Report: 85% of businesses have no commitment to cut supply chain emissions

This is according to a new analysis of the climate disclosures made by more than 23,000 companies through CDP this year, produced in collaboration with Boston Consulting Group (BCG).

For the average large listed company, supply chain emissions will be 26 times higher than those generated in operations. The discrepancy is even higher in the retail and apparel sectors, at a ratio of 92:1 tonnes and 47:1 tonnes respectively.

The only sector in which supply chain emissions are equal to or less than operational emissions is fossil fuels.

As such, having a robust plan to cut supply chain emissions should be part of any corporate climate strategy.

But CDP found that just 15% of companies have a publicly stated, time-bound numerical target to cut supply chain emissions.

The platform also believes that most sectors are reporting just a fraction of their supply chain emissions, typically 22% or lower, due to challenges collecting primary data and/or using poor emissions factor approaches.

CDP and BCG found that it typically takes businesses between 12 and 18 months to achieve partial Scope 3 data disclosure, then an additional 12 to 36 months to build this out to full disclosure.

Without quality data or a top-level imperative, most businesses (79%) are not assessing supply chain risks relating to the low-carbon transition. These could include increased carbon taxes, reporting non-compliance fines and stranded assets.

Only half of corporates disclosing through CDP evaluate the financial risks from upstream emissions; however, of those that do, a third acknowledge the risk to profit.

Three priority actions for businesses

The report identified three steps which most businesses leading the way on Scope 3 strategising and disclosures had implemented to enhance ambition and action.

The first is ensuring board-level oversight of climate strategy. This is most effective when boards are climate-aware, having had at least basic education on key climate competencies including risk and opportunity management.

Second is engaging with suppliers on climate-related issues, beginning with top-level discussions before moving onto disclosures and then more comprehensive risk assessments and management.

The last is setting an internal carbon price.

Firms taking these three steps are five times, seven times, and four times more likely – respectively – to have set a supply chain emissions target.

“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,” said BCG managing director and partner Diana Dimitrova, who co-authored the report.

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