Tackling Supply Chain Emissions: How Major Brands are Enlisting Suppliers to Reach Their Sustainability Goals
Have you been receiving more ESG data requests about your supply chain emissions from customers lately?
Supply chain emissions and general ESG disclosures are gathering steam as major brands increasingly look to bolster supply chain sustainability. Amazon is the latest voice to join the chorus with its recently announced supply chain standards that will require mandatory emissions reporting from its vast network of suppliers starting in 2024.
Requests for ESG information are undoubtedly on the rise. The CDP, the most common reporting framework companies use to request emissions data, saw requests for data jump from 20,000 in 2021 to over 40,000 in 2022. Moreover, a recent study predicts that soon, 92% of major buying organizations will require suppliers to share ESG information. This information includes far more than just GHG emissions with companies requesting data surrounding diversity figures, water usage, raw materials, packaging, and more. A further wave of ESG requests are expected to be triggered by the new ISSB disclosure standards (including scope 3 and other value chain metrics), which are anticipated to be adopted by over 100,000 companies.
By 2024, 92% of major buying organizations will require their suppliers to share ESG information.
In this article, we’ll delve into supply chain emissions, what companies are asking of their suppliers, why companies are increasingly turning to suppliers to reach their own emissions targets, and how companies can navigate customer requests for their emissions and sustainability data to protect and win more business.
Major Brands Engaging Suppliers on Emissions
Many major brands are requesting their suppliers to help them meet their ambitious climate goals, here is a snapshot of some of the companies doing so and what they are asking for:
Target:With 96% of its carbon footprint coming from the supply chain, Target aims to have 80% of its suppliers set a science-based reduction target on their scope 1 and 2 emissions by 2023 to meet their ambitious target of reducing 30% of emissions by 2030.
Walmart:Collaborates with suppliers through Project Gigaton with the shared goal of reducing 1 billion tons of CO2 from its global supply chains. To date, the project has engaged 4,500 suppliers and reduced 750 million tons of CO2.
Apple:With one of the most ambitious global supply chain emissions reduction goals, Apple aims to have a carbon-neutral supply chain by 2030. Apple suppliers report their scope 1 and 2 emissions annually, and the company also offers education and investment in its suppliers’ carbon removal and renewable efforts through its Clean Energy Program.
Microsoft:In order to be carbon negative by 2030, Microsoft requires suppliers to report scope 1, 2, and 3 emissions data annually via CDP and to set a target to reduce emissions by 55% by 2030.
Together, the efforts by these leading companies, along with Amazon’s new supplier standards, will have far-reaching repercussions for global supply chains.
Sustainable Supply Chains Focus on Emissions
In July 2023, Amazon announced in its 2022 sustainability report that to reach its 2040 net zero targets, they would require suppliers to report emissions and set decarbonization targets. Previously, Amazon only suggested that suppliers should report their emissions data voluntarily. However, the new announcement mandates reporting on emissions data and goal setting. Amazon has also pledged to provide its suppliers with solutions to measure emissions, set targets, and plan for emissions reduction.
Amazon’s announcement is expected to affect the majority of the over 200,000 companies in their supply chain within a year. Adding to the over 50,000 companies already affected by a similar requirement from Microsoft and the 40,000 that received requests for supplier emissions through the CDP in 2022. In short time, no company will be untouched by requests for supply chain emissions data. As global climate regulations come into place across global markets, these numbers will likely rise further still, and Amazon is just one of the many companies being proactive around supply chain emissions.
Unpacking Supply Chain Emissions
The majority of the Greenhouse Gas (GHG) emissions that large companies emit are not in the energy they use in their offices and factories but in their complex, global supply chains. Supply chain or scope 3 emissions can account for up to 75% of a company’s carbon footprint on average across all sectors. Because they are produced outside of the direct control of a company, they can be challenging to measure, manage, and reduce.
Scope 3 emissions include a company’s entire upstream and downstream value chain. For a company like Target, the value chain (scope 3) contributes to 96% of its overall carbon footprint making it the most significant source of their carbon emissions and representing the largest area of opportunity to address to meet their ambitious goal of net-zero emissions by 2040. To achieve this goal, Target will have to engage with companies upstream and downstream in their value chain. With scope 3 representing such a significant proportion of a companies’ carbon footprint, managing these emissions is and engaging the companies in their supply chain is essential for meeting their net zero goals.
New Supply Chain Standards
With new supply chain standards being issued across the board from companies like Target, Amazon, and Microsoft, companies should expect to receive ESG data requests from their largest customers in the near future. Although these new supply chain standards contain voluntary guidance on what suppliers should do on general sustainability. Emissions measuring and emissions reduction targets are the first mandatory requirements for suppliers. Here are three examples of the most common mandated requirements companies should expect to be receiving from their customers:
Measure and Report Greenhouse Gas Emissions
Microsoft’s suppliers must disclose complete, consistent, and accurate scope 1, 2, and 3 greenhouse gas (GHG) emissions data through the CDP framework, one of the more common reporting formats buyers request suppliers to comply with.
Good.Lab can help your company measure emissions with our GHG Emissions Calculator along with access to our team of experts to guide you through report into CDP, ISSB, or any customer survey.
Set Emissions Reduction Targets
Target has a goal of having 80% of their suppliers by spend will set science-based reduction targets on their scope 1 and 2 emissions by the end of 2023.
Certification of Lower Emissions Products and Services
In its 2022 sustainability report, Amazon committed to looking for suppliers that help them to achieve their decarbonization targets, signaling a preference for companies with certified low-carbon products.
Good.Lab’s team of experts have experience with companies like Nike and Lululemon on sustainable product development and can help your brand calculate the Product Footprintof every SKU to make data-driven decisions about materials and product development and advise on meeting Climate Pledge Friendly and other relevant product certifications.
Navigating Supply Chain Sustainability and Emissions Data Requests
As more companies are asked to respond to supply chain emissions and sustainability surveys and new Codes of Conduct, getting ahead of the game may be the difference between winning and losing key accounts. While complying with these new requests may seem daunting, Good.Lab can help you meet the challenges of responding to customer sustainability requests;
Determine exactly what is being asked of you and how to prioritize competing requests
If you sell to multiple customers, you’ll need a clear understanding of exactly what is being asked of you and any areas of commonality. This enables you to determine and collect the correct data for all requests, reduces the chances of double reporting, and minimizes your workload. If target setting is required of your company, you’ll want to set one emissions reduction target that works for your company, its unique operations, and any customer requirements.
Know which sustainability and ESG reporting frameworks to use
Typically, you will receive emissions data requests via the CDP questionnaire, which remains the most common tool for larger companies to request supply chain emissions data, with over 40,000 requests. However, some companies may request emissions or other ESG data based on SASB standards, GRI, or SBTi. The convergence of sustainability reporting standards and regulations under the ISSB (which will integrate the SASB standards, be integrated into the CDP questionnaire, and be interoperable with all other standards and regulators) will enable suppliers with requests from multiple companies to share similar information across the board, reducing the demands of reporting.
Measure and assess other sustainability and ESG metrics
Although your requirements for reporting may start with emissions, customers with ambitious sustainable value chain goals, like Walmart, Microsoft, and Target, will eventually have requirements beyond emissions. Some companies already request data on water and deforestation through the CDP. And most companies are already encouraging suppliers to report on and reduce waste. Companies should consider their exposure to all ESG risks and consider which matter most with a materiality assessment to determine prioritization.
The Future of Supply Chain Sustainability
Companies are shifting from polite requests to mandates in order to reduce their scope 3 emissions and meet climate targets. With new climate disclosure regulations on the horizon from the U.S. SEC and other entities, you should expect more pressure to report on this data. Also, expect requests for more and new sustainability metrics, including reporting on water, waste, DE&I, packaging, and other ESG metrics, including end-of-life disposal for your products. Managing supply chain emissions is a critical part of the future for large brands like Amazon, Microsoft, and Target, and meeting their ambitious emissions reduction goals is one they cannot do alone.
Good.Lab provides an end-to-end ESG solution so your company can measure emissions, set reduction targets, and be prepared when more customer requests come rolling in. Let’s talk about turning requests for your sustainability data from a challenge into an opportunity for long-term business growth!
Disclaimer: Good.Lab does not provide tax, legal, or accounting advice through this website. Our goal is to provide timely, research-informed material prepared by subject-matter experts and is for informational purposes only. All external references are linked directly in the text to trusted third-party sources.
Ready to talk ESG?
Connect with our ESG experts today!
From ESG program development to ESG target setting, data management and reporting, our team of ESG experts can help you fast-track building a world-class ESG program.
CPA.com and Good.Lab Announce Program to Accelerate Accounting Firms’ Growth in ESG Advisory Services
CPA.com, the business and technology subsidiary of the AICPA, and Good.Lab, a leading provider of environmental, social and governance (ESG) software and consulting services, today announced a new ESG practice development program that will enable accounting firms to respond to growing client demand for ESG advisory services. The program launched with an initial cohort of […]
From our inception, we envisioned a company that stands for more than just profit. This vision led us to becoming a certified B Corp and pledging our commitment to “1% for the Planet” – a global alliance of businesses that contribute 1% of their sales towards environmental endeavors. Our partnership with 1%, which started on […]