BCG: Why Supply Chain Emissions in the FTSE 100 Are Rising

Emissions are on the rise within the supply chains of FTSE 100 companies.

According to a study by INVERTO, a consultancy within the Boston Consulting Group (BCG), these emissions increased by 62 million tonnes last year compared to the year before.

This totals an alarming 3.3 billion tonnes, a 3% increase.

The analysis points out that although numerous firms are committed to curbing their emissions, including Scope 3 emissions from their supply chains, achieving these goals is proving to be gradual and inconsistent.

Scope 3 emissions are comprehensive, including carbon outputs linked to all the raw materials, products and services a company utilises, as well as emissions resulting from customers using the products.

Despite the critical importance of reporting these in driving down carbon footprints, only 86 of the FTSE 100 companies have incorporated Scope 3 emissions data in their annual or sustainability reports.

This omission suggests that actual emissions could be even higher than reported.

Decarbonisation: A global challenge

Companies worldwide are grappling with emission reduction challenges.

BCG's "Boosting Your Bottom Line Through Decarbonisation" underscores the persistent rise in Scope 3 emissions globally.

Even companies with long-term commitments to emission reductions have observed an increase in their carbon outputs, and only 10% of European companies are on track with their emission reduction commitments.

Kiren Pandya, Principal at INVERTO, highlights the complexity of achieving net zero: “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.”

Within the FTSE 100 context, while 37 companies reported an uptick in their supply chain emissions, 32 registered reductions.

This disparity underscores the challenges and erratic progress toward net zero goals across some of the UK's largest companies.

“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," Kiren adds. 

What progress is being made towards decarbonisation?

Despite the overarching trend of rising emissions, there are emergent signs of progress.

An increasing number of FTSE 100 companies are becoming more transparent about their carbon footprints and their strategies for mitigation.

The percentage of these firms reporting on net zero initiatives increased from 53 to 68 over the past year, with those forming formal emission reduction strategies rising from 50 to 78.

"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,” Kiren says.

Companies with climate transition plans are more than three times as likely to reduce their emissions, according to BCG’s study.

The most significant emitters among the FTSE 100 — primarily oil, gas, mining and engineering firms — account for 92% of total Scope 3 emissions.

This concentration highlights the importance of targeted efforts in these high-emission sectors.

“What’s really positive is that more and more companies are actively tracking their Scope 3 emissions and now have detailed plans in place to reduce them,” Kiren notes.

Can AI help reduce emissions?

INVERTO suggests starting with manageable steps that can lead to significant impacts in the mid-term.

By honing in on supply chain inefficiencies, sourcing materials more locally and decarbonising logistics, companies can see considerable emission reductions.

"The bulk of supply chain emissions reductions are relatively easy to realise in the medium term. Businesses should be focusing on the ‘low-hanging fruit’ in their Scope 3 emissions," Kiren explains.

Additionally, leveraