Supply Chain Decarbonization and Net-Zero Momentum

As companies strive towards net-zero, many have started measuring their Scope 1 and Scope 2 emissions. However, the greater challenge is in addressing Scope 3 emissions, which the CDP estimates to be 11 times higher than Scope 1 and, on average, represent more than 70% of companies’ total emissions¹. These emissions, which involve the entire supply chain and customer engagement, could be the catalyst for substantial change.

The consensus at COP28 in Dubai highlighted the need to measure, disclose, and reduce Scope 3 emissions, particularly for small and medium-sized enterprises. Despite the substantial impact of these emissions, only 41% of companies currently report on their value chain emissions, according to the CDP². This highlights the need to empower suppliers to establish effective decarbonization strategies across their entire supply chain. Even with the growing number of commitments set to tackle Scope 3 emissions, the path from ambition to effective implementation can be complex and challenging.

“Supply chain decarbonization is essential for the real decarbonization
of the economy. Supporting SMEs in this challenge is a priority today.
Support in terms of knowledge, tools and access to financing is required.”
Mónica Chao, President, Women Action Sustainability

Recognizing the magnitude of this challenge, Schneider Electric’s Sustainability Business partnered with Women Action Sustainability (WAS) to conduct research with leaders from large and small-and-medium-sized enterprises (SMEs) throughout 2023, examining Scope 3 decarbonization challenges, opportunities, and collective actions. Released in December 2023, the report, “Supply Chain Decarbonization: An Essential Step Towards Net-Zero” spotlights the primary drivers and challenges that both large corporations and SMEs encounter when addressing supply chain decarbonization. The research also explores business and partnership opportunities and provides recommendations to key stakeholders involved in Scope 3 decarbonization.

Scope 3 Conversations are in Motion: Insights from this report were first shared at a conference in Madrid on November 22, 2023, and subsequently showcased at COP28 on December 11, 2023 (watch this recording of the presentation at COP28).

Leaders convene to discuss Scope 3 at a Sustainability Business
conference in Madrid, November 2023

Top Three Findings: The report highlights the following important trends:

1. The active inclusion and participation of #SMEs is essential for supply chain decarbonization. Small and medium-sized enterprises (SMEs) encounter specific obstacles in addressing Scope 3 emissions due to constraints such as time, knowledge, talent, negotiation power, and funding. Given that SMEs make up 90% of global businesses (OECD), it is crucial to offer support and leadership alongside these key supply chain stakeholders.

2. The creation of #partnerships is critical for Scope 3 cohesion: the report underscores the interconnected nature of supply chains and their far-reaching impact on decarbonization efforts, emphasizing the collective responsibility and influence that supply chain partners wield in achieving carbon neutrality. Programs such as Energize and Catalyze are shining examples of how collaboration and innovation can pave the path to climate neutrality.

“Our Net-Zero future depends on collective action and proven innovation. With an ecosystem already in place to support Scope 3 targets, and technologies readily available to decarbonize and reduce energy use – we’ve reached a tipping point. It’s time to connect the value chain in purposeful new ways so we can pave a shared path to Net-Zero.”
Gwenaelle Avice-Huet, EVP, Europe Operations, Schneider Electric

3. Digitization, electrification, and new technologies are critical to the fight against climate change. There are tools and technologies that are already available to measure, track and reduce Scope 3 emissions more quickly and effectively. 40% of all emissions in the supply chain can be reduced with measures such as electrification, efficiency, renewable energy, and circularity.

Learn how digital software solutions such as Zeigo by Schneider Electric provides the digital ecosystem to monitor and manage emissions efficiently across the entire supplier network.

“Real-time data is a basic and indispensable tool for improving processes and efficiency. It is key to information management and traceability, allowing us to pinpoint the origin of our carbon footprint.” Carles Navarro, Director General, BASF Spain

Recommendations for large companies, SMEs, financial institutions and public administration

These trends are setting the pace for essential steps towards net-zero and supply chain decarbonization. The challenges can be overcome with readily-available tools and technologies and partnerships across the business ecosystem. The report includes recommendations for large companies, the financial sector, public administration, and SMEs, focusing on sustainable investing, strategy adaptation, and simplifying processes to incentivize progress. For SMEs, a roadmap is provided to turn their commitments into action, identifying drivers such as green financing, digital tools, and strategic partnerships.

Download the “Supply Chain Decarbonization: An Essential Step Towards Net-Zero” report and gain insights and guidance on how to effectively lead and engage with supply chain partners to drive Scope 3 commitments forward, together.

Contributors:

Nelly Warren, Senior Sustainability Consultant
Livia Orozco, Sustainability Consultant
Alicia Escarda, Sustainability Consultant

References:

1. https://www.cdp.net/en/articles/media/companies-failing-to-engage-suppliers-on-nature-and-climate-despite-incoming-regulation

2. ibid