Supply chain decarbonization has become a top priority for CEOs as they face unprecedented climate challenges and growing customer concerns about environmental impact. This guide provides a comprehensive roadmap to a greener business model, focusing on practical strategies and real-world examples. In this guide, you will learn:

1. The importance of supply chain decarbonization in reducing emissions
2. Best practices and successful decarbonization methods
3. Innovative tools and technologies, from AI-driven logistics to circular economy principles
4. How to measure your carbon footprint and set achievable reduction targets
5. The latest regulations shaping the business landscape

Whether you’re a startup or a multinational corporation, this guide breaks down complex concepts into actionable steps, helping you transform your supply chain into a sustainable and positive part of your business model. Together, we’ll explore how to contribute to the global push towards net zero emissions.

Supply Chain Decarbonization: Mastering Scope 3 Emissions

For modern companies , particularly in climate tech, understanding and managing Scope 3 emissions has become a strategic imperative. These value chain emissions typically represent over 90% of a company’s carbon footprint, making them the key battlefield in corporate climate action.

Beyond Direct Control: Understanding Scope 3

The Business Case for Scope 3 Management

The magnitude of Scope 3 emissions is staggering. Recent analysis shows that supply chain emissions average 11.4 times higher than operational emissions. For technology and manufacturing companies, this figure can be even more dramatic. This represents both a challenge and an opportunity for businesses looking to lead in sustainability.

Breaking Down the Scope 3 Universe

The GHG Protocol categorizes Scope 3 emissions into 15 categories, each representing distinct business activities:

Upstream Activities:

1. Purchased goods and services: Emissions from the production of goods and services acquired by the company.
2. Capital goods: Emissions associated with the production of equipment, buildings, and other fixed assets.
3. Fuel and energy-related activities: Emissions related to the production and transportation of fuels and energy purchased by the company, not included in Scope 1 or 2.
4. Upstream transportation and distribution: Emissions from the transportation and distribution of products purchased by the company.
5. Waste generated in operations: Emissions from the disposal and treatment of waste generated in the company’s operations.
6. Business travel: Emissions from employee business trips in vehicles not owned by the company.
7. Employee commuting: Emissions from employees traveling between their homes and work.
8. Upstream leased assets: Emissions from the operation of assets leased by the company (lessee) not included in Scope 1 or 2.

Downstream Activities:

9. Downstream transportation and distribution: Emissions from the transportation and distribution of products sold by the company.
10. Processing of sold products: Emissions from the processing of intermediate products by downstream companies.
11. Use of sold products: Emissions from the use of goods and services sold by the company.
12. End-of-life treatment of sold products: Emissions from the waste disposal and treatment of products sold by the company.
13. Downstream leased assets: Emissions from the operation of assets owned by the company (lessor) and leased to other entities.
14. Franchises: Emissions from the operation of franchises not included in Scope 1 or 2.
15. Investments: Emissions associated with the company’s investments, including equity and debt investments and project finance.

Strategic Challenges in Scope 3 Management

Modern businesses face three primary challenges in addressing Scope 3 emissions:

Data Visibility: Getting accurate emissions data from complex global supply chains requires sophisticated tracking systems and supplier cooperation.

Control Limitations: Unlike direct emissions, Scope 3 requires influencing partners’ behaviors and decisions across your value chain.

Scale Complexity: The sheer scope of global supply networks makes implementing reduction strategies a complex orchestration challenge.

Here is a video from RE: TV discussing the complexities of decarbonizing the food supply chains globally.

Innovation Opportunities in Scope 3 Reduction

Forward-thinking companies are deploying cutting-edge strategies to tackle Scope 3 emissions:

Digital Supply Chain Integration: Implementing blockchain and IoT solutions for real-time emissions tracking and verification.

Supplier Innovation Programs: Creating collaborative platforms where suppliers can share best practices and access green technologies.

Circular Design Thinking: Developing products with minimal lifecycle emissions through advanced materials and modular design.

Green Logistics Optimization: Utilizing AI-powered route optimization and alternative fuel vehicles.

Strategic Sourcing Evolution: Building resilient, low-carbon supply networks through strategic supplier partnerships.

As climate tech continues to evolve, managing Scope 3 emissions will become increasingly crucial for business success. Companies that master their value chain emissions now will be better positioned to:

• Meet escalating regulatory requirements

• Satisfy growing investor demands for climate action

• Capture market share from environmentally conscious customers

• Drive innovation in their industries

Success in Scope 3 reduction requires a comprehensive strategy that combines technological innovation, supplier collaboration, and business model evolution. For climate tech companies, this represents not just a challenge to overcome, but an opportunity to demonstrate leadership in the transition to a low-carbon economy.

4 Key Steps to Decarbonize Your Supply Chain: A Practical Framework

Looking to transform your company to a more eco-friendly model?  Your supply chain is a great place to start. This practical framework outlines four essential steps to guide you through the process, and will help you make meaningful progress in reducing greenhouse gas emissions across your entire value chain.

1. Establish Your Emissions Baseline

To begin any effective decarbonization effort, you first need to get a clear picture of your current carbon footprint – think of it as taking a snapshot of where you stand today.

This process starts with mapping out your entire supply chain, carefully identifying every significant source of greenhouse gas emissions, from manufacturing facilities to transportation routes.

You’ll want to set up automated systems that can continuously gather emissions data from all your suppliers, making sure everyone is measuring things the same way by following established guidelines like the GHG Protocol.

By analyzing this data, you can create detailed profiles for each supplier, which helps pinpoint exactly where your emissions are highest. This baseline assessment is crucial because it gives you the concrete starting point you need to set realistic reduction targets and measure your progress over time.

2. Engage and Empower Suppliers

Getting your suppliers on board is essential for reducing carbon emissions throughout your supply chain. Think of it as building a team where everyone works together toward the same environmental goals.

Start by educating your suppliers about practical ways they can cut emissions, just like teaching team members new skills. You’ll want to help them set up the right tools and systems to track their progress, and consider offering rewards or benefits to those who make significant improvements.

Creating spaces where suppliers can share their success stories and learn from each other’s experiences can spark innovation and help spread effective solutions across your network.

This collaborative approach ensures that everyone understands their role and has the support they need to contribute to your overall decarbonization goals.

3. Implement Technical Solutions

Implementing technical solutions is a crucial step in reducing emissions throughout your value chain. Start by integrating AI-powered logistics optimization, which can help streamline transportation routes and minimize fuel consumption, thereby cutting down on transportation emissions.

Next, focus on energy-efficient manufacturing processes that use less energy and produce fewer emissions during production. Additionally, consider adopting low-carbon materials and embracing circular economy principles, which encourage recycling and reusing resources to lessen environmental impact.

Finally, investing in renewable energy infrastructure for your key suppliers can significantly enhance their sustainability efforts, ensuring that the entire supply chain moves toward a greener future. By taking these steps, you can create a more efficient and environmentally friendly value chain.

4. Monitor, Report, and Optimize

Creating a continuous improvement cycle is key to effectively reducing carbon emissions in your business. Think of it as a fitness tracker for your company’s environmental health.

Start by regularly checking your performance against the goals you’ve set, just like tracking your daily steps. Implement advanced monitoring systems to get accurate, real-time data on your emissions – it’s like having a smart watch that constantly measures your heart rate and activity levels.

Develop clear ways to share this information, making your progress visible to everyone involved, similar to sharing your fitness achievements on social media. Use the data you collect to regularly fine-tune your strategy, adapting your approach as you learn what works best, much like adjusting your workout routine for better results.

Finally, keep challenging yourself by setting more ambitious targets over time, just as you would increase your fitness goals as you get stronger. This ongoing cycle of monitoring, reporting, and optimizing ensures that your efforts to reduce emissions continue to improve and evolve, keeping your business on track for a greener future.

