The latest move to require suppliers to develop Science Based Targets (SBTi) could have a profound impact on reducing corporate Greenhouse Gas (GHG) emissions.
In late April, Salesforce, the global CRM provider, announced that it was adding a Sustainability Exhibit to all supplier procurement contracts with a goal of reducing the company’s carbon footprint.
This new initiative is leading the way to similar adoptions across other companies, further accelerating the process of securing commitments from companies to adhere to science-based targets.
Salesforce’s intention is clear and is to be applauded. To reduce their carbon footprint, Salesforce needs to make sure that their suppliers, a key component within their value chain, in turn measure and reduce their own carbon footprint.
What Are Science Based Targets?
These are emission-reduction targets adopted by companies to reduce GHG emissions and are considered “science-based” if they are in line with the level of decarbonization required to keep the global temperature increase below 2°C compared to pre-industrial temperatures, as described by the Intergovernmental Panel on Climate Change (IPCC).
For a company to sign up to a science-based target, it will need to establish its own carbon footprint incorporating their Scope 1,2 and most likely, Scope 3 emissions.
What are Scope 1, 2 and 3 Emissions?
Scope 1 emissions are those that come from company-owned or controlled sources.
Scope 2 emissions are those that arise from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
Scope 3 includes all other indirect emissions that occur in a company’s value chain and are the result of activities from assets not owned or controlled by the reporting organization, and that indirectly impacts its value chain, including all sources not within an organization’s scope 1 and 2 boundaries.
Scope 3 emissions are usually the greatest share of the carbon footprint, covering emissions associated with purchasing, raw materials, business travel, waste and water, investments, and product disposal.
Overview of GHG Protocol scopes and emissions across the value chain
Some interesting points about Scope 3 emissions:
- There are 15 sub-categories within Scope 3 – 8 upstream and 7 downstream.
- They can often represent as much as 80% of a company’s total emissions.
- In most cases, only half of the 15 categories apply to any individual company.
- Purchasing and Product use tend to be quite significant for many organizations.
Value chain emissions often make up the bulk of companies’ GHG emissions and therefore climate impact, but they are typically the most difficult to track, measure and address.
Several tools are available to help companies establish their Scope 3 emissions based on industry segment, size, and other key indicators. But the task is often complex and companies can sometimes struggle to navigate the Scope 3 landscape and as a result have not always recorded or reported their Scope 3 emissions, and despite best intentions are significantly under-reporting their GHG emissions.
If the above sounds ominously familiar and you need help navigating the Scope 3 landscape, you should contact us for assistance.
How can one single company make such a difference?
When you consider the number of suppliers to large organizations, the numbers can add up and become very meaningful, very quickly. Consider a hypothetical, large company ABC Corporation with 50,000 suppliers (many large companies have many more suppliers than this). As is the case with Salesforce, for the hypothetical ABC Corporation to comply with the SBTi initiative, they will in turn most likely need to require most of their suppliers to do the same, and so on.
The Power Of One
Imagine if every company followed Salesforce’s lead and required an SBTi submission?
While this example is over-simplified (there’s likely to be significant overlap and commonality in suppliers), the point to make is that if every company approached reducing Greenhouse Gas emissions in the way Salesforce has, the potential to transform the corporate landscape through a single initiative can make an enormous impact. Their approach has the ability to reach a significant number of companies (and suppliers) very quickly and is complemented and further strengthened by Salesforce’s recent launch of their new platform aiming to help companies streamline, track and measure supply chain carbon emissions.
As more companies set science-based targets to reduce their emissions, it will be key for the SBTi to establish a process to track progress against targets. And with more and more governments calling for the disclosure of the financial risks associated with climate change in the coming year, the SBTi will issue more specific guidance on what companies are required to publicly report to facilitate this process in the future.