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Companies see challenges coaxing suppliers into reporting, curbing emissions

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Companies see challenges coaxing suppliers into reporting, curbing emissions

Companies that aim to curb their indirect greenhouse gas emissions said one big challenge to reaching that goal is finding ways to coax suppliers to track, report and ratchet down their own emissions.

Suppliers have varying levels of sophistication and maturity, said David Eichberg, global initiatives lead on sustainability and social innovation at HP Inc. "Some are much more capable of taking on science-based targets [while others] are still really getting their arms around inventory and reporting."

Because the learning curve may be steeper for some suppliers, companies "are all generally starting soft" regarding what they ask of their suppliers, said Martin Spitzer, a senior director of climate and renewable energy at World Wildlife Fund. "What you're seeing is that it's working its way into the normal company/supplier relationship." WWF is one of several organizations partnering in the Science-Based Targets initiative to help companies establish emissions reductions goals in line with the Paris Agreement on climate change.

Experts have said supply chain-related emissions, if left unaddressed, can pose a financial risk to companies in the context of efforts to meet the Paris accord's goal of limiting global warming to no more than 2 degrees Celsius above preindustrial levels.

About one-quarter of more than 4,800 companies and organizations around the globe have said they target supply chain-related emissions, according to the CDP, formerly the Carbon Disclosure Project. The group recently reported that greenhouse gas emissions in supply chains on average can be four times those of some companies' emissions from direct operations.

But getting good data and convincing suppliers to play along means starting out with expectations that differ depending on the level of sophistication and size of each supplier, experts said.

Because reporting is such a big undertaking, "you have to bring them in and then begin to ratchet it up," Eichberg said at a Feb. 28 workshop in Denver hosted by the World Resources Institute. "We originally were asking them to report, and now we're asking them to set a target." Because the goal is to reduce emissions, HP has targeted the suppliers that have midrange to high levels of emissions, he added.

The key is to figure out how to "approach the businesses so that they'll see this really not as a constraint on growth but as an opportunity to drive innovation and efficiency," Eichberg said. HP committed to reducing the emissions intensity — the amount of emissions per unit — of consumers' use of its products by 25% from 2010 levels by 2020, and it aims to curb the intensity of "scope 3 emissions," of which supply chain emissions are a component, from certain production and transportation suppliers by 10% from 2015 levels by 2025.

Unlike scope 1 and scope 2 emissions, which are tied directly to a company's operations and energy consumption, scope 3 emissions occur outside of a company's immediate purview and can be harder to nail down and address. Scope 3 emissions are created as a consequence of a company's activities but by sources the company does not own or control, including other businesses in its supply chain and consumers of its products. For example, a car manufacturer's scope 3 emissions would include those produced over the life of the motor vehicles it builds.

Most scope 3 emissions come from the goods and services a company purchases and from the ways consumers use their products, said Stephen Russell, a senior associate at the World Resources Institute, another partner in the Science Based Target initiative.

A company that makes washing machines and wants to reduce scope 3 emissions might redesign the machines to make them better at washing clothes in cold water and thereby reduce their use of electricity or gas. Scope 3 emissions also can include those produced when a supplier mines or processes raw materials, when employees of that supplier commute to work or transport materials, and when sold products are disposed of at the end of their useful life.

Some other companies that have set science-based scope 3 targets are Kellogg Co., Colgate-Palmolive Co., Daiichi Sankyo Co. Ltd., EDP - Energias de Portugal SA, General Mills Inc., Landsec and NRG Energy Inc.

Kellogg in 2015 set a target to reduce scope 3 emissions 50% from 2015 levels by 2050 and asked about three-quarters of its suppliers, or about 700 companies, to report their emissions to CDP. Kellogg plans to use that data to calculate the company's 2015 baseline emissions, said Erin Augustine, Kellogg's senior sustainability manager.

That effort has faced an uphill process, and suppliers' data has not always been accurate, which means Kellogg had to ask suppliers to recheck the figures, Augustine said. While most of the suppliers it is targeting provide the ingredients for its food products, Kellogg also is working with suppliers that transport its products and companies that handle marketing materials.

Some of the bigger suppliers already were reporting, but others were not, Augustine said. For those the latter group of companies, CDP and Kellogg are crafting training materials that highlight the five to 10 questions Kellogg wants answered and guidance on how suppliers can go about answering them, she continued. "We're trying to limit the ask if they're doing it just for us."