This is the second report in the Net-Zero Challenge series by the World Economic Forum in collaboration with Boston Consulting Group. The report addresses nine major initiatives companies can do to decarbonise their Scope 3 upstream value chain emissions. Scope 3 upstream value chain emissions refer to supply-chain emissions including procured products, transport of suppliers and business travel.

More and more companies are going beyond their own operations (Scope 1 and 2) and disclosing their supply chain emissions (Scope 3). Corporations can multiply their climate impact by decarbonising their supply chain, which will be a ‘’game-changer’’ in the corporate climate change impact.

Hard-to-abate sectors, such as steel, heavy transport and chemicals generate low profits relative to the emissions they produce. This creates a barrier to fund decarbonisation. Consumer-facing companies, which are more profitable relative to the emission they create, have a lower impact on end consumers because they can pass on decarbonisation costs in increments. 

The eight major value chains that contribute to more than half of the global emissions are food, construction, fashion, fast-moving consumer goods, electronics, automotive production, professional services and freight. The solutions to fully decarbonise these value chains are already available.

Eight levers to abate these supply chain emissions include; Circularity and recycling; Material and process efficiency; Renewable power; Renewable heat; New production processes; Nature-based solutions; Fuel switch and; Carbon capture, utilization and storage (CCUS). Several of these levers are available and affordable today, some even lead to cost savings.

The average of 40% of emissions in the supply chain can be eliminated with little or no cost. Moreover, the costs of decarbonising the supply chain will have a low impact on the end-consumer prices, only requiring a 1-4% increase. Affordable abatement opportunities are particularly evident in industries such as fashion, auto and electronics. The freight industry, in contrast, is dependent on more costly measures to fully decarbonise.

Lack of transparency in supply chain emissions and broader industry and government support present barriers to decarbonise. Moreover, procurement teams may not be aware of low-carbon alternatives when making purchasing decisions.

In decarbonisation measures where costs are high and enabling infrastructure is needed, without governmental and industry support, the transition can be too costly. Industry ecosystem initiatives are utilised to overcome these challenges.

Nine supply chain initiatives companies should use to tackle their scope 3 emissions:

Create transparency

1. Build supply chain emissions baseline and exchange the data with suppliers
2. Set ambitious targets to reduce emissions in Scope 1, 2 and 3, and report on the progress publicly

Optimise for CO2

1. Redesign products for sustainability
2. Design a supply chain and sourcing strategy for sustainability

Engage suppliers

1. Integrate emissions metrics in the procurement standards and track the performance, require the suppliers to do the same
2. Engage with suppliers to address their emissions

Push ecosystems

1. Engage in industry initiatives for best practices, policy advocacy, traceability and certification
2. Scale-up buying-groups to strengthen demand-side commitments

Enable the organisation

1. Introduce low-carbon governance to support internal incentives and empower the organisation

1. Accounting for Scope 3 emissions is becoming best practice in the corporate world. Scope 3 refers to the emissions from procured products, transport from suppliers and business travel.
2. Supply-chain decarbonisation presents a major and untapped opportunity for global climate action. Companies have the ability to create significant and necessary changes, in most industries with low costs.
3. 40% of emissions can be abated at very low costs. Across the analysed supply chains 40% of all emissions could be eliminated with measures that either yield savings, for example, by implementing efficiency measures, or come at abatement costs below €10 per tonne of CO2, for example, switching to renewable power.
4. Eight major value chains (food, construction, fashion, fast-moving consumer goods, electronics, automotive production, professional services and freight) contribute to more than half of the global emissions, and the solutions to decarbonise them are already available.
5. There are eight levers to abate the supply chains; (1) Circularity and recycling; (2) Material and process efficiency; (3) Renewable power; (4) Renewable heat; (5) New production processes; (6) Nature-based solutions; (7) Fuel switch and; (8) Carbon capture, utilization and storage (CCUS).
6. There are available and affordable supply-chain abatement opportunities for industries such as fashion, auto and electronics. Heavy industries, such as cement and freight supply-chains, are more costly to decarbonise due to immature technologies.
7. The costs of decarbonising the supply chain will have a low impact on the end-consumer prices, only requiring a 1-4% increase.
8. Lack of transparency and support from broader industry and governments presents a barrier to achieve decarbonisation in the supply chain.
9. Corporations should use initiatives in the following areas to tackle their Scope 3 emissions; (1) Create transparency; (2) Optimise for CO2; (3) Engage suppliers; (4) Push ecosystems; (5) Enable the organisation.