Nature and Biodiversity

Corporate climate action: 3 essential steps to reduce Scope 3 emissions

It's harder to track and cut Scope 3 emissions, but not impossible

It's harder to track and cut Scope 3 emissions, but not impossible Image: Getty Images

Stefan Klebert
Chief Executive Officer, GEA
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Nature and Biodiversity?
The Big Picture
Explore and monitor how Energy Transition is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Climate and Nature

This article is part of: World Economic Forum Annual Meeting
  • Companies must reduce emissions in their operations, but to make a real difference, they must do so across their supply chains.
  • Scope 3 emissions often make up the largest portion of a company’s carbon footprint and recognizing and addressing this is critical in the urgent race to combat the climate crisis.
  • To reduce Scope 3 emissions, companies must use the power of procurement and become more collaborative.

With each passing year after the 2015 Paris Agreement, the need for urgent climate action has only grown. Climate change is increasingly having tangible effects around the world. The recent global stocktake at the 2023 UN Climate Change Conference (COP28), an important review process, has made it clear once again: collectively we are falling short of our climate ambitions. It’s time to speed up our efforts.

Discover

What's the World Economic Forum doing about the transition to clean energy?

The business sector, in particular, has a unique responsibility – and opportunity – to drive substantial change. The most fundamental step in this journey is for companies to reduce emissions in their own operations. But, for those committed to making a real difference, this merely sets the stage for scaling up efforts across the entire value chain. To do this we must:

1. Prioritize Scope 3 emissions

Indirect greenhouse gas emissions from suppliers and products sold – known as Scope 3 emissions – often make up the largest portion of a company’s carbon footprint. Recognizing and addressing them is critical. While many firms diligently measure their direct climate impacts (Scope 1 and 2), the broader impact of their supply chains and product lifecycles are too often overlooked. A holistic approach is necessary.

That is why GEA’s commitment to achieve net zero by 2040 is not limited to our direct operations. It encompasses all emissions Scopes and spans our entire value chain. This long-term ambition is reinforced by interim targets for 2030, which we have just increased substantially. Our net-zero and our mid-term targets have recently been validated by the Science Based Targets initiative (SBTi) – underscoring that our ambitions follow the latest climate science and are in line with the Paris Agreement goals.

Because of their complex nature, Scope 3 emissions can only be reduced together with suppliers, customers and other stakeholders. Success requires an approach that combines innovation and collaboration. For engineering and manufacturing companies, this means first and foremost adapting the products and solutions we offer. Given the longevity of our goods, every machine we sell today can impact the environment for decades. For this reason, we are focused on designing machines that use fewer resources and emit less over their lifecycle. We also partner with customers at an early stage to maximize the potential of today’s technologies.

By taking a comprehensive, 360-degree approach, we can achieve significant improvements. Importantly, what’s sustainable for the planet is usually also positive for the bottom line; it just takes some upfront effort and investment. After all, efforts to save resources not only benefit the environment, but also lead to long-term cost savings and increased operational efficiency. For a company like GEA, the focus on sustainability is also a critical factor for success in a market increasingly demanding eco-friendly solutions.

Have you read?

2. Harness the power of procurement

Another key area for reducing Scope 3 emissions lies in the power of procurement. By focusing on this often-underappreciated topic, companies can effect transformation beyond their immediate operations. The rationale is compelling: when climate leaders set rigorous sustainability standards and engage their suppliers by demanding greater commitment and transparency, they create a ripple effect that amplifies along entire value chains.

To move forward, companies can foster an open dialogue with their suppliers while requiring that they permit trusted verifiers to establish a sustainability scorecard, share data for product lifecycle analysis and commit to sustainability goals validated by SBTi. If suppliers fail to comply, their status as preferred suppliers will be withdrawn. Such measures create a strong motivation, even for those companies that have previously been reluctant to prioritize decarbonizing their own operations.

Our experience shows that many suppliers are more than willing to contribute. Our annual GEA Supplier Day is a testament to this, providing us with a platform to discuss sustainability with those who supply us with metal parts, electronic components and many other intermediate products. This model can be replicated by others.

Discover

How is the World Economic Forum fighting the climate crisis?

3. Establish cross-industry supplier milestones

The shift towards stronger sustainability standards and more proactive supplier engagement by leading companies is a significant – and welcome – development. But by joining forces, we can amplify the impact and motivate a broader range of suppliers. At present, suppliers often face a patchwork of differing priorities, expectations and time horizons from their various customers. This situation underscores the need for greater collaboration and leadership.

As a member of the World Economic Forum’s Alliance of CEO Climate Leaders, I found it important to help shape such cross-industry guidance. My team and I were actively involved in developing the Scope 3 Upstream Action Plan. Launched at COP28 and resulting from the collaboration of leading global companies, this plan is a pivotal tool to engage suppliers and encourage them to decarbonize. It calls for Alliance members to set Scope 3 targets aligned with a 2050 net-zero pathway by 2025 and to start engaging at least 30% of their supplier base by the same year. By 2026, this engagement should expand to at least 67% of suppliers and, by 2028, suppliers are expected to establish their own Scope 1-3 targets, aligned with a 2050 net-zero pathway, and disclose their emissions.

Agreements, such as the Scope 3 Action Plan, provide a common framework for progress, aligning what we ask from our suppliers and how we incentivize them.

A joint response for a better world

Tackling the climate crisis requires a robust response, particularly from the corporate sector. Adopting comprehensive Scope 3 emissions reduction strategies, embedding decarbonization in procurement and establishing a cross-industry framework for supplier engagement are vital steps toward a more sustainable way of doing business. The task is daunting, but the potential to contribute to a better world is immense.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Nature and BiodiversityForum InstitutionalEnergy Transition
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Why nature-positive cities can help transform the planet

Carlos Correa Escaf

May 24, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum