Running Ahead: Apparel and Footwear Lead on Scope 1 and 2 Target Completion

The Data

1. 1

   186 companies of the 338 in our data set have set SBTi targets, 97% of which have set Scope 1 and 2 targets.

2. 2

   Of the companies with progress data available (132), 120 have reported progress.

3. 3

   The apparel and footwear industry leads on progress when looking at both Scope 1 and 2 targets, with a 76% average target completion rate.

4. 4

   The tech industry is leading the charge when it comes to Scope 2 emissions, with a target completion rate of 100%.

Laying the Groundwork: Scope 1 and 2

With new developments and constantly evolving policies relating to Scope 3, managing these emissions has proven to be particularly challenging. In contrast, The GHG Protocol's stable standards and calculation methods for Scope 1 (direct emissions) and Scope 2 (indirect purchased emissions) have provided a consistent structure for over a decade. Core principles and methodologies established for Scope 1 and 2 can also form the basis for Scope 3 accounting, plus build credibility with suppliers and vendors.  

The foundation of effective sustainability target setting for Scope 1 and 2 lies in clearly defining organizational boundaries, for which the GHG protocol outlines two primary approaches:  

• The equity share approach, which requires reporting emissions based on a company’s ownership percentage 
• The control-based approach – divided into two categories – financial and operational. This requires reporting all emissions, regardless of ownership, if the company has any decision-making power over them.  

Our analysis reveals that, as of the last SBTi report in 2022, 120 of 132 companies have made progress on their targets. To assess the impact of different approaches on reporting and boundaries, we examined industry-specific average target completion rates. We found that apparel and footwear take the lead on Scope 1 and 2 target completion, with an average rate of 76%, while the tech industry excels when it comes to achieving Scope 2 targets.

The data illustrates each industry's position relative to its own goals and timelines, rather than comparing the pace of their emission reduction efforts. We delve into how companies are making progress below.  

Leading the Way on Renewable Energy  

Richemont, a luxury goods company, has set its organizational boundary using the financial control-based approach and reports Scope 2 emission via a market-based approach.* 

With a target to reduce Scope 1 and 2 emissions by 46% and source 100% of renewable electricity by 2030, the company is implementing various strategies, some of which include:   

• Setting up a new criterion to identify projects with an environmental agenda and then conducting robust energy audits 
• Becoming a member of RE100 (an initiative that aims to accelerate the transition to clean energy and achieve zero carbon electricity grids by 2040) 
• Investing in on-site energy generation and partnering with local utilities  

These methods have been working – in 2023, 97% of Richemont’s electricity consumption came from renewable sources.   

Another example comes from Reckitt Benckiser, which has set its organizational boundary using the operational control-based approach along with a market-based reporting approach. Its target is to reduce 65% of Scope 1 and 2 emissions and use 100% renewable electricity by 2030. Initiatives include: 

• On-site solar installations at 13 sites, along with local Power Purchase Agreements (PPAs), green tariffs for suppliers, and other site-specific initiatives 
• Exploring alternative fuels, including replacing gas with lower emission energy sources and fuels 

The results? The company's 2023 sustainability report reveals that 94% of total electricity consumption came from renewable sources.   

The Takeaway 

While Scope 3 emissions typically account for the largest portion of a company's carbon footprint, addressing Scope 1 and 2 emissions remains crucial, can be an easier starting point, and also lays the foundation for addressing Scope 3. Initial steps are to clarify goals and criteria, ensure accountability, and invest in alternative energy sources or exploration.

We recommend a structured approach, which involves emission assessment, categorization of the emissions under Scopes, and identifying the largest contributors to your carbon footprint. To leverage Scope 1 and 2 for Scope 3, consider:  

Building internal capacity:  Developing skills and knowledge in carbon accounting for Scope 1 and 2 creates a foundation for tackling more complex Scope 3 emissions. 

Engaging suppliers: Showcasing your own emission reduction efforts can inspire and encourage suppliers to follow suit, facilitating Scope 3 reduction. 

Establishing credibility: Demonstrating success in Scope 1 and 2 reduction builds credibility when engaging with value chain partners on Scope 3 emissions.  

Addressing Scope 1, 2, and 3 in this way allows for tangible progress in the near term while also preparing for comprehensive emissions management in the long term. 

To see a different data cut or to dig deeper into this topic, reach out to our Head of Research Analytics, Cody Stack, at Cody.Stack@zero100.com.    

Methodology 

Zero100’s proprietary data and analytics are a combined effort between our data scientists and research analysts. We provide data-first insights matched with our own research-backed points of view and bring this analysis to life via real-world case examples being led by supply chain practitioners today.     

For this study, we analyzed 338 supply chain organizations, relevant SBTi data, and 130+ unique references of companies setting targets relating to Scope 1 and 2 emission reduction. We also analyzed over 150 unique company notes on target coverage, exclusion, and target plans.  

*Scope 2 emissions is divided into two methods: The market-based approach, which enables organizations to demonstrate the impact of their renewable energy investments, and the location-based approach, which offers transparency on the physical emissions generated at a site. 

Further Reading 

• Data Insight: SBTi Scope 3 Targets Cluster around Supply – and Pharma Comes Out on Top    
• Data Insight: Digital Leaders Set – and Hit – More Ambitious SBTi Targets  
• The Signal: Decarbonizing the AI Revolution