The Scope 3 Year in Stories: September 2024
Capgemini Report Examines Scope 3 Regulation Impact
In September, Capgemini's report revealed the role of geopolitics, greenwashing and regulation on sustainability efforts.
The "A World in Balance 2024: Accelerating Sustainability Amidst Geopolitical Challenges" report dived into the impact of these global pressures on sustainability.
The study surveyed more than 2,100 executives from 727 large organisations worldwide, along with insights from 6,500 consumers.
The findings showed geopolitical tensions and conflicts were affecting business operations and hindering sustainability progress. As resources became diverted and international cooperation stalled, sustainability initiatives faced new challenges.
However, it wasn't all doom and gloom; there were many projects still gaining momentum.
Geopolitical tensions, including US-China relations, the war in Ukraine and the European energy crisis, added complexity to sustainability strategies.
The report showed that 64% of executives believe geopolitics is now a major factor influencing sustainability investments.
In the US, many executives became concerned about future government funding for climate projects. Almost three-quarters of American executives reported receiving federal support, such as through the Inflation Reduction Act or CHIPS Act, to fund sustainability initiatives.
However, geopolitics isn’t always a hindrance. Sometimes, crises can accelerate change. For instance, the war in Ukraine prompted Germany to accelerate its renewable energy targets, aiming for 100% renewable energy by 2035.
Despite the challenges posed by geopolitics, business leaders pressed ahead with sustainability initiatives.
The report also found that as businesses ramped up sustainability efforts, consumer trust lagged behind.
This growing distrust was particularly strong among younger consumers. Among Gen Z and millennials, concerns about greenwashing rose by 26% and 22%, respectively, compared to 2023.
Executives did not ignore this shift, according to Capgemini.
Six out of 10 surveyed expressed concerns about how the public perceives their sustainability claims, up from just 11% the previous year.
Supply Chain Leaders Adapt to Scope 3 Challenges
Meanwhile, another report from Boston Consulting Group (BCG) and CDP highlighted a pressing issue: Scope 3 emissions reached 26 times greater than operational emissions.
The report showed 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 emphasised the urgent need for businesses to address their supply chain emissions.
The “Scope 3 Upstream” Report, published by BCG and CDP, shed light on the critical gaps in how companies manage their supply chain emissions.
CDP, a global non-profit organisation, was instrumental in driving transparency in environmental impact reporting, with more than 24,000 companies disclosing their data through CDP in 2023.
The report pinpointed three crucial factors that influence a company's commitment to addressing Scope 3 emissions:
Climate-Responsible Boards: Companies with a board that actively oversaw climate issues were 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.
Supplier Engagement: Engaging suppliers on climate-related issues significantly increased the likelihood of setting Scope 3 targets. Companies that prioritised supplier engagement were 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 revealed that only 40% of companies currently engage with their suppliers on these critical issues.
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 revealed that companies are 2.4 times more likely to set targets for their operational emissions than for their supply chain emissions.
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