ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.GainingvisibilitytohiddenhotspotstomovefromtargetstoactiontovalueFrominsightstoaction,thepathtoextraordinaryvaluestartshere.Marketing+CommunicationsIngridRubinMarketing+CommunicationsLead–SupplyChain&OperationsTerezaHolubováMarketingSpecialist–SupplyChain&OperationsAcknowledgmentsKrisTimmermansLead–SupplyChain&OperationsPeterLacyLead–SustainabilityServices&ChiefResponsibilityOfficerJan-WillemJanninkManagingDirector–IndustryX,SustainableValueChainLeadStephenMeyerAccentureResearchLead–SupplyChain&OperationsMatiasPollmann-LarsenManagingDirector–SupplyChain&Operations,SustainableValueChainLeadRebeccaSternbergMarttilaManagingDirector–Operations,SustainabilitySaranyaHariPrincipalDirector–Operations,SustainableValueChainJoshWhitneyManagingDirector–Sustainability,SustainableValueChainNorthAmericaResearchStephenMeyerAccentureResearchLead–SupplyChain&OperationsBobbyJamesAccentureResearchManager–SupplyChain&OperationsDeepakTantryAccentureResearchAssociateManager–SupplyChain&OperationsYuhuiXiongAccentureResearchManager–SupplyChain&Operations,EconomicModellingandDataScience2ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.ForewordWiththeclimateclockticking,reducingScope3emissions—thosethataretheresultofactivitiesfromassetsnotownedorcontrolledbythereportingorganization,butthattheorganizationindirectlyimpactsinitsvaluechain1—hasbecomeatoppriorityforcompaniesaroundtheworld,especiallythosethathavecommittedtonetzero.It’satremendouslydifficultproblemtosolve,giventhehuge,complexglobalsupplychainnetworksthatarethebackboneofmoderncompanies.Mostlargecompanies,forexample,don’tevenknowthesuppliersbeyondTier1,thosetheyinteractwithdirectly—letalonehaveanysortofinfluenceorcontroloverthem.Thislackofvisibilitymeanscompaniesonlyknowwhattheycansee—whichisn’tallthatmuch.Theycan’ttrulymanageScope3emissionsbeyondTier1suppliersandreporttheminaconsistent,repeatableandauditableway.Infact,thevastmajorityofcompanieshavemadelittleprogresstodateindealingwithScope3emissionsbecausetheyjustdon’tknowwheretofindthem.It’svitalforcompaniestobeabletoidentifyallthesourcesoftheirupstreamemissionsbecause,Accentureresearchhasfound,mostoftheseemissions—nearlytwo-thirds—comefromTier2suppliers(i.e.,subcontractors)andbeyond.Visibilityintothesupplierbaseiskeytoputtingcompaniesinthepositiontoact:•Ithelpsthemmakebetter-informeddecisionsabouthowandwheretoallocatetheirresourcestodeliverthegreatestimpact.That’sespeciallycriticalnow,ascompaniesneedtoacceleratetheirprogressifthey’retomeettheirambitiousdecarbonizationgoals.•ItenableschiefsupplychainofficersandprocurementleaderstounderstandhowtoembedresponsibleprocurementacrosstheenterprisetodrivemeaningfulreductionsinupstreamScope3.•Anditcanuncoverawiderangeofopportunitiesforcompaniestogeneratebroaderenterprisevaluebeyondemissionsreductionbycreatingmoreefficient,resilient,cost-effectiveandcustomer-centricsupplychainnetworks.Thechallengeofreducingemissionsisenormous,butnotinsurmountable.Inthisreport,weexplorehow,withtherightcombinationofvisibility,actionsandcollaboration,wecanreachourgoalsandputtheplanetontheroadtoamore-sustainablefuture.KrisTimmermansLead–SupplyChain&OperationsPeterLacyLead–SustainabilityServices&ChiefResponsibilityOfficer3ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.WhilefocusingtheireffortsonengagingTier1suppliers,Accentureanalysisrevealsthatmostcompanies’carbonintensityhotspotsliebeyondtheirTier1suppliers,withintensityvaryinggreatlydependingongeographiclocationornetworkcomplexity.Companiesneedtodrivemulti-tieremissionsvisibilityandregionalsupplierengagementstrategiestocreatetargetedimpactatscale.Thispaperpresentsinsightsandactionsforcompaniestoacceleratethedecarbonizationoftheirsupplychains.Scopes1,2and3:What’sthedifference?Scope1emissionsaredirectgreenhouse(GHG)emissionsthatoccurfromsourcesthatarecontrolledorownedbyanorganization(e.g.,emissionsassociatedwithfuelcombustioninboilers,furnaces,vehicles).Scope2emissionsareindirectGHGemissionsassociatedwiththepurchaseofelectricity,steam,heatorcooling.Scope3emissionsaretheresultofactivitiesfromassetsnotownedorcontrolledbythereportingorganization,butthattheorganizationindirectlyimpactsinitsvaluechain.Scope3emissionsincludeallsourcesnotwithinanorganization’sScope1and2boundary.TheScope3emissionsforoneorganizationaretheScope1and2emissionsofanotherorganization.Source:EnvironmentalProtectionAgency(EPA),UnitedStatesCompanieslookingtodecarbonizeScope3emissionsaremissingthemark.4ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.IntroductionTheUnitedNationsGlobalCompact(UNGC)CEOstudydoneincollaborationwithAccenturesaysthesupplychainisthekeytowinningthebattleagainstclimatechange.That’sbecausesupplychainsarethebiggestcontributortotheproblem—theygenerateupto60percentofglobalemissions.2Chiefexecutiveofficers(CEOs)recognizethechallenge.Oftheglobal2000(G2000)companies,34percenthavesetanambitiousnetzerotargetinlinewithclimatescience.Manycompanieshavecommittedtonetzerooperationsby2040,orpossiblyearlier.3Manycompaniesarealreadycommittedtopoweringtheiroperationswithrenewables.So,thebigpriorityisnowshiftingtoefficientlymeasuringandreducingScope3emissions.YetCEOs’intentionshaven’ttranslatedintosignificantactions.AccordingtoaCDPsurvey,4only10percentofcompaniesaretrackingatleastsomeelementsofScope3emissions.Ofthatsmallgroup,only9percentareachievingtheiremissionstarget.Chiefsupplychainofficersmuststillbalancewhatcanoftenbeconflictingpriorities—cost,quality,serviceandnow,sustainability.Andinthatequation,sustainabilityoftentakesabackseat.AccordingtoarecentAccenturesurvey,5just22percentofprocurementleadersseesustainabilityasatop3priority.Clearly,companiesneedtodomoretoaddressemissionstoachievetheirdecarbonizationgoals.Butit’snotjustaboutcarbon.AfocusoneliminatingScope3emissionsiscriticalbecauseitcanbringvaluebeyondemissions.Dependingontheirsector,companiesarelinkingsustainabilityoutcomestotheirenterprisevaluecreationagenda.Thisincludesaccessingpremiumcustomersegments,expandingmarketaccess,improvingtalentretentionandattraction,loweringthecostofcapital,mitigatingregulatorydisruption,improvingresilienceandmitigatingrisk.GeneratingsuchbenefitsstartswithgainingrealvisibilityintoScope3emissions—particularlythosecomingfromupstreamsuppliers.This,inturn,requirescompaniestotrulyunderstandallthesourcesoftheirupstreamemissions—acrosseverytieroftheirsupplierbase—andthedifferencesinthosesourcesatthesupplyingindustryandcountrylevels.TheseinsightsaretheprerequisitestosubsequentlytakingactiontoreduceScope3emissions.5ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.OpeningeyestotheopportunitiesGaining“n-tier”supplychainnetworkvisibilityisnecessarytoidentifythemaindriversofupstreamemissions—”hotspots.”Suchvisibilityallowscompaniestoseewhat’sstrategicallyimportanttothesupplychainandwheretofocustheirefforts.AnAccenture-developeddatamodelenablestheconnectionsbetweendifferentindustriestobequantified,whichinturngivesanaccuratepictureintothelocationandsizeofupstreamgreenhousegasemissions.Basedonthisdatamodel,we’veidentifiedtheinsightsandactionsthatwillhelpcompaniesacceleratethedecarbonizationoftheirsupplychains.7ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Nearlytwo-thirdsofupstreamemissionslaybeyondTier1suppliersandingeographicallycomplexnetworksOurresearchfoundthemajorityofupstreamemissionsformostindustriesliesbeyondTier1suppliers(Figure1).Acrossallindustries,Tier1suppliersareresponsibleonlyforanaverageof36percentoftotalupstreamemissions.Industrieslikeaerospaceanddefense,hightech,andautomotivehaveapproximately80percentoftheirupstreamemissionscomingfrombeyondTier1.Industriesthathaveless-complexsuppliernetworkstendtohavealargerportionoftheiremissionscomingfromtheirTier1suppliers.Thesesectorsincludeenergy,utilitiesandnaturalresources.Inmostcases,ifupstreamemissionsareasignificantportionofacompany’stotalemissions,theytendtooccurdeeperinthesuppliernetwork,asillustratedbyFigure2.8ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#3Aerospace&DefenseHighTechAutomotiveHealthCG&SFinancialServicesCommunications&MediaTravelTransportationIndustrialChemicalsRetailNaturalResourcesCG&S_AgriUtilitiesEnergyAverage=36%EmissionintensitytonGHG/$M19%21%19%41%20%22%19%21%23%19%39%37%28%28%18%26%31%23%16%30%31%30%22%17%33%24%17%26%33%29%16%22%33%34%15%18%34%25%16%24%35%26%16%12%23%37%26%16%22%45%24%13%18%53%22%11%14%57%21%10%67%18%7%7%Tier1Tier2Tier3Tier4toNthTransportationMorevisibilityUpstreamemissionvisibility(Tier1emissionoftotalupstreamemission)EnergyUtilitiesCG&S_Agri0510152025303575%50%25%0%Sources:AccentureResearchanalysisbasedonEXIOBASE3dataset,2022RatioofScope2andupstreamScope3emissionstoScope1emissionsLessvisibilityBubblesizerepresentsindustry’stotalupstreamemissionUpstreamemissionsareasmallerpercentoftotalUpstreamemissionsarealargerpercentoftotalNaturalResourcesRetailChemicalsCG&SFSTravelCommunications&MediaA&DAutomotiveHighTechIndustrialHealthFigure2:UpstreamemissionimportanceandvisibilitybyindustrySource:AccentureResearchanalysisbasedonEXIOBASE3dataset,2022Figure1:DistributionofupstreamemissionsbysuppliertierSource:AccentureResearchanalysisbasedonEXIOBASE3dataset,20229ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#390%20%40%60%80%100%ShareofTier1emissionwithintotalupstreamemissionBubblesizerepresentsthetotalupstreamintensityoftheindustryLessvisibilityMorevisibilityUtilitiesFinancialServicesCG&S-Agri100%95%90%85%80%75%70%65%60%55%50%5%0%NationalInternationalInternational&complexNaturalResourcesRetailChemicalsTransportationAutomotiveTravelCG&SCommunications&MediaA&DEnergyHighTechIndustrialHealthShareofupstreamemissionfromthesamecountryNational&complexNational&visibleInternational&visibleNetworkandgeographiccomplexityplayadeterminingroletoo,asFigure3illustrates.Infact,somesectorshavethemostemissionswithinthesamecountryandgeography.Utilities,naturalresourcesandagriculturebenefitfromrelativelyshortervaluechains,whileothers(consumergoodsandservices(CG&S),communicationsandmedia,andaerospaceanddefense)haverelativelycomplexupstreamemissions.Othersectorshavemoregeographicallydispersedsourcesofemissions,andwhiletheenergyvaluechainisrelativelysimple,othersmustfacecomplexupstreamvaluechains(e.g.,automotive,hightechandchemicals).Figure3:UpstreamemissionvisibilityandgeographicdependencebyindustrySource:AccentureResearchanalysisbasedonEXIOBASE3dataset,202210ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#310Insight#2Fornearly50%ofindustries,realupstreamhotspotsdifferfromthoserepresentedbyTier1suppliersThelargesourcesofemissions(“hotspots”)varyacrossindustries(Table1),andsodothetargetedactionsneededtoaddressthem.Inmanycases,thehotspotsindeepersupplierTiers(2andbeyond)aredifferentfromthoseinTier1(Table1,highlightedingreen).Toidentifyandtargettherightsetofhotspotsthatwillmakethelargestimpact,visibilitytosuppliersbeyondthoseinTier1isessential.11ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#3BeyondTier1hotspotMetalprocessingsuppliersPetroleumandnaturalgassuppliersAgriculturalrawmaterialsPetroleumandnaturalgassuppliersPetroleumandnaturalgassuppliersPetroleumandnaturalgassuppliersPetroleumandnaturalgassuppliersPetroleumandnaturalgassuppliersPetroleumandnaturalgassuppliersAgriculturalrawmaterialsPetroleumandnaturalgassuppliersTable1:UpstreamScope3hotspotsbysuppliertierSource:AccentureResearchanalysisbasedonEXIOBASE3dataset,2022IndustryAerospace&DefenseAutomotiveConsumerGoods&ServicesChemicalsCommunications&MediaEnergyHighTechIndustrialNaturalResourcesTravelUtilitiesTier1hotspotMetalprocessingsuppliersMetalprocessingsuppliersAgriculturalrawmaterialsChemicalsuppliersTransportationsuppliersPetroleumandnaturalgassuppliersMetalprocessingsuppliersConstructionmaterialsuppliersPetroleumandnaturalgassuppliersAgriculturalrawmaterialsPetroleumandnaturalgassuppliers%ofTier1emissions34.2%26.3%64.0%18.9%10.9%80.8%29.5%43.0%26.1%27.9%17.7%%ofbeyondTier1emissions18.7%17.7%35.3%22.5%17.1%39.1%17.6%23.9%27.8%33.3%15.9%Excludingpurchasedpowergeneration(i.e.,Scope2)Note:HighlightedingreenaretheindustrieswheretheirhotspotbeyondTier1emissionsisdifferentfromtheTier1emissionshotspot.12ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#3Tier1Tier2Tier3Tier4...Forinstance,lookatFigure4.WhileforafoodandbeveragecompanyintheUnitedStatesthehotspotthatcanbeidentifiedinTier1isalsothehotspotacrossalltiers,thisisnotsoevidentintheautomotivesectorinGermany,whereonlymulti-tiervisibilityrevealstherealvaluechainemissionhotspot,whichmightnotbeobviousjustlookingattheTier1suppliers.Withoutvisibilityintomulti-tieremissions,companiesmayendupfocusingandspendingresourcesonactionsthatultimatelymaynothaveasignificantimpactonreducingoverallScope3emissions.Figure4:SourcesofupstreamemissionsbysuppliertierandindustryAutomotiveinGermanyCG&S(Food&Beverage)inUSSource:AccentureResearchanalysisbasedonEXIOBASE3dataset,2022RawmaterialProcessingUtilitiesManufacturingRetailTransportServicesTier1Tier2Tier3Tier4Tier5BeyondTier513ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#313Insight#3Geographicalfootprintofyoursupplychainmatters,asitsignificantlyinfluencesyouractualupstreamemissionsThedegreeofdependencyonlocalversusglobalsuppliersvariesbycountry,eveninthesameindustry,whichinturnhasanimpactontheamountandsourceofupstreamemissions.Thisisclearwhenallindustriesareaggregated,asshowninFigure5.Interestingly,the“BRIC”countries(Brazil,Russia,IndiaandChina)tendtohavemostoftheirupstreamemissionsconcentratedwithintheircountry.Conversely,forEuropeanUnioncountries,thegreatestpercentageofupstreamemissionstendtocomefromoutsidetheirborders.100%90%80%70%60%50%40%30%20%10%0%%ofupstreamemissionsSouthKoreaFranceItalyGermanySpainUKJapanCanadaUSAAustraliaMexicoIndiaBrazilChinaRussiaSameCountrySameContinentRestoftheWorldFigure5:GeographicsourceofupstreamemissionsbycountrySource:AccentureResearchanalysisbasedonEXIOBASE3dataset,202214ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#3Considerthehightechindustry.AsFigure6illustrates,there’sconsiderabledifferenceinthegeographicsourceofupstreamemissionsforhightechcompaniesintheUnitedStates,JapanandChina.ForChinesecompanies,almost80percentofemissionsarewithinthenationalborders;thefigureislowerthan50percentintheUnitedStates.Figure6:Differencebetweencountries–hightechindustryHighTechinChinaRawmaterialProcessingUtilitiesManufacturingRetailTransportServicesHighTechinJapanHighTechinUnitedStatesTotalupstreamemissionsfromChinaTotalupstreamemissionTotalupstreamemissionintensity(per$M)79%Emission(milliontonnes,CO2)%oftotalemissions1970.72486.7857TotalupstreamemissionsfromJapanTotalupstreamemissionTotalupstreamemissionintensity(per$M)59%Emission(milliontonnes,CO2)%oftotalemissions99.4168.6340TotalupstreamemissionsfromUnitedStatesTotalupstreamemissionTotalupstreamemissionintensity(per$M)46%Emission(milliontonnes,CO2)%oftotalemissions44.195.6152Source:AccentureResearchanalysisbasedonEXIOBASE3dataset,202215ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#3Scope1emissionintensity(tonGHG/$M)01002003004005006007008009001,0001,1001,2001,3001,400BubblesizerepresentsthetotaloutputoftheindustryinthecountryIndia2,5002,0001,5001,0005000Totalupstreamemissionintensity(tonGHG/$M)AsiaPacificAmericasEuropeRestofworldBrazilChinaJapanRestofAsiaPacificRussiaFranceUnitedStatesGermanyCanadaItalyAustraliaRestofAmericasTaiwanMiddleEastSouthKoreaEmissionintensity(emissionperunitofpurchase)withinaspecificindustryalsovariestoalargeextentbyregion.Forexample,inthemetalsindustry,acountrysuchasIndiahasamuchhigherintensityforbothScope1andtotalupstreamemissionscomparedwiththeUnitedStates(Figure7).Thisintelligencecanaugmentactionstostrategicallydiversifythesupplierbaseorstrategicallyinfluencetheflowsofgoodstoavoidexposuretoincreasedemissionsduetogeography.Multi-tiervisibilityallowsbetterunderstandingofthesourceofemissionsandmoreaccuratetargetingofemissionreductioneffortsforeachcase(Figure8).Figure7:Metalsmanufacturingindustryemissionintensity(ton/$M)Source:AccentureResearchanalysisbasedonEXIOBASE3dataset,202216ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#316Tier1Tier2Tier3Tier4BeyondTier4Tier1Tier2BeyondTier2Figure8:Metalsindustryupstreamemissions,UnitedStatesandIndiaSource:AccentureResearchanalysisbasedonEXIOBASE3dataset,2022MetalprocessinginUSMetalprocessinginIndiaRawmaterialProcessingUtilitiesManufacturingRetailTransportServices17ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Insight#1Insight#2Insight#317StartmovingfasterTheprecedingthreeinsightsarevaluableforseveralreasons.TheyshowhowtransparencyanddataonupstreamScope3canhelpcompaniesmaketheiremissionsactionable,auditableandreportable.Theycanhelpcompaniesidentifywheretheycanreducepotentialcost,regulatory,reputation,andotherrisksandpressuresthatmayexistinthesupplychain,acrossbothsuppliertiersandgeographies.Inturn,companiescanusedata-driveninsightstomakebetter,moreinformedpurchasing,design,manufacturing,planning,after-salesservices,productend-of-lifeandotherdecisionsthatreduceend-to-endsupplychainemissions.Andcompaniescanusetheseinsightstofocustheeffortsoflimitedresourcesontheareaswhereactioncanhavethebiggestimpact.Butcompaniesneedmorethanjustvisibility.ToacceleratetheirprogressinaddressingScope3emissionsandgeneratinggreaterenterprisevalue,theyalsoneedtoact,fast-trackingtheirpathtoadata-powereddigitalcore.Basedontheinsightsfromourresearch,we’veidentifiedfivekeyactionscompaniesneedtofocusonnowtobeginmakinganimpact.Buildingadigitalcoremeanspullingdata,AIandtechnologyintoeverypartofthebusinesstocreatean“intelligentoperation.”Firstlayer:Modern,cloud-basedinfrastructureandsecuritylayerthatisautomated,agileandsecurebydesign.Nextlayer:DataandAI,whichhelpsenterprisesasknewquestionsandfindnewanswerstodrivedecision-making.Functionalandenterprisetransformationisthenenabledthroughre-platforming.Fivekeyactionsfromourinsights19ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Conductarealmulti-tieremissionshotspotanalysistosettargetsanddrivetherightactionsAllupstreamemissionsaren’tcreatedequalandlargesourcesexisthiddenfromnormalview.Somesupplyingindustriesorcountriescanaccountforanoutsizedproportionofemissionscomparedwithothers.Therefore,tofocusonwhat’smostimportant,companiesshouldconductadetailedanalysisoftheirsupplierbasetodeterminethebiggestsourcesofemissions.Theinsightsfromsuchananalysisprovidethefoundationforanactionplantoaddresstheareasofmostsignificantimpact.AccentureiscurrentlyworkingwithaglobalpharmaceuticalcompanytousetheirTier1purchasingdatatoidentifyhotspotsintheirextendedsuppliernetwork.Combiningtheresultsoftheindustry/country-leveldatamodelwithcompany-specificrelationshipdata,thelocationsofsignificantsourcesofemissionsinTiers2and3havebeenidentified.ThesehotspotshavebeentracedtotherelatedTier1suppliers,enablingthesupplychainteamtohavedata-drivenconversationswithitssuppliersthatcanleadtospecificactionstoreduceemissions.20ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Action2Action3Action4Action5Action2EmbedsustainabilityintocategoryplanningandsupplierselectionWithhotspotsidentified,acompanycanintegrateactivitiestoreduceemissionsintospendcategoryplaybooks.Thefirststepistoensureenvironmental,socialandgovernance(ESG)criteriaareincludedineverystepofthesourcinganddecision-makingprocess.Dependingonthehotspotareasidentified,acompanycancustomizecategoryplans,includingemission-reductionstrategies,toaddresshotspotsasappropriate.LeadingcompaniesarealreadydoingthisformanyTier1suppliers.ButtheywillhavetopushsuchinitiativesfurtherupstreambyhelpingTier1suppliersapplythesameprinciplestotheirpurchases.Aglobalfinancialservicescompanysetanambitiontobuildaleadingprocurementfunctionwithsustainabilityandresponsiblepracticesembeddedthroughoutprocesses,technologyandwaysofworking.Todothis,thecompanyestablishedanddroveanESGprocurementstrategywithanactionableroadmapandembeddedanESGprocurementpolicyacrosskeydocumentationandprocesses.Finally,theyeducatedsourcingteamsthroughpracticaltoolkitsbyprovidinginitiativestohelpachievenetzero,drivesupplierdiversityandeliminatemodernslaveryacrossthesupplychainnetwork.21ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Action2Action3Action4Action5Action3IntegrateemissionsintothesupplychaincontroltowerandimplementadigitaltwinControltowerscanhelpcompaniesreduceScope3emissionsbycentralizingvisibilityanddecision-makingandguidingactionswithshort-andlong-termbenefits.Apowerfulcomplementtoacontroltowerisadigitaltwinofthesupplychainthatgeneratestheend-to-endvisibilitynecessarytooptimizesupplychainnetworksacrossservice,costs,qualityandsustainability—inrealtime.Adigitaltwinleveragesdatatomapphysicalmaterialflows,uncoversub-tiersuppliersandrisks,simulatethecarbonfootprintoftheentirenetwork,andidentifybottleneckswithinthesupplychaintohelpcompaniesrespondeffectivelytodisruptiveevents.22ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Action2Action3Action4Action5Action4SupportsuppliersintheirongoingdecarbonizationeffortsWiththerighttoolsandresources,companiescanproactivelyworkwithsuppliersonanongoingbasistohelpthemimprovetheirowndecarbonizationperformance.Asupplierengagementprogramiscriticaltothiseffort.Suchaprogramshouldcommunicateemissionsrequirements.Itshouldprovidethenecessarytrainingandassistancetosetscience-basedtargets,baseline,reportandimproveESGperformance.AnditshouldcreateincentiveprogramstomotivatesupplierstoacceleratetheirESGjourney.Segmentingthesupplierbasecanhelpcompaniestailortheirengagementprogramsappropriately.Finally,improvingsupplierdataqualityandaccuracyenablesatransitionfromspend-basedemissionscalculationstoauditable,supplier-providedactivity-levelactualvalues.AnexampleofasupplierengagementprogramforESGisonerolledoutbyanaerospaceanddefensemanufacturer.Thecompanyrecognizedthatsupplierswerecriticaltoitsabilitytoachieveitssustainabilityobjectivesofdecarbonizationandtransparencyinthesupplychain,zeroforcedlabor,acultureofproductsafetyandbusinessintegrity.Thecompanyformedfourteams(comprisingabout10peoplespecializinginsustainablesupplychainprinciples)torunthreetargetedinitiativeswiththecompany’ssuppliers:•SupplierCodeofConduct—Thisfocusedonachievingthehigheststandardsofresponsibilityandsafetyprinciplesthroughoutoperationsandsupplychain.Thegoalistohave80percentofsupplierscomplyinginitially,and100percentby2025.•Sustainabilityassessmentsandreporting—Thisisgearedtowardensuringsuppliers’compliancewithregulationsandmanagingsupplychainandreputationalrisk,whiletrackingtowardnet-zeroemissionstargets.•Datatransparency—Thisisdesignedtoensuretheresponsiblesourcingofmaterials,includingavoidingsupportofconflictminerals,forsubstancesandmaterialspurchasedfrom300suppliers.23ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Action2Action3Action4Action5Action5Collaborateacrossyoursector,withpeers,suppliersandecosystempartnerstospeedupdecarbonizationatscaleAsignificantchallengeinmeetingdecarbonizationgoalsisthatcompaniesacrosssupplychainsandindustriesrelyuponoftenincompleteemissionsdatabuiltonad-hocsharing.Whatisrequiredisanintelligentoperatingmodeltoaggregatedatafrommultiplepartiesandmakerecommendationsonthemosteffectivestepstowardsdecarbonization.Theseplatformsrequiresupplierstocommittoongoingengagement.Theymustcontinuallyimprovethequalityoftheirdataandactuponsuggestions.Suppliersmakingclearprogressarerewardedfortheiractionsthroughincentivemechanismsaswellasavoidingpotentialpenaltiesorlossofbusinessduetopoorperformance.Thisbringsadvantagestothecustomersofthesesuppliers,providingamorecompleteviewofScope3emissionssotheycaninvestforthegreatestimpact.Wearealreadyseeingexamplesofthesecollaborativeplatformstoday,includingAccenture’sSustainabilityAccelerator.AnotherexampleisWalmart’sProjectGigaton,6createdtomobilizesuppliersonclimateactionbyprovidingthemwithresourcesandinnovationsupporttomakeithappen,allwhilereducingWalmart’sownScope3.ThisincludessupplierincentivesrangingfromadvantageousfinancingprogramsforSBTi-validatedtargetstoaccesstorenewableenergy.24ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.Action1Action2Action3Action4Action5ConclusionMakingmeaningfulprogressonScope3Carboniscentraltothenewdefinitionofthesupplychainrole.Fortoolong,thevaluethesupplychainbrings(especiallyitsprocurementfunction)wasdefinedbytheefficiencyitcoulddeliver.Thescaleofthechallengeinreducinggreenhousegasemissionsismassive.Thesupplychainhasaresponsibilitytotakealeadingroleandexpandthetypesofvalueitdeliverstothebusiness.Thenatureofemissions“changesthegame”forthesupplychain.Itmakesamulti-tierapproachessential.It’snotenoughforonecompanytomeetitsgoals.Meaningfulprogressisonlypossiblewhenallcompaniesact.Asaresult,supplychainsmustmoveawayfromthehistoric“suppliermanagement”approachofpricenegotiationandsupplysecurity.Theynowneedtofocusonabroaderorchestrationoftheextendednetwork.Onlybyworkingtogetheronthesharedproblemcanthesharedbenefitberealized.Thefirststepforcompaniesistogaindeepvisibility—tomovefrom“whattheythoughttheyknew”towhat’sreality.Bycombiningsuchvisibilitywithcollaborativeactionsfocusedonthebiggestupstreamemissionshotspots,companiescanfulfilltheiraggressivedecarbonizationcommitmentswhilesignificantlyincreasingtheoverallenterprisevaluethatsupplychainscreate.Thescaleofthechallengeinreducinggreenhousegasemissionsismassive.Thesupplychainhasaresponsibilitytotakealeadingroleandexpandthetypesofvalueitdeliverstothebusiness.26ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.ResearchmethodologyAccentureResearchbuiltadatamodeltoapproximateupstreamgreenhousegasemissionsofdifferentindustriesusingatimeseriesofenvironmentallyextendedmulti-regionalinput-outputtables.Thedatasetincludes163industriesand49geographicareas(44countriesandfiverestofworldregions).References1EnvironmentalProtectionAgency(EPA),UnitedStates:https://www.epa.gov/climateleadership/scope-3-inventory-guidance2KrisTimmermans(2022,January6).Thesupplychainisthekeytowinningthefightagainstclimatechange.Accenture:https://www.accenture.com/_acnmedia/PDF-170/Accenture-The-Supply-Chain-Key-To-Winning-Fight-Against-Climate-Change.pdf3Jean-MarcOllagnier,PeterLacy,MauricioBermudezNeubauer(2022,November2).Acceleratingglobalcompaniestowardsnetzeroby2050.Accenture:https://www.accenture.com/content/dam/accenture/final/capabilities/strategy-and-consulting/strategy/document/Accenture-Net-Zero-By-2050-Global-Report-2022.pdf4AccentureResearchanalysisbasedonCDPSurvey2021,CarbonDisclosureProject(CDP),2021.https://www.cdp.net/en5KristinRuehle,VivekLuthra(2022,May20).Sourcingasustainablefuture.Accenture:https://www.accenture.com/content/dam/accenture/final/a-com-migration/pdf/pdf-177/accenture-procurement-hfs-survey-pov.pdf6KathleenMcLaughlin(2022,April6).AcceleratingClimateAction:ProjectGigatonMarksKeyMilestone,Walmart:https://corporate.walmart.com/newsroom/2022/04/06/accelerating-climate-action-project-gigaton-marks-key-milestone27ThoughtyouknewtheScope3issuesinyoursupplychain?Thinkagain.AboutAccentureAccentureisaglobalprofessionalservicescompanywithleadingcapabilitiesindigital,cloudandsecurity.Combiningunmatchedexperienceandspecializedskillsacrossmorethan40industries,weofferStrategyandConsulting,TechnologyandOperationsservicesandAccentureSong—allpoweredbytheworld’slargestnetworkofAdvancedTechnologyandIntelligentOperationscenters.Our721,000peopledeliveronthepromiseoftechnologyandhumaningenuityeveryday,servingclientsinmorethan120countries.Weembracethepowerofchangetocreatevalueandsharedsuccessforourclients,people,shareholders,partnersandcommunities.Visitusatwww.accenture.comCopyright©2022Accenture.Allrightsreserved.AccentureanditslogoaretrademarksofAccenture.AboutAccentureResearchAccentureResearchshapestrendsandcreatesdata-driveninsightsaboutthemostpressingissuesglobalorganizationsface.Combiningthepowerofinnovativeresearchtechniqueswithadeepunderstandingofourclients’industries,ourteamof300researchersandanalystsspans20countriesandpublisheshundredsofreports,articlesandpointsofvieweveryyear.Ourthought-provokingresearch—supportedbyproprietarydataandpartnershipswithleadingorganizations,suchasMITandHarvard—guidesourinnovationsandallowsustotransformtheoriesandfreshideasintoreal-worldsolutionsforourclients.Formoreinformation,visitwww.accenture.com/researchDisclaimer:Thiscontentisprovidedforgeneralinformationpurposesandisnotintendedtobeusedinplaceofconsultationwithourprofessionaladvisors.Thisdocumentreferstomarksownedbythirdparties.Allsuchthird-partymarksarethepropertyoftheirrespectiveowners.Nosponsorship,endorsementorapprovalofthiscontentbytheownersofsuchmarksisintended,expressedorimplied.
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