Climate Action Starts with Supply Chain
Why Supply Chains Matter for Climate Action
Tackling climate change is a huge challenge that goes beyond just making small adjustments within companies; it means rethinking our supply chains entirely. According to the CDP Supply Chain Report 2022, emissions from a company’s supply chain are, on average, 11.4 times higher than the emissions from its direct operations. Only 36% of businesses are keeping track of their Scope 3 emissions from purchased goods and services. To really tackle climate change, companies need to quickly rethink their supply chains and work closely with partners and suppliers. However, they face some challenges along the way.
A big challenge is the lack of transparency in many supply chains, which makes it hard to measure emissions accurately and understand their true impact.
Companies run into several obstacles when trying to measure Scope 3 emissions. Often, the data they have is incomplete or too vague, making it difficult to draw clear conclusions. Many businesses don’t have the right tools to gather and analyze their data effectively. Most Scope 3 emissions are beyond their control, making real changes tough. Plus, constantly changing regulations add even more confusion to compliance and reporting.
In 2022, only 39% of nearly 18,600 companies actively engaged their suppliers on climate issues. The top 20% were able to involve over 80% of their suppliers, while the bottom half engaged less than 25%.
Other Environmental Concerns Getting Less Attention
While climate change is getting a lot of attention, other important environmental issues often get pushed aside. For instance:
Despite this endeavor, climate change continues to be the primary focus, meaning that crucial concerns like preserving ecosystems and promoting a circular economy are frequently disregarded.
The Value of Precise Measurement
For firms to truly comprehend their environmental impact, precise measurement is essential. They are able to discover areas for improvement and make more informed decisions going forward.
This data is the foundation for reporting, transparency, and informed decision-making, helping to drive real progress. Since supply chains account for a large portion of environmental impact, addressing them is essential for effective climate action.
Strong Leadership and Better Incentives Are Key
Reducing the environmental impact of supply chains requires strong leadership and commitment. Right now, 74% of companies have board-level responsibility for climate issues, and 41% of those without this structure plan to establish it in the next two years. To truly create change, accountability must extend throughout the organization, especially in procurement.
Additionally, companies need to provide better incentives for their suppliers. While some include climate criteria in their contracts, very few base their purchasing decisions on science-based targets aimed at limiting global warming to 1.5°C.
Such as:
Conclusion
Businesses need to step up their climate action faster in order to prevent an environmental disaster, especially in their supply networks. Many continue to focus just on climate change, ignoring the wider ecological effects, and cling to outdated buying habits. Legislators play an important role by offering incentives and preparing for new rules. In the end, creating climate-positive supply chains is a team effort that involves everyone in the value chain, not just businesses. When companies step up and take action, they help create a more resilient and sustainable future for everyone.
Rethinking supply chains is vital for climate action, with emissions often 11.4 times higher than direct operations. What challenges do you see for companies in this effort?