Each step in this framework should be tailored to your organization’s specific context and capabilities. Success requires sustained commitment, clear metrics, and regular assessment of progress against defined goals.

Key Performance Indicators to Track:

Leading companies are integrating these metrics into their standard business performance reviews, ensuring that carbon reduction receives the same attention as traditional business metrics.

By following this structured approach, companies can systematically reduce their supply chain emissions while building more resilient and sustainable business operations. The key is to maintain momentum through consistent execution and regular strategy refinement based on measured results.

3 Supply Chain Decarbonization Examples

Let’s look at three clever ways businesses are cleaning up their supply chains, making everything from sneakers to smartphones a little greener for our planet.

Walmart’s Project Gigaton: A Supply Chain Revolution

In 2017, Walmart launched Project Gigaton, an ambitious initiative aimed at slashing 1 billion metric tons of greenhouse gas emissions from its global supply chain by 2030. This groundbreaking program has since become a beacon of corporate climate action, demonstrating the power of collaboration in driving sustainable change.

How Project Gigaton Works

Project Gigaton operates through a multi-faceted approach:

1. Supplier Engagement: Walmart actively encourages suppliers to set science-based emissions reduction targets, fostering a culture of sustainability throughout its vast network.
2. Digital Resources: The Sustainability Hub, an online platform, provides suppliers with essential tools and resources to measure and reduce their carbon footprint.
3. Focus Areas: The initiative targets six key areas:
   • Energy efficiency
   • Renewable energy
   • Waste reduction
   • Sustainable packaging
   • Nature conservation
   • Transportation optimization
   • Product use and design improvements
4. Stakeholder Collaboration: Walmart partners with NGOs and other stakeholders to leverage expertise and drive innovation in climate action.

Remarkable Progress

By 2020, Project Gigaton had already made significant strides:

• Over 2,300 suppliers joined the initiative
• 230 million metric tons of emissions avoided

In a stunning development, Walmart announced in February 2024 that it had achieved its billion-ton goal more than six years ahead of schedule. This accelerated success underscores the effectiveness of Walmart’s approach and the commitment of its partners.

Project Gigaton stands as a testament to the transformative power of corporate leadership in addressing climate change. By mobilizing its vast supply chain, Walmart has not only reduced its own environmental impact but has also catalyzed a shift towards sustainability across multiple industries.

Apple’s Green Bonds: Financing a Sustainable Supply Chain

Apple, a tech giant known for innovation, has taken a pioneering financial approach to decarbonizing its supply chain. By leveraging green bonds, Apple is driving sustainable change throughout its global network of suppliers and partners.

The Green Bond Strategy

Apple’s strategy revolves around issuing green bonds to fund environmentally-focused projects:

1. Massive Investment: Since 2016, Apple has issued $4.7 billion in green bonds, demonstrating its commitment to sustainable finance.
2. Targeted Allocation: The funds are strategically directed towards projects that reduce the carbon footprint of Apple’s operations and supply chain.
3. Innovative Focus: Apple aims to develop new low-carbon manufacturing and recycling technologies, pushing the boundaries of sustainable production.

Key Initiatives

Apple’s green bond-funded projects include:

1. Carbon-Free Aluminum: A groundbreaking initiative to create the first-ever direct carbon-free aluminum, revolutionizing a traditionally carbon-intensive material.
2. Recycling Innovation: Investment in advanced recycling technologies, including robots like “Daisy” that can disassemble iPhones to recover valuable materials.
3. Renewable Energy: Funding for renewable energy projects, including on-site solar installations and investments in wind farms.
4. Energy Efficiency: Upgrades to facilities and manufacturing processes to reduce energy consumption.

