and far removed from retailers' direct influence, supporting innovations like circular material use and sustainable sourcing could reduce emissions by 25% to 30% at scale.
The path forward
While reducing Scope 3 emissions is complex, McKinsey concludes that it is achievable through collaboration across the value chain. By working with farmers, manufacturers, NGOs and consumers, retailers can make substantial progress towards decarbonisation.
The report emphasises that significant emissions reductions require systemic change, not isolated efforts.
Retailers must seize these opportunities, not just to meet regulatory requirements but to enhance their strategic, economic and brand positioning in a market increasingly focused on sustainability.
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