New Transformation Guide on reducing upstream Scope 3 emissions

Many companies with decarbonization targets have taken steps to address both their operational (Scope 1 and 2) emissions, and upstream (Scope 3) emissions. Scope 3 emissions are typically the largest source of emissions across sectors, but can also be the most challenging to address when working with multiple suppliers across a complex supply chain.

To help companies engage with their suppliers on this topic, Transform to Net Zero has published its first Transformation Guide, entitled Buyer-Supplier Engagement to Reduce Upstream Scope 3 Emissions.  In this Guide, three Transform to Net Zero founding members, Unilever, Nike, and Microsoft, all of whom included Scope 3 reduction in their net zero commitments, share their approach of engaging suppliers to bring them along in the decarbonization journey.

The Transformation Guide answers the questions:

• How should companies prioritize suppliers for scope 3 engagement?
• What incentives can companies provide to a supplier to decarbonize?
• How can companies address emissions several tiers up the supply chain?
• How can companies enable suppliers to measure and report carbon reductions?

The Transformation Guide unveils two new initiatives from Unilever, which has set goals of net zero emissions across its value chain by 2039 and halving the footprint of its products by 2030. The Climate Promise is an initiative through which Unilever is inviting its suppliers to set public commitments to halve emissions by 2030, publicly report on progress, and share their emissions data.

Unilever’s segmentation exercise identified the 300 suppliers that contribute a meaningful share of its upstream scope 3 emissions. A second initiative, The Climate Program, will support these 300 suppliers in implementing climate actions to set reduction targets and develop implementation plans. In 2021 and 2022 Unilever will develop and pilot the concepts with a small subset of suppliers, before moving to scale from 2023 with the majority of the 300 suppliers.

Microsoft has set a goal of reducing its absolute Scope 3 emissions by more than half and removing the remainder to reach carbon negative by 2030. The company has implemented a three-part strategy of accountability, education and engagement, and is incentivizing and supporting its suppliers to reduce their scope 1, 2, and 3 emissions.

Microsoft has entered into a partnership with the International Finance Corporation (IFC), a sister organization to the World Bank, to help reduce Microsoft’s energy-related supply chain emissions. IFC will work with designated Microsoft suppliers in emerging markets, primarily in Asia, to identify technical solutions and financing opportunities that can reduce GHG emissions in the production process.  The size and scope of IFC’s loan and advisory services will vary based on tailored arrangements with the suppliers depending on their needs. Microsoft also plans to scale the program offerings to its suppliers’ suppliers, thereby creating impacts beyond its Tier 1 supply chain.

Nike’s end-to-end approach focuses on carbon and energy, waste, chemistry, and water across the entire product lifecycle to help improve conditions for people and places worldwide. The Transformation Guide introduces two ground-breaking initiatives where Nike is moving beyond disclosure into climate action.  In 2020, Nike launched the Supplier Sustainability Council (SSC), now with eleven strategic suppliers representing approximately 50% of Nike’s FY20 Footwear and Apparel, and Accessories finished goods volume. SSC partners have committed to ambitious reductions across their entire Scope 1 & 2 emission footprint across their footwear and apparel businesses (not only Nike-related emissions) –a projected 42% cut in baseline emissions over 10 years.

Nike also launched the Supplier Climate Action Program (SCAP) encouraging suppliers to address climate change strategically through development of their own long-term climate mitigation plans, while aligning with Nike’s Science-based Targets set for 2030, which include reducing absolute GHG emissions in owned/operated by 65% and reduce emissions by 30% across the extended supply chain.

Buyer-Supplier Engagement to Reduce Upstream Scope 3 Emissions describes these and other approaches by the three companies as guidance for businesses seeking to improve their supplier engagement to reduce upstream Scope 3 emissions. It is the first of a series of Transformation Guides designed to share real-life approaches that companies can adopt in their business transformation to net zero.