Scope 3 emissions, the indirect emissions generated throughout a company’s value chain, are a significant part of a retailer’s carbon footprint. These emissions encompass activities from sourcing and manufacturing to transportation and beyond. McKinsey’s report, “Retailers’ Climate Roadmap: Charting Paths to Decarbonised Value Chains,” underscores the complexities retailers face in reducing these emissions. The report states that the path to reducing Scope 3 emissions is often complex and challenging, akin to navigating a “particularly Byzantine maze.”
Strategies for Scope 3 Emission Reduction
The report identifies seven key areas where retailers can focus their decarbonisation efforts:
- Transitioning to clean and renewable energy in supply chains.
- Reducing farming emissions from livestock management.
- Adopting regenerative practices in plant-based agriculture.
- Increasing circularity of products and packaging.
- Reducing waste and improving process efficiency.
- Reducing emissions in transportation.
- Transitioning from animal to plant protein.
By combining these actions, retailers could achieve a 55-65% reduction in Scope 3 emissions by 2030. However, some initiatives may come with significant costs. Actions that do not increase system costs could still achieve a 12-17% reduction in emissions.
Leveraging Decarbonisation Levers
The report also outlines four key “levers” that retailers can use to drive down Scope 3 emissions:
- Cost-effective near-tier levers: Engaging with direct suppliers and consumers to promote renewable energy adoption and sustainable consumption habits.
- Cost-effective far-tier levers: Collaborating with suppliers and industry partners to implement cost-saving or cost-neutral sustainability measures.
- Costlier near-tier levers: Working closely with tier one, two, and three suppliers to spark innovation and improve the feasibility of emissions reduction strategies.
- Cost-prohibitive far-tier levers: Collaborating with value chain partners to invest in circularity and recycling technologies.
By adopting these strategies and leveraging these levers, retailers can make significant progress in reducing their Scope 3 emissions, aligning with broader sustainability goals and contributing to a decarbonised future.