Ambitious Goals

Apple’s green bond strategy supports its broader environmental objectives:

• Achieve a 100% carbon-neutral supply chain by 2030
• Use 100% recycled and renewable materials in all products
• Eliminate plastic packaging by 2025

Impact and Recognition

Apple’s approach has yielded significant results:

• As of 2021, 110 suppliers have committed to using 100% renewable energy for Apple production
• The company has reduced its carbon footprint by 40% since 2015
• Apple received the UN Global Climate Action Award in 2019 for its supply chain efforts

Apple’s use of green bonds exemplifies how financial instruments can be leveraged to drive sustainable transformation in complex global supply chains. By aligning its financial strategy with its environmental goals, Apple is setting a new standard for corporate climate action.

Unilever’s Climate Programme: Transforming the Supply Chain

Unilever, a global consumer goods giant, has taken a proactive stance in addressing climate change through its innovative Climate Programme. This initiative focuses on direct supplier engagement to drive significant emissions reductions throughout its complex supply chain.

Strategic Approach

Unilever’s Climate Programme operates on several key principles:

1. Targeted Engagement: The company identified 300 suppliers with the highest climate impact, focusing resources where they can make the most difference.
2. Collaborative Guidance: Through the “Unilever Climate Programme,” the company provides hands-on guidance and resources to help suppliers reduce their emissions.
3. Ambitious Goals: The “Unilever Climate Promise” challenges suppliers to halve their emissions by 2030, aligning with Unilever’s own sustainability targets.
4. Value-Driven Partnerships: Unilever prioritizes relationships with suppliers who share its commitment to sustainability, creating a network of like-minded partners.

Key Initiatives

The Climate Programme encompasses several innovative projects:

1. Supplier Carbon Footprint: Unilever helps suppliers measure and manage their carbon footprint, providing tools and expertise.
2. Renewable Energy Transition: The company supports suppliers in shifting to renewable energy sources, sharing best practices and facilitating connections with clean energy providers.
3. Sustainable Agriculture: Unilever works with farmers to implement regenerative agriculture practices, reducing emissions while improving soil health.
4. Low-Carbon Logistics: Collaboration with transport partners to test and implement battery-operated refrigeration systems and other low-carbon technologies.

Impact and Recognition

Unilever’s Climate Programme has yielded impressive results:

• By 2020, Unilever had reduced its manufacturing emissions by 65% compared to 2008 levels.
• The company achieved 100% renewable grid electricity across its operations in 2019.
• Unilever was recognized as a leader in corporate sustainability by the Dow Jones Sustainability Index.

Future Outlook

Looking ahead, Unilever aims to:

• Achieve net-zero emissions from all products by 2039
• Help suppliers set their own science-based targets
• Invest €1 billion in a new dedicated Climate & Nature Fund

Unilever’s Climate Programme demonstrates the power of supply chain collaboration in driving systemic change. By engaging suppliers directly and providing concrete support, Unilever is not only reducing its own environmental impact but also catalyzing a broader shift towards sustainability in the consumer goods industry.

Embracing the Sustainable Supply Chain Revolution

The path to supply chain decarbonization is both a challenge and an opportunity. The examples we’ve explored demonstrate that with creativity, determination, and strategic planning, significant emissions reductions are achievable. As regulatory pressures mount and consumer preferences shift, companies that prioritize sustainable supply chains will gain a distinct competitive advantage.

The road ahead may be demanding, but it’s also filled with potential for innovation, efficiency gains, and positive impact. By leveraging the methods and insights shared in this guide, businesses can position themselves as leaders in the low-carbon economy of tomorrow, driving meaningful change while securing their place in a sustainable future.

References

McKinsey & Company:  Making supply-chain decarbonization happen

U.S. Environmental Protection Agency (EPA): Supply Chain Guidance

We Mean Business Coalition: How companies can accelerate value chain decarbonization

World Business Council for Sustainable Development (WBCSD): Incentives for Scope 3 supply chain decarbonization

Food and Agriculture Organization of the United Nations (FAO): Carbon footprints in the supply chain: A practical guide for continuous improvement

U.S. Department of Energy (DOE): Chemicals Value Chain Decarbonization: Integrated Solutions for a Complex Challenge

World Economic Forum: Decarbonizing Supply Chains: A Scope 3 Playbook for India