The supply chains of FTSE 100 companies emitted 3 billion tons of CO2 last year, shows research by supply chain experts INVERTO, a subsidiary of Boston Consulting Group.
These latest figures show just how far the UK’s biggest businesses still have to go in achieving Net Zero in their supply chains (i.e. the raw materials, goods and services that FTSE 100 companies use).
The Top 5 emitters alone accounted for 86% of the FTSE 100 total (2.56bn tonnes of CO2), while the Top 10 accounted for 93% (2.79bn tonnes of CO2). The Top 10 was dominated by oil & gas, mining and engineering firms. Supply chain emissions – also known as Scope 3 emissions – include all indirect emissions occurring in the upstream and downstream activities of an organisation, e.g. from the goods and services it purchases.
Sushank Agarwal, Managing Director at INVERTO, argues that though much work remains, progress is being made towards Net Zero emissions in FTSE 100 supply chains. “Even though there’s still a long way to go, we’re in a much better place than we were on supply chain decarbonisation just a couple of years ago. There’s now a lot of awareness and strong senior sponsorship, but many are still in the process of turning that into concrete action.
“Those businesses that have started their journey are mainly focusing on reducing their Scope 3 emissions through embedding sustainability measures into their sourcing processes and working directly with key suppliers to reduce emissions throughout the value chain. The bulk of supply chain emissions reductions are relatively achievable in the medium term, with only a minority requiring further technological advancement or very large-scale investment. That’s what businesses should be focusing on today – the low-hanging fruit in their supply chains.”
Still too few FTSE 100 companies setting Net Zero targets
There is concern that not enough FTSE 100 companies have made explicit commitments for when they will achieve Net Zero. INVERTO’s research shows that so far, only 53 FTSE 100 companies have set a clear target date for fully decarbonising their supply chains. With an average target date of 2043 (see table below), INVERTO says that more FTSE 100 companies should be setting challenging targets for faster supply chain decarbonisation.
Agarwal says there is also a lack of FTSE 100 companies setting interim targets on their roadmap to Net Zero. This tactic means companies are more likely to commit resources to decarbonisation today, rather than hoping to catch up in 10 or 20 years’ time. “All companies should have a clear deadline for achieving Net Zero and milestones in place to get there. If they are targeting 2050 for complete decarbonisation of their supply chains, they should make clear where they will reach by 2030 and 2040 too. While some sectors will of course take much longer to get there, their progress will undoubtedly quicken over time.”
Far more reporting needed from the UK’s biggest listed companies
INVERTO says there is also a lack of regular and precise reporting on progress in reducing supply chain emissions by FTSE 100 companies. Overall, 57 FTSE 100 companies report their progress to shareholders, although the quality of the reporting varies significantly. While 57 companies have reporting in place, only 44 are reporting by using a clear metric – most often a percentage change on the year before. This is a sign that improvement is necessary, says Agarwal.
Highest-emitting sectors account for lion’s share of overall supply chain emissions
Despite the FTSE 100 as a whole emitting some 3 billion tonnes of CO2, just two sectors accounted for five sixths of the total: oil & gas with 49.6% and mining with 34.3%. Between them both, oil & gas and mining amount to just eight FTSE 100 companies.
Agarwal concludes: “All companies have a responsibility to bring down their supply chain emissions, but some more so than others. It’s expected that oil & gas and mining account for the lion’s share of emissions, so these sectors have the most to contribute to decarbonisation. Their efforts will automatically have a huge effect on other companies Scope 3 emissions as well.”
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