What’s needed to drive supply chain CO2 reductions?

Nov 20

We’re seeing more companies requiring their suppliers to set Science-based targets (SBTs)—a step in the right direction. But are the current levels enough to move the needle on scope 3 reductions? Based on data from some 23,000 companies that disclosed to CDP last year, the CDP / HSBC report, 'Strengthening the Chain' says "not yet."

Here’s why:

- Buyers are engaging less than 50% of their procurement spend and only 40% of their upstream emissions, leaving significant CO2 exposure untouched.

- A whopping 85% of companies still lack upstream emission reduction targets. Even though supply chain emissions are, on average, 26x greater than operational emissions (Scopes 1 and 2).

- There’s a noticeable lack of sustainability integration in procurement practices, with a bit too much focus on reducing a company’s own emissions. And there are marked knowledge gaps, especially among SMEs.

But there’s hope. Here’s CDP's advice on how you can bridge the gap and effectively engage your suppliers:

💰 Financial incentives is a great start

Suppliers with financial incentives are 52% more likely to align with their buyers’ climate ambitions than those provided only with training. And 64% of CDP respondents reported climate-related opportunities with significant financial potential.

📈 Capacity building creates momentum

Suppliers that receive buyer support to set SBTs are more than 2.5 x more likely to adopt these targets themselves. Even providing training makes suppliers just under 2 x more likely to assess climate-related risks.

🤝 Collaboration sparks innovation

But it’s when suppliers and buyers team up on joint R&D for low-carbon tech that the impact is really felt. Suppliers are then over 4 x more likely to commit to SBTs.

The upshot? Move beyond simply requiring SBTs from suppliers. By incentivizing, supporting, and collaborating, buyers can unlock the full potential of their supply chain to drive meaningful climate action.

Read more on The Pivot's approach to engaging the supply chain.

#CDP #supplychain #CO2impacts #scope3 #strengtheningthechain