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Business climate commitments often ignore a key element: supply chains

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For nearly 30 years, pharmaceutical giant Bristol Myers Squibb has proclaimed that it is setting and meeting ambitious energy and greenhouse gas emissions targets. These days, those goals include being ‘carbon neutral’ by 2040.

OEM Caterpillar, Texas Instruments, Exxon Mobil and the Walt Disney Company have all made similar statements about the sustainability of their operations and set emission reduction targets.

But something is missing from these lofty corporate goals: any accounting for significant emissions from their supply chains or waste from their products. For some companies, these can total up to 95% of their overall greenhouse gas contributions.

A closer look at claims by US companies that they are stepping up efforts to tackle the climate crisis – made in marketing and investor presentations – reveals that many of these claims remain fairly limited and fail to reduce the larger one. Source of Carbon Emissions: Global supply chains that power the modern economy and have become a dinner table conversation amid massive disruption this year.

Emissions from supply chains and waste are “extremely important,” said Tom Cumberlege, associate director of the Carbon Trust, which works with businesses, governments and others to create plans to reduce carbon emissions. “Any business that doesn’t measure the entire value chain is missing a key part of its impact. “

Businesses are re-emphasizing their role as responsible stewards of the environment as the annual United Nations global warming conference kicks off in Glasgow. Heads of state, diplomats and activists meet in person to set new targets for reducing fossil fuel emissions in hopes of preventing the average global temperature from rising more than 1.5 degrees Celsius per compared to pre-industrial revolution levels. Failure to do so could lead to catastrophic consequences of global warming, scientists warn.

But despite their promises of help, many companies continue to take action to reduce carbon emissions as little as possible. These include the installation of solar panels at the head office, the design of more energy-efficient stores and the monitoring of commuting and business trips of their employees.

But emissions from factories that make the sneakers sold on e-commerce sites or from farms that produce the meat and milk sold on grocery store shelves continue to rise in some cases.

This poses challenges for consumers who want to spend money on sustainable goods and services and for investors who are increasingly looking to finance businesses that are helping, without harming, the planet.

Angel Hsu, assistant professor at the University of North Carolina and founder of Data-Driven EnviroLab, created a database using business climate information and other sources and found that 1,858 companies out of 2,000 have committed or are committed to going net zero. But only 210 of the companies reported emissions from supply chains or consumer waste.

In another analysis, Professor Hsu found that about two-thirds of companies that said they were on track to meet the emission reduction targets set for 2030 had set low or low targets. “I am generally skeptical of a company that says it has met or exceeded its goals at this point,” Professor Hsu said.

Amazon said emissions from indirect sources, for example, increased 15% in 2020 from the previous year. The company pointed out that when its emissions are measured against its booming sales, its carbon footprint has decreased. But some climate experts say this calculation, called carbon intensity, masks the fact that the company is still generating an increasing amount of carbon.

“The planet doesn’t care about carbon intensity,” said Roland Geyer, professor of industrial ecology at the University of California at Santa Barbara, “The climate is affected by absolute emissions.”

Walmart said it’s difficult to accurately measure the carbon contributions of its many suppliers, and the company is not disclosing whether its total supply chain emissions have increased or decreased each year. The company said about 95% of the carbon emissions from its business come from its supply chain.

The retailer said it has set a voluntary emission reduction target for its suppliers and that around 1,500 companies have reported progress towards that target.

But Walmart hasn’t asked suppliers to cut emissions. On the contrary, if they report certain levels of progress, Walmart gives them labels such as “Giga-Gurus” and “Sparking Change Suppliers”

“We have internal dashboards showing which vendors are involved and who are the leaders,” said Zach Freeze, senior director of strategic initiatives and sustainability at Walmart. “Traders are competitive. They want to be in the ranking.

More and more companies are trying to quantify the problem. The number of companies voluntarily submitting their emissions reports and reduction targets to Science Based Targets, a non-profit organization that assesses and approves company targets, has doubled this year to over 2,000 , said Alberto Carrillo Pineda, co-founder of the initiative.

Last week, the organization released the criteria companies will need to meet to meet “net zero” goals later, and they include significant reductions in supply chain emissions. But Carrillo Pineda noted that companies provide data voluntarily, so “there is no full guarantee that a company always includes all emissions.”

Ultimately, companies may be forced to do so. The Securities and Exchange Commission is questioning whether to require companies to provide more robust information about their issues, citing an increased demand for more transparency from investors.

In July, SEC Chairman Gary Gensler said he asked his staff for a recommendation on whether to start requiring companies to disclose emissions generated by their suppliers to give investors an accounting complete of their carbon footprint.

“Companies could announce their intention to be ‘net zero’ but provide no information to support that claim,” Gensler said in a speech this summer.

But getting companies to more fully disclose their carbon footprint is only part of the challenge. A significant reduction in emissions in their supply chains could fundamentally conflict with their business models.

Take the retail industry. The more products retailers sell, the more emissions they generate from the production and transportation of those products. Target said sales during the pandemic – which grew by $ 15 billion in 2020, more than its total sales growth in the previous 11 years – contributed to a 16.5% increase in emissions from its Supply Chain.

“The historic challenges and unique retail needs driven by the dynamics of 2020 have had an undeniable impact on our business as we respond to growing consumer demand,” Target said in its latest sustainability report. “In turn, we have also seen an increased impact of our emissions. “

Still, Target says it is delivering on its commitment to achieve net zero emissions, including its supply chain, by 2040.

“These increases do not deter us from our net zero commitment, nor from our work to continue to create strategies to avoid, reduce and remove emissions from our value chain,” the company said.

Prof Geyer said the pressure on companies to consistently increase profits and sales makes such commitments unrealistic. He recently wrote a book, “The Business of Less,” in which he argued that companies have to slow their growth or make other drastic changes to their operations if they are to truly help the climate. Such transformations no longer seem impossible, as the automotive industry demonstrates with its shift to electric vehicles.

“The big myth in the world of corporate sustainability is the idea of ​​’win-win’ – that a business can maximize its profits while remaining environmentally friendly,” Prof Geyer said in an interview. “We have 30 years of data that we can look at and say it’s not working. “


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