Scope 3 Carbon Gets Little Press, but Supply Chain Leaders Are on It Anyway

A Google News search for the term “Scope 3 carbon” yesterday turned up a shockingly stale set of citations. Of the first 20 articles listed, the most recent was from four days ago and 10 were published in May 2024 or earlier. It looks as though the media think there’s nothing left to talk about. 

If so, they are wrong.  

Supply chain leaders continue to work on decarbonizing upstream operations (aka, Scope 3), which account for about 80% of industrial GHG emissions. Meanwhile, climate change keeps setting new records for unbearable heat and extreme weather. 

“Zero Percent Carbon, 100% Digital” Is Our Supply Chain Mission 

We recently hosted a group of 40 supply chain executives in Dublin for a roundtable on AI and autonomous operations during which one of the hottest debates was around the question of handling Scope 3 carbon. The takeaway was that supply chain leaders continue to think about limiting carbon emissions as a core design principle governing how they source, make, and move the things we want and need as consumers.  

Unfortunately, too many constituencies seem hooked on admiring the problem of climate change, rather than thinking of energy, agriculture, and economics as a system that can work for everyone without requiring “degrowth”. This includes activist groups that fight efforts to enable energy transitions with new infrastructure and regulators that overreach with rules that are impossible to follow or enforce. 

Still, most supply chain leaders press on, recognizing not only the urgency of limiting climate change from Scope 3 carbon, but also the practicalities of getting it done in the real world. Digital technology is emerging as a key enabler, given its potential to transform the effectiveness of measurement and management tools, but even this depends on pivoting from awareness and performative activity to solutions and action. 

Closing the Gap Between Talk and Results 

Our discussion included operations executives from Europe, Asia, and North America, plus technologists and policy experts from the Environmental Defense Fund and Tony Blair Institute for Global Change. We identified five critical gaps that supply chain leaders must address to keep moving toward real solutions. 

1. We Lack an Operator-Policymaker Interface – There is too little understanding of operational realities among policymakers, particularly in the EU, which is the world’s most aggressive regulator. This leads to rules that lack a credible path to compliance (eg, the Corporate Sustainability Due Diligence Directive, which stalled on objections from Germany before passing recently).
The solution: Collectively creating best practices for engaging Brussels to enable predictive compliance with clear price signals. 

2. Boards are Unclear on the Vital Few Operational Actions – Boards remain keen to ensure companies’ long-term license to operate is not at risk, but they don’t fully understand the complexities of what drives what in terms of carbon emissions.
The solution: Create a simple board presentation that explains supply chain carbon to crystallize tradeoffs and dependencies moving forward, rather than mainly reporting on progress against commitments. 

3. Suppliers Are Short on Cash for Scope 3 Improvements – Insisting on carbon reductions from suppliers is senseless unless they can handle the CapEx needed to change their own operations.
The solution: Include supplier funding considerations in carbon mitigation plans with strategic partners, making company or third-party financing an option when appropriate payback conditions can be met. 

4. There Is Still No Clear Value Translator across Cash, Cost, and Carbon – Most big companies have public carbon reduction goals that CEOs and boards consider important. Unfortunately, when operational choices force a short-term tradeoff between carbon and margins, margins usually win.
The solution: Explicit and consistent carbon pricing mechanisms need to be developed and shared with regulators and peers to help normalize accounting for value beyond cash.

5. Scope 3 Data Capture Tools Are Immature and Inaccurate – Addressing the previous four gaps requires accurate, emitter-specific data. Average emissions factors aren’t enough, and yet existing digital tools offer little more.
The solution: Short term, many companies will probably build their own tools. But in the longer term, we need a push on venture capitalists to foster a deeper bench of serious tech partners. 

News cycles have been busy this year, with elections and the Olympics creating a false impression that decarbonization is somehow passé. Not so, say supply chain leaders.  

In fact, the real work is just beginning.