Corporate suppliers emit tons of greenhouse gases. Trying to help reduce them — on behalf of another company — is complicated.
Depending on the sector, supply chain emissions are an average of 11.4 times larger than a company’s operational emissions, according to a 2022 report on supply chain sustainability metrics from sustainability data firm CDP. As of that analysis, just 41 percent of companies reporting to CDP disclosed emissions for supply chains — part of their "Scope 3" impact — and only 14 percent of corporate targets included this category.
The outlook is brighter if you consult the latest progress report from the Science Based Targets initiative, the organization many multinational companies use to set and validate their science-based targets for reducing emissions enough to meet the Paris Agreement’s goal of keeping global temperature increases below 1.5 degrees Celsius. Ninety-six percent of the roughly 1,100 companies that had validated targets as of year end 2022 covered Scope 3, SBTi reported.
Pharmaceutical company AstraZeneca, software firm Atlassian and healthcare tech maker Philips are three companies helping their suppliers set science-based targets and work toward lowering emissions, a process that requires close engagement with suppliers.
Here are steps they’re taking.
Set goals, guide suppliers
Atlassian’s commitment is to get 65 percent of its suppliers (by emission) for goods and services it purchases to set science-based targets by fiscal year 2025, which ends July 31, 2025. As of its latest sustainability report, only 6.9 percent had done so.
"It’s time to hustle," said Atlassian chief sustainability officer Jessica Hyman. "That’s the attitude we’re taking this year."
To increase awareness, Atlassian includes its science-based targets requirements in purchasing contracts and negotiations. It published supplier guidelines and created free resources that show suppliers the process of setting targets, in collaboration with the Business Council on Climate Change.
Atlassian is also offering consulting to its 10 highest-emitting suppliers, based on spend, to help them with the target-setting process.
There are plenty of challenges. Suppliers change every year — not just the names but how much is spent. Atlassian’s biggest supplier is Amazon Web Services and its parent company, Amazon does not currently plan to commit to SBTi validation. Atlassian’s team is working with AWS to address this, but Hyman said no resolution is in sight.
Pool purchasing power
One strategy working well for AstraZeneca is collaborating with companies that share its suppliers to achieve common goals. "It’s about getting a coalition of the willing," said Robert Williams, procurement sustainability director at AstraZeneca.
For example, AztraZeneca is a founding partner of Energize, a program funded by pharmaceutical companies that want their supply chains to run on renewable energy. As of December, the initiative included 500 suppliers that work with the sponsoring companies, which include GSK, Novartis, Novo Nordisk, Pfizer, Roche and Sanofi. The effort has helped organize five "buyer cohorts" that plan to pool their purchasing power to negotiate renewable power purchase agreements. Those companies represent an aggregate electricity demand of more than 2 terawatt-hours.
AstraZeneca’s commitment is to reduce absolute Scope 3 emissions by 50 percent by 2030, compared with a 2019 baseline year. As of its latest sustainability progress report, for 2022, it reported an increase of 8.6 percent. Getting suppliers to set science-based targets will be necessary to achieve absolute emissions reductions, Williams said.
Teach suppliers to teach their suppliers
AstraZeneca and Philips are helping their largest, direct suppliers transition to net-zero business practices and providing them with resources and data that, in turn, help those suppliers directly engage with their own suppliers.
The result is a "cascade" that flows through industries more holistically, said Robert Metzke, senior vice president and global head of sustainability at Philips. "Using global supply networks, not just chains, is a very feasible and scalable way that goes much faster than negotiations," he said.
Philips provides guidance on energy audits and "train the trainer" programs, so that suppliers can engage their own.
It aims to have 50 percent of its supply chain set science-based targets by 2025; so far, it has achieved 46 percent participation, according to Metzke.