Supply Chain Leaders Adapt to Scope 3 Challenges

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Scope 3 emissions are 26x higher than operational emissions (Credit: Freepik)
BCG & CDP's latest report reveals Scope 3 emissions outpace operational emissions by 26 times, urging supply chain leaders to intensify climate action

A recent report from Boston Consulting Group (BCG) and CDP has highlighted a pressing issue: Scope 3 emissions are now 26 times greater than operational emissions.

The report shows that these emissions, often arising from supply chain activities, are significantly underreported and overlooked compared to Scope 1 and 2 emissions.

In 2023, upstream emissions from the manufacturing, retail, and material sectors surged, surpassing by 1.4 times the total CO2 emissions released across the European Union in 2022.

This stark increase emphasises the urgent need for businesses to address their supply chain emissions.

The “Scope 3 Upstream” Report, published by BCG and CDP, sheds light on the critical gaps in how companies manage their supply chain emissions.

CDP, a global non-profit organisation, has been instrumental in driving transparency in environmental impact reporting, with more than 24,000 companies disclosing their data through CDP in 2023.

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Identifying key factors for change

The report pinpoints three crucial factors that influence a company's commitment to addressing Scope 3 emissions:

  1. Climate-Responsible Boards: Companies with a board that actively oversees climate issues are five times more likely to establish a Scope 3 target and align their transition plans with the 1.5°C climate goal. This finding highlights the importance of governance in driving corporate climate action.

  2. Supplier Engagement: Engaging suppliers on climate-related issues significantly increases the likelihood of setting Scope 3 targets. Companies that prioritise supplier engagement are nearly seven times more likely to have a Scope 3 target and a transition plan aligned with the 1.5°C objective. However, the report reveals that only 40% of companies currently engage with their suppliers on these critical issues.

  3. Internal Carbon Pricing: Companies that integrate internal carbon pricing into all business decisions are four times more likely to set a Scope 3 target. This practice not only incentivises emission reductions but also ensures that climate considerations are embedded in the company’s overall strategy.

Despite these insights, the report also reveals that companies are 2.4 times more likely to set targets for their operational emissions than for their supply chain emissions.

Alarmingly, only 15% of businesses that disclose data to CDP have set a Scope 3 target.

The report estimates that the carbon liability from disclosed upstream emissions in the manufacturing, retail, and materials sectors alone amounts to more than US$335bn, a risk that many supply chain stakeholders might be underestimating.

Diana Dimitrova, BCG Managing Director and Partner, and co-author of the report, emphasises the critical role of oversight bodies: “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.”

Diana Dimitrova, BCG managing director and partner, and co-author of the report

How are leaders responding? 

The findings have spurred reactions from various industry leaders.

For instance, Kapila Mehta, Vice President of Sustainability at Schneider Electric's Power Products division, highlights the company’s commitment to supporting partners in reducing their Scope 3 emissions.

“Schneider Electric is committed to partner support as it recognises both the demand for Scope 3 emissions reduction, but also the barriers that its ecosystem faces in meeting mere Scope 1 and 2 requirements,” says Mehta.

Kapila Mehta, VP of Sustainability in Schneider Electric’s Power Products division

Mehta further explains that Schneider Electric offers a range of digital tools, such as Zeigo Activate and the Sustainability School, to help companies of all sizes track and report their emissions. These tools aim to make emission reductions not only achievable but also profitable.

Similarly, Sophie Riegel, Sustainability Manager at MongoDB, describes the company’s journey toward achieving Net Zero by 2030 and being 100% powered by renewables by 2026.

Riegel notes, “Our first step towards achieving this goal involved understanding the breakdown of our Scope 1, 2, and 3 emissions within our overall carbon footprint.”

Sophie Riegel, Sustainability Manager at MongoDB

She reveals that MongoDB’s Scope 3 emissions account for 97.5% of their total footprint, with a significant portion originating from their cloud partners. “We cannot reach Net Zero without collaborating with them,” says Riegel.

She adds that by 2025, MongoDB's major partners, including AWS, Google Cloud, and Microsoft Azure, will be fully powered by renewables. This collaboration, Riegel believes, will help reduce emissions for MongoDB’s customers and their respective Scope 3 emissions.


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