- Despite the Disproportionate Scale, Supply Chain
Scope 3 Emissions Continue to Be Overlooked, with Only 15%
of Corporates Having Set a Supply Chain Emissions Target
- Three Significant Drivers of Action in Supply Chain
Emissions Are a Climate-Responsible Board, Supplier Engagement, and
Internal Carbon Pricing
- In 2023, Disclosed Upstream Emissions from the
Manufacturing, Retail, and Materials Sectors Alone Suggest a Carbon
Liability1 of over $335
Billion
- Scope 3 Emission Blind Spots Drive Significant Unreported
Risks for Both Investors and Corporates
- Onus of Action and Accountability Falls on Corporates (Both
Management and the Board of Directors) and Investors
LONDON and BOSTON, June 25,
2024 /PRNewswire/ -- In 2023, corporates reported
that their Scope 3 supply chain emissions were, on average, 26
times greater than their emissions from direct operations (Scopes 1
and 2).2 According to the new Scope 3 Upstream: Big
Challenges, Simple Remedies report, published today
by Boston Consulting Group (BCG) and CDP, upstream emissions
from the manufacturing, retail and, materials sectors had a
footprint 1.4 times the total CO2 emitted in the EU in
2022.
However, supply chain emissions continue to be overlooked, with
corporates twice as likely to measure operational
emissions3 (Scopes 1 and 2) than their supply chain
emissions (Scope 3). Furthermore, corporates are 2.4 times more
likely to set targets for operational emissions compared with
supply chain emissions. Of the corporates disclosing to CDP,
only 15% have set a Scope 3 target.
"These figures highlight that the challenge of effectively
measuring Scope 3 emissions is widespread and spans industries,"
said Sonya Bhonsle, director of
strategic accounts at CDP. "Meaningful strides toward emissions
reductions require corporates to evaluate their full supply chain,
then raise ambition and take accountability. The first step to
driving meaningful change toward a 1.5°C-aligned net zero future
begins with disclosure."
The report identifies the three most significant factors that
correlate with ambition and action on Scope 3 upstream
emissions:
- Climate-Responsible Board. Corporates with a
climate-responsible board, which has climate oversight and
competence, are 5x more likely to have a Scope 3 target and a
1.5oC-aligned transition plan
- Supplier Engagement Programs. Corporates that engage
with suppliers on climate-related issues are almost 7x more likely
to have a Scope 3 target and a 1.5oC-aligned transition
plan. However, only four in ten corporates engage with their
suppliers.
- Adoption of Internal Carbon Pricing. Corporates with an
internal carbon price mandated for all business decisions are 4x
more likely to have a Scope 3 target and a 1.5°C-aligned Scope 3
transition plan.
Disclosed upstream emissions from just the manufacturing,
retail, and materials sectors in 2023 alone imply a carbon
liability1 of over $335
Billion. This liability is at risk of being overlooked by
both corporates and investors.
"The responsibilities and incentives to act on Scope 3 emissions
for corporates and investors converge on risk management, and their
oversight bodies must push for risk quantification and management"
says Diana Dimitrova, BCG managing
director and partner, and coauthor of the report.
Only half of corporates disclosing through CDP evaluate the
financial risks from upstream emissions; however, of those that do,
a third acknowledge the risk to profit. Despite these risks, fewer
than one in ten investors require investees to disclose Scope 3
upstream emissions as part of investment policies.
Boards have a fiduciary responsibility to manage these risks,
and investors must price in the risks from carbon liability
(business operational risk) and demand greater transparency through
disclosure.
By prioritizing the three significant drivers, corporates can
drive a step change in managing Scope 3 upstream emissions.
Download the publication here:
https://www.cdp.net/en/supply-chain/cdp-bcg-scope-3-report
Media Contacts:
Eric Gregoire
gregoire.eric@bcg.com
Toyosi Adebayo
Toyosi.adebayo@cdp.net
Footnotes:
1 CDP disclosed emissions priced at IMF-proposed 2030
price of $75.
2 Based on emissions disclosed through CDP.
3 Scopes 1 and 2.
About Boston Consulting Group
Boston Consulting Group
partners with leaders in business and society to tackle their most
important challenges and capture their greatest opportunities. BCG
was the pioneer in business strategy when it was founded in 1963.
Today, we work closely with clients to embrace a transformational
approach aimed at benefiting all stakeholders—empowering
organizations to grow, build sustainable competitive advantage, and
drive positive societal impact.
Our diverse, global teams bring deep industry and functional
expertise and a range of perspectives that question the status quo
and spark change. BCG delivers solutions through leading-edge
management consulting, technology and design, and corporate and
digital ventures. We work in a uniquely collaborative model across
the firm and throughout all levels of the client organization,
fueled by the goal of helping our clients thrive and enabling them
to make the world a better place.
About CDP
CDP is a global non-profit that runs the
world's environmental disclosure system for companies, cities,
states and regions. Founded in 2000 and working with more than 700
financial institutions with over $142
trillion in assets, CDP pioneered using capital markets and
corporate procurement to motivate companies to disclose their
environmental impacts, and to reduce greenhouse gas emissions,
safeguard water resources and protect forests. Over 24,000
organizations around the world disclosed data through CDP in 2023,
with more than 23,000 companies – including listed companies worth
two thirds global market capitalization - and over 1,100 cities,
states and regions. Fully TCFD aligned, CDP holds the largest
environmental database in the world, and CDP scores are widely used
to drive investment and procurement decisions towards a zero
carbon, sustainable and resilient economy. CDP is a founding member
of the Science Based Targets initiative, We Mean Business
Coalition, The Investor Agenda and the Net Zero Asset Managers
initiative. Visit cdp.net or follow us @CDP to find out more.
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SOURCE Boston Consulting Group (BCG)