As Amazon and other major corporations intensify efforts to reduce their carbon footprints, they are compelling their suppliers to follow suit, with significant consequences for non-compliance.
Starting in 2024, Amazon will require its suppliers to share emissions data, set reduction goals, and report progress, as detailed in its recent sustainability report. This aligns Amazon with companies like Microsoft, Walmart, and Apple, which also demand enhanced decarbonization from their suppliers.
This push stems from growing demands for eco-friendly practices from consumers, investors, regulators, and governments. A corporate sustainability consultant, Bob Willard noted that pressure on companies is cascading down to their suppliers.
Businesses categorize emissions into three scopes: Scope 1 (direct emissions), Scope 2 (purchased energy), and Scope 3 (indirect emissions, primarily from suppliers and customers). The non-profit CDP found that Scope 3 emissions constitute about 75% of total emissions for major industries.
Andrew Winston, an author on business sustainability, highlighted that companies can exert significant control over their supply chains to reduce these emissions.
Small businesses face significant challenges meeting new sustainability mandates, citing a lack of resources, skills, and funds to track and report emissions effectively.For example, a consumer goods company can’t make consumers wash in cold water but can choose eco-conscious suppliers. This focus on supply chains will increase pressure and demand for transparency.
Salesforce and AstraZeneca have implemented strict decarbonization requirements for their suppliers, demanding comprehensive emissions reporting and carbon-neutral deliveries. While not including suppliers in its Scope 3 accounting, Amazon is similarly enforcing emissions tracking and goal setting.
Small and medium-sized businesses face challenges meeting these demands due to resource constraints. According to the SME Climate Hub, while 80% of small businesses prioritize emission reductions, 63% lack the necessary skills, and 43% lack funds.
Intuit QuickBooks found that two-thirds of small businesses are taking steps to reduce their environmental impact, but those not acting cite a lack of money, time, and resources.
Karen Kerrigan of the Small Business & Entrepreneurship Council acknowledges the substantial initial costs and resource demands for compliance. Chaitali Patel of Evergood highlights the extensive effort required for emissions data collection and recordkeeping.
Despite economic pressures, small businesses will soon need to comply with these sustainability mandates. As larger companies struggle to meet their emissions reduction goals, they are increasingly scrutinizing their supply chains.
A New York Times review found that many major food and restaurant companies are failing to reduce emissions, with most emissions originating from suppliers. Just Capital reports that although more companies are committing to carbon reduction, actual emissions reductions remain limited.