- Amazon and other major companies from Walmart to Apple face growing consumer, investor, and regulatory demands to reduce carbon emissions.
- Suppliers are often the biggest component in total emissions, yet niche manufacturers and contractors face financial and resource limitations.
- Supply chain partners, which in Amazon’s case include third-party sellers, unable to meet climate change standards can risk losing business.
As Amazon and other big businesses ramp up efforts to reduce their carbon footprint, they’re putting pressure on their suppliers to do the same, and those who don’t may pay a big price.
Starting in 2024, Amazon will require suppliers to share their emissions data, set emissions goals, and report on their progress, the e-commerce giant said in its recently released sustainability report. With that move, it joins Microsoft, Walmart, Apple, and others in saying that suppliers must step up decarbonization efforts.
“The pressure is coming at companies, who are then putting pressure on suppliers,” said Bob Willard, a corporate consultant and author of six books on sustainability.
And in a cascade, those suppliers are leaning on their suppliers.
Businesses typically track three levels of emissions. Scope 1 come directly from operations. Scope 2 are from purchased energy such as electricity. And scope 3 relate to a company’s activities but come from indirect sources such as supplier emissions and emissions from customers using their products. An analysis of major industries by the non-profit CDP found that, on average, scope 3 accounts for about 75% of all emissions.
Companies have much more control over their suppliers than many other areas of indirect emissions, says Andrew Winston, author of several sustainability-related business strategy books.
For instance, while a consumer goods company can’t force a detergent buyer to wash in cold water, it can be selective in working with eco-conscious suppliers.
“The supply chain is where there’s going to be continued rising pressure and transparency because companies have a direct impact over that,” Winston said.
Decarbonization mandates are getting tougher
Salesforce now requires suppliers to disclose scope 1, 2, and 3 emissions, deliver products and services on a carbon-neutral basis, and fill out a supply scorecard each year. AstraZeneca suppliers are expected to annually report emissions data to the CDP and set science-based goals.
While Amazon doesn’t include suppliers in its scope 3 accounting, it’s effectively dealing with this in the way many other firms have started doing, by forcing suppliers to report emissions to them and set goals which emissions levels can then be tracked against. “We know that to further drive down emissions, we must ensure those in our supply chain make the operational changes necessary to decarbonize their businesses,” Amazon said in the sustainability report.