Scope 3 Emissions Reduction Requires a Team Effort
For most large companies, Scope 3 sources comprise the largest share of total carbon footprint — as much as 80 percent of greenhouse gas (GHG) emissions. Therefore, for companies to meet net-zero commitments, they will need to not only make internal changes to operations (Scope 1) and electricity use (Scope 2), but also influence the operations of hundreds, or even thousands, of suppliers.
Companies must be strategic in the level of effort put against each supplier, the requests that they make of each supplier, and the negotiating leverage they exert. Successful companies stratify their suppliers based on factors like GHG emissions, industry climate maturity, and business importance into supplier “archetypes” that guide an engagement strategy:
1) Strategic suppliers: Five to 10 suppliers operating in emissions hotspots. For these suppliers, abatement will require close partnership and 1-to-1 collaboration. Specific actions taken may include product and supply chain reengineering, demand optimization or partnerships to accelerate industry-wide transformation efforts.
2) High impact suppliers: Between 10 and 50 suppliers that are large contributors to emissions, often in industries with higher industry pressure. For these suppliers, companies can exert influence by making direct asks for reductions, utilizing negotiating leverage.
3) Transactional suppliers: From 500 to 1,000 smaller emitters, each of which individually makes a relatively small contribution to the company’s footprint. Here, companies can typically focus on securing commitments to science-based targets while maintaining accountability through procurement standards.
Companies can most effectively address Scope 3 emissions by leveraging existing supplier relationship management programs. Doing so can ensure that outreach to suppliers is coordinated across multiple strategic priorities, that requests are communicated consistently to suppliers, and that the sustainability agenda receives the appropriate senior attention needed to meet publicly communicated net-zero commitments.