30th November 2023
With COP28 being heralded as ‘the finance COP’, some fundamental questions concerning finances, investment, and the commitment of private sector players needed, are going to be asked. Dax Lovegrove, head of sustainability at Salterbaxter, discusses how businesses can drive corrective climate action, and keep the target of limiting global heating to 1.5C alive.
The next Conference of the Parties meeting continues to take on the challenges around corrective climate action. COP28 will provide a global stocktake to advise governments on strengthening efforts to get on track with hitting the Paris Agreement goals. In addition, universal calls for a clear timeline on phasing out unabated fossil fuels surround the conference. The decarbonisation of food and agricultural systems is another area receiving much attention.
On adaptation, there are ongoing efforts to organise the illusive loss and damage fund, define the Paris Agreement’s global goal on adaptation, and firm up the pledge by developed countries to increase international adaptation finance. Progress on finance flowing from North to South to support the most vulnerable countries will continue to be under the spotlight.
The pressure remains on nations (especially rich ones) to do more. Businesses are also expected to step up. They can drive corrective climate action from their side by managing extended impacts and providing financial support across global value chains.
Do more
Over 2,300 corporations have science-based targets approved with the Science Based Target Initiative (SBTI). However, most are failing to act on the lion’s share of their footprint – Scope 3 emissions. These emissions are not directly produced by the company itself, and are not the result of activities from assets owned or controlled by them, but by those that it's indirectly responsible for up and down its supply chain, which are often the main hotspot.
The CDP reports supply chain emissions can be 11 times higher than operational emissions. And yet, less than a third of companies across the globe disclose Scope 3 data in a meaningful way - as advised by ISS Corporate Solutions. Beyond disclosure, action on Scope 3 is also low. A European report by Centrica Business Solutions indicates being proactive on Scope 3 management is not high on the agenda and that 68% of businesses in their survey prioritise Scope 1 and 2 within their net zero plans.
Progress is slow and the challenge is on. According to PwC, the annual rate of global decarbonisation must increase by seven to twelve times to get on track with limiting warming to 1.5C. The bottom line is that while nations ratchet up, businesses must do the same.
The main opportunity is to deliver the required level of carbon reduction across international supply chains. We Mean Business has launched the ‘Supplier Cascade’ initiative to accelerate the pace at which businesses reduce their Scope 3 emissions.
There are glimmers of leadership. Some companies have been early movers in engaging suppliers on targets and practices and there are leading lights to draw lessons from. Ericsson requires suppliers to set a public target in line with halving greenhouse gas emissions by 2030. Unilever is providing guidance, tools and resources, for the 300 suppliers whose products have highest climate impact.
US Foods commits to a 2027 target by which suppliers covering 67% of emissions from purchased goods and services are to have set science-based targets. Sodexo suppliers representing 75% of supply chain emissions have been given roadmap requirements for 2030. Mars is engaged with major suppliers covering a third of emissions and has reduced Scope 3 emissions by 6% on 2015 levels.
H&M goes further. The Group has set the goal to reduce absolute emissions across the value chain by 56% by 2030 (from a 2019 baseline). Beyond this, H&M has also transparently set aside significant budget for financing supplier transitions to using cleaner energy and materials.
Supply chain
The approach to suppliers is evolving. It requires identifying and engaging suppliers where there is greatest impact and influence, applying soft incentives such as awarding preferred supplier status or applying preferential payment terms, and hard support - in the form of finance.
A first phase is supporting suppliers on carbon footprint measurements, and target setting with the SBTI guidance for SMEs. This leads to accountability where suppliers take on the responsibility for hitting targets. The second phase is equally important – working in partnership with suppliers to co-invest in new cleantech and energy management practices.
When Scope 3 management enters the mainstream and suppliers are supported, this will be a major part of accelerating global decarbonisation. It needs to happen this decade to reach the required rate of emissions reduction and will add to investment flows into less wealthy countries where much of supply chains are located. Additional finance for supply chain climate resilience will unlock further funds.
We are at the business end of keeping 1.5C alive, and business needs to play its part.