25.10.2024
Decarbonization
The Business Case for Scope 3 Emission Reduction
In today's evolving business landscape, integrating climate action into corporate strategies is no longer optional—it’s key to long-term success. Companies leading in Scope 3 emission reductions, which occur across their supply chains, are positioning themselves to thrive in a net-zero economy.
Struggling to build a business case for supply chain decarbonization? Join our Scope 3 Action Group and learn how to tackle it head-on. Cohort #4 kicks off in March 2025 - apply now and lead your company's way towards a greener future!
Why Scope 3 Action Makes Financial Sense
Reducing emissions across the value chain enhances profitability, mitigates risks, and meets stakeholder expectations. Scope 3 emissions often account for over 80% of total emissions, especially in industries like manufacturing, retail, and tech (WEF, 2023). Addressing these emissions presents both a challenge and an opportunity for climate leadership.
"With supply chain emissions on average 26x greater than operational emissions, companies must drive transparency and action down the supply chain to reduce impacts and future-proof their business." - CDP, 2024
A market report estimates financial risks related to supply chain emissions at $162 billion, compared to $56 billion in mitigation costs. Companies taking action not only reduce costs but also build stronger relationships with customers and investors who demand transparency on environmental impacts.
Risk Mitigation and Regulatory Readiness
Global regulations are tightening, with the EU’s Corporate Sustainability Reporting Directive (CSRD) making Scope 3 disclosures mandatory by 2025 (Deloitte, 2022). Failure to act exposes businesses to penalties, carbon pricing, and trade barriers.
Proactive companies mitigate these risks by managing supply chain emissions, setting science-based targets, and adopting sustainable practices, ensuring resilience against both physical climate risks and regulatory changes.
Distribution of organizations with validated targets by region as of December 2023, SBT, 2024
Financial and Competitive Advantages
Reducing Scope 3 emissions offers immediate financial benefits. According to CDP, companies involved in supply chain climate initiatives saved $13.6 billion in 2023, alongside preventing 43 million tonnes of GHG emissions—equivalent to Sweden’s annual emissions. Savings came from:
Low-carbon energy use
Process efficiency
Product innovation
Optimized energy consumption
Moreover, businesses with strong Scope 3 strategies often receive better financing terms, as investors increasingly factor climate risks into decisions. Proactive climate action also enhances brand reputation, positioning companies as sustainability leaders, which appeals to climate-conscious consumers.
Empowering Suppliers to Drive Change
Deep decarbonization requires supply chain engagement. Leading companies incentivize suppliers who meet climate goals, fostering collaboration on emissions reduction. Providing suppliers with tools, training, and resources helps them manage their own emissions, enhancing efficiency and reducing Scope 3 emissions.
Driving Scope 3 Action with Cross-Industry Collaboration
ClimateChoice’s Scope 3 Action Group empowers companies to tackle Scope 3 emissions by providing insights, tools, and resources. Here’s how the group supports the journey:
Data Management: Benchmark internal climate management, gather supplier data, and establish a data-driven approach to assess supplier climate maturity.
Supplier Engagement: Explore proactive strategies to foster sustainability in the supply chain—communicating goals, sharing best practices, and collaborating on emissions reduction.
Roadmapping for Action: Use the ‘Scope 3 Masterplan’ to create individual decarbonization initiatives based on supplier climate maturity.
These key modules enhance companies' ability to manage their carbon footprint and build a collaborative peer-group environment where decision-makers can benchmark, share challenges, and co-create best practices.
Conclusion: Leading the Transition to a Net-Zero Economy
The shift to a net-zero economy presents significant opportunities for companies that take decisive action on Scope 3 emissions. Addressing these emissions reduces risks, enhances financial performance, and establishes companies as leaders in a climate-conscious market. Aligning your supply chain with a net-zero future is no longer optional—it’s a strategic business imperative.
Struggling to build a business case for supply chain decarbonization? Join our Scope 3 Action Group and learn how to tackle it head-on. Cohort #4 kicks off in March 2025 - apply now and lead your company's way towards a greener future!
