We’re just back from Climate Week NYC, where the theme was “Getting it Done”. “It,” of course, is cutting emissions to keep global warming to 1.5 degrees C. With the recent passage of the IRA and the CHIPS Act, we’ve entered a more hopeful (and a more urgent) phase in the climate movement. The feeling in the climate community is that we just might succeed.
Climate Week included plenty of chatter about the importance of taming value chain emissions to “get it done”. By this point, the importance of the value chain - “Scope 3 emissions” - should be considered indisputable truth, right up there with “net-zero by 2050” and “you can’t manage what you don’t measure”. It’s time the conversation moves past the obvious conclusion that “Scope 3 matters!” to discussions about what to do about it.
This is the focus of a new data initiative at Climate Neutral. For the first time, we dumped a bunch of carbon inventories (sanitized and unattributed) into a data warehouse and took a look. Here’s what we found.
1. Supply chain matters! (We told you so)
Okay, let’s get it over with: 73% of all emissions came from purchased goods and services. These emissions come from inputs to finished goods and services, and ignoring them tends to miss most of a company’s emissions. They matter so much that it’s silly to think about a company making and shipping products in factories around the world but only counting emissions from offices and employees. We were excited to hear this echoed this week over and over again – by leaders from Microsoft, Nike, Unilever, Natura & Co. and more.
Convinced yet? Good. So stop obsessing over emissions from your Zoom calls and WFH emissions, and start obsessing over what’s happening with supply chain emissions. They really, really matter. If a company says it’s got a climate plan, and it omits Scope 3, go ahead and file it in your “return to sender” bin.
Global emissions are, indeed, rising fast. But more to the point: 69% of all emissions come from “uncontrolled facilities.” They’re beyond the scope of control of the brand that sells the finished product. When you see a favorite pair of comfy sweats or go-to travel mug, it’s likely that it was designed by the brand, and made by a company that the brand neither owns nor operates. This makes those emissions harder to eliminate than if they were controlled.
And here’s the rub: it’s as difficult and overwhelming for the brand to select low-GHG product inputs as it is for consumers to select low-GHG finished products. That’s why reducing emissions by a significant amount is so hard. And until we acknowledge this hurdle, it’s going to be impossible to get over it.
Across all of the thousands of products included in the analysis, more than 25% of all carbon emissions come from steel. This is quite a distinction, because the data reflect emissions from 700 distinct sources – including plastic. It may seem crazy that only one of 700 sources accounts for one-quarter of all emissions. But steel is a notoriously dirty sector. New research from our friends at Project Drawdown says that about 18% of the decarbonization required in the next decade must come from industry, including steel production. So while no one loves a piece of single-use plastic, metal is a much bigger climate culprit.
Progress is coming quickly due to federal action and industry collaboration. Consumer brands must also play a role by finding ways to get low-carbon steel into finished goods. Climate neutrality puts a price on each tonne of a brand’s emissions. Because steel accounts for such a large chunk of emissions, it’s responsible for a big hunk of the costs of climate neutrality. Low carbon steel will go a long way toward making climate neutrality cheaper.
This one surprised us: 81% of emissions came from just two places: China and Taiwan. That’s way more than the global tally - China produces under one-third of all global emissions. But for consumer brands, Chinese emissions are an outsized challenge, since so much manufacturing happens there.
That challenge is also an opportunity. An American consumer brand that pushes for low-carbon energy and materials in its supply chain has influence well beyond the USA. President Biden called on world leaders this week to make this “the moment we find within ourselves the will to turn back the tide of climate devastation and unlock a resilient, sustainable, clean energy economy to preserve our planet.” So although China is on an untenably slow path to net-zero, and U.S. diplomacy seems to have stalled prior U.S.-China collaboration on climate initiatives, consumer brands have a huge role to play in accelerating the transition with voluntary, market-driven pressure.
Sourcing low carbon steel for a water bottle or skis is tough. Production capacity is low, costs are high, and brands have low visibility into the actual sources of their raw materials. So what else can we do?
Focus on the other elephants in the room, such as electricity from outside the US – the third-biggest emissions contributor overall, responsible for 10% of total emissions. The fastest and easiest way to reduce those emissions is through an International Renewable Energy Certificate (iREC), a market-based mechanism to buy renewable energy internationally. iRECs give a company legal property rights over the generation of clean energy. iRECs can accelerate renewable energy development while reducing a brand’s net carbon emissions.
With consumer spending being a large and growing share of US GDP (just under 70%), the power of consumers is absolutely massive. As the world seeks to shift sharply away from its GHG-intensive ways, consumer brands must choose immediate action and carbon accountability over hollow promises and long term commitments. Consumers have the opportunity to accelerate this and get to the heart of the climate problem: right at the carbon-intensive supply chains that support the creation and delivery of goods and services that humans depend on.
There’s much more to be explored in the data, and over the next few months we’ll be publishing additional deep dives and analysis on the dataset and insights to help each of us “Get it Done” faster.
We analyzed the carbon inventories from a broad cross-section of Climate Neutral Certified companies that met our independent nonprofit standard to measure, reduce, and compensate. This analysis represents the emissions from 150+ Climate Neutral Certified companies. Fourteen industries are represented in our certified brand community and in 2022, as a group, we measured and offset more than 1 million tonnes of carbon from 2021 calendar year emissions. We work with brands ranging from millions to several hundred million dollars in annual revenue.
Our analysis of Climate Neutral Certified brands includes more than 150 carbon inventories from 2021. This is not representative of all Climate Neutral Certified brands in total, but focused on larger business inventories that were refined with our carbon measurement tool, the BEE. This still relies on emissions factors for calculation, but it ensures higher quality data with more users-supplied detail on company operations.
Cover: Port of Los Angeles. Photo by Barrett Ward on Unsplash
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Bella joined the Climate Neutral team with experience in nonprofit and social enterprise work, focusing on sustainable development and off-grid energy in East Africa. She earned a degree in environmental policy from Georgetown University. Bella is an outspoken advocate for her native Cleveland, but is giving Brooklyn a try for a while. Look for her there walking back and forth to the public library.
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