FTSE 100 supply chain emissions increased by 62 million tonnes of CO2 last year – despite commitments to reduce emissions
- But improvements in reporting and strategy for reduction shows more companies taking the challenge of Net Zero seriously
- BCG study on decarbonisation shows emissions of companies globally continue to rise
Supply chains of FTSE 100 companies emitted an extra 62 million tonnes of CO2 last year reaching 3.3 billion tonnes in total*, shows research by supply chain management consultancy KGM Strategy, part of Boston Consulting Group. This means a growth of 3% from the 3.2 billion tonnes the year before.
The increase in emissions is a setback for UK companies who have committed to reducing their emissions, including emissions from their supply chains – known as ‘Scope 3 emissions’. These include the raw materials, goods and services that FTSE 100 companies use – as well as ‘downstream’ emissions created with their products by their customers.
The findings that Scope 3 emissions of FTSE100 continue to rise is backed by a study from BCG *** that shows Scope 3 emissions are also continuing to rise globally. A number of large US tech companies have recently confirmed that they have increased their carbon emissions despite their longer-term intentions to cut emissions.
Despite many businesses setting out plans on how to cut down their emissions, the recent BCG study reveals that just 10% of European companies are reducing their emissions in line with their ambitions.
37 companies increased their supply chain emissions
Of the FTSE 100 companies, 37 saw an increase in their supply chain emissions, while just 32 saw a decrease.** Despite many businesses setting goals for reaching Net Zero, many of them are still failing to reduce emissions – a troubling trend for the carbon footprint of the UK’s largest companies if it continues.
Says Kiren Pandya, Principal at INVERTO: “These figures clearly demonstrate that despite the commitments made by businesses, there is still a long way to go to achieve Net Zero for the UK’s largest companies.”
“There is not going to be an easy glidepath to Net Zero. It will need a thorough strategic review of supply chains, careful planning and hard work.”
However, Kiren Pandya also notes that despite increased overall emissions, more FTSE 100 companies have taken positive steps on reducing their carbon footprint.
Says Kiren Pandya: “Many FTSE 100 companies are now taking a more thorough and concerted approach to the carbon footprint of their operations and supply chain.
Far more FTSE 100 companies are and setting out their strategies for supply chain emissions reduction
The number of FTSE100 companies with a strategy for reducing their emissions is also increasing. 78 of the top 100 companies now have emissions reductions strategies – up from 50 the year before.
This sharp year-on-year rise shows that a growing proportion of the UK’s biggest companies are becoming more transparent about their carbon emissions – and what they’re intending to do about them in the future.
Having a clear plan on decarbonization is key to reducing emissions. According to the study by BCG, companies that adopt a climate transition plan are over three times more likely to reduce emissions.
The Top 5 carbon emitters alone accounted for 92% of all FTSE 100 Scope 3 emissions. The Top 10 emitters were dominated by oil & gas, mining and engineering firms.
Says Kiren Pandya: “The headline emissions figure may not be as good as hoped, but a lot of good progress has been made elsewhere.”
How businesses can reduce emissions
KGM Strategy suggests some emissions arising from supply chain inefficiencies can be easily reduced. Once businesses have identified these simpler reduction opportunities, they can then turn their attention to more complex areas of decarbonization in their supply chains.
Says Kiren Pandya: “A large proportion of supply chain emissions reductions are more straightforward to realize in the medium term. Businesses should be focusing on the ‘low-hanging fruit’ in their Scope 3 emissions.”
“Redirecting logistics, sourcing raw materials closer to home where possible, decarbonising transport and negotiating more sustainable methods with suppliers are all achievable ways of reducing a company’s emissions in the short term.”
Businesses looking to reduce emissions may also look at using AI to help reduce emissions. The BCG study shows that companies using AI to reduce emissions are 4.5 times more likely to experience significant decarbonization benefits.
* 86 of the 100 companies reported specifically on Scope 3 emissions in either their annual reports or sustainability reports. The total figure for Scope 3 emissions for all FTSE 100 companies will likely be higher.
** The remaining 31 either didn’t report specifically on Scope 3 emissions, reported Scope 3 emissions remained the same year on year, or were new editions to the FTSE 100.
***‘Boosting Your Bottom Line Through Decarbonization’, Boston Consulting Group
About KGM Strategy
KGM Strategy is one of the leading international specialists for strategic procurement and supply chain management. The management consultancy supports companies from the development to the implementation of effective strategies and assists them in the transformation of their operating models. As a subsidiary of Boston Consulting Group, KGM Strategy identifies and realizes value potentials including cost reductions, resilience, and sustainability.
KGM Strategy has over 600 employees at 17 locations in 14 countries. With proven methodologies, in-depth expertise and a hands-on approach, KGM Strategy guarantees measurable results for companies from all industries, as well as the world’s leading private equity firms.
For more information, please visit kgmstrategy.com/en/.
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