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A key component of corporate climate pledges is supply chains

A key component of corporate climate pledges is supply chains

For nearly 30 years, the pharmaceutical giant Bristol Myers Squibb has proclaimed it’s been setting and meeting ambitious targets around energy and greenhouse gas emissions. These days, those goals include being “carbon neutral” by 2040.

Exxon Mobil, Texas Instruments, Exxon and Caterpillar have all made similar claims regarding sustainability and set emissions reduction goals.

These lofty corporate goals are missing something: any accounting of significant emissions from their supply chain or waste from their products. These emissions can amount to as much as 95 % of companies’ total contributions to global warming.

A closer look at corporate America’s claims that it’s accelerating efforts to tackle the climate crisis — made in marketing and investor presentations — reveals that many of these assertions remain quite limited and fail to make a dent in the largest source of carbon emissions: the global supply chains that power the modern economy and have become dinner-table conversation amid massive disruptions this year.

Emissions from supply chains and waste are “hugely important,” said Tom Cumberlege, an associate director at The Carbon Trust, which works with companies, governments and others to create carbon-reducing plans. “Any company that isn’t measuring the full value chain is not coming to grips with a key piece of their impact.”

Corporations are again highlighting their role as responsible environmental stewards as the United Nations’ annual global warming conference in Glasgow begins. The meeting will bring together heads of state, diplomats, activists and others to set new targets to reduce fossil fuels’ emissions. This is in the hope of preventing the average global temperature rising by more that 1.5 degrees Celsius from levels before the Industrial Revolution. Scientists warn that failing to do so could result in catastrophic consequences from global heating.

Many companies are taking steps to reduce carbon, despite their promises to help. These include installing solar power at headquarters, designing more energy-efficient stores, and tracking employees’ commutes and business travel.

However, emissions from factories that make the sneakers for e-commerce or from farms that produce the meat and dairy that are sold on grocery shelves continue growing in some cases.

This presents challenges for consumers who want to buy sustainable goods and services, as well as investors who are increasingly looking to finance companies that help the planet.

Angel Hsu, a University of North Carolina assistant professor and founder of Data-Driven EnviroLab created a database using corporate disclosures and other sources. It found that 1,858 of 2,000 companies have pledged or committed themselves to becoming net zero. Only 210 companies reported emissions from consumer waste or supply chains.

Professor Hsu conducted another analysis and found that approximately two-thirds the companies that claimed they were on track to meet their 2030 emission-reduction goals had set low or unambitious targets. “I’m generally skeptical of a company that says it has achieved or overachieved its targets at this point,” Professor Hsu said.

Amazon reported that indirect emissions rose 15% in 2020, compared to the previous years. Amazon pointed out that its carbon footprint has been decreasing if its emissions are measured in relation to its booming business. Some climate experts argue that this calculation, known as carbon intensity, hides the fact the company is still generating increasing amounts of carbon.

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

Walmart stated that it is difficult to accurately quantify carbon contributions from its many suppliers. The company also doesn’t disclose whether total emissions in the supply chain have been increasing/ decreasing each year. According to the company, 95 percent of carbon emissions related its business come from its supply chains.

The retailer stated that it has established a voluntary emissions reduction goal and that approximately 1,500 companies have reported progress towards the goal.

Walmart has not required suppliers to reduce their emissions. Rather if they report certain levels of progress, Walmart awards them with labels such as “Giga-Gurus” and “Sparking Change Suppliers”

“We have internal dashboards showing which suppliers are participating and who the leaders are,” said Zach Freeze, a senior director of strategic initiatives and sustainability at Walmart. “Merchants are competitive. They want to be on the leaderboard.”

A growing number of companies are trying quantify the problem. Alberto Carrillo Pineda is the co-founder of Science Based Targets, which assesses and approves company targets and submits voluntary emission reports.

Last week, the organization released the criteria companies will have to meet to reach “net zero” goals later, and they include steep reductions in emissions from supply chains. But Mr. Carrillo Pineda noted that the companies provide the data voluntarily, so “there is no full guarantee that a company is always including every emission.”

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The Duke of Cambridge and David Attenborough jointly launched the initiative in 2020.

Companies may eventually be forced to disclose their emissions. The Securities and Exchange Commission is considering whether to require more detailed disclosures from companies regarding their emissions. Investors are demanding more transparency.

In July, the S.E.C.’s chairman, Gary Gensler, said he had asked his staff for a recommendation on whether to start requiring companies to reveal emissions generated by their suppliers to give investors a full accounting of their carbon footprint.

“Companies could announce plans to be ‘net zero’ but not provide any information that stands behind that claim,” Mr. Gensler said in a speech this summer.

The challenge is not over. It could be detrimental to their business model to reduce emissions in their supply chains.

Let’s take the retail industry. The more products retailers sell, then the more emissions they create from the production and transportation. Target said sales during the pandemic — which grew by $15 billion in 2020, greater than its total sales growth over the prior 11 years — contributed to a 16.5 percent increase in emissions from its supply chain.

“The historic challenges and unique retail needs driven by the dynamics of 2020 had an undeniable impact on our business as we met increased consumer demand,” Target said in its most recent sustainability report. “In turn, we also saw an increased impact of our emissions.”

Target maintains its commitment to net zero emissions by 2040, which includes its supply chain.

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

Professor Geyer stated that companies are under constant pressure to grow their sales and profits. He recently wrote a book, “The Business of Less,” in which he argued that companies need to pull back on their growth or make other radical changes to their businesses if they want to truly help the climate. These transformations are possible, as the auto industry has shown by switching to electric vehicles.

“The big myth in the corporate sustainability world is the idea of ‘win-win’ — that a company can maximize profits and still stay environmentally friendly,” Professor Geyer said in an interview. “We have 30 years of data that we can look at and say that doesn’t work.”


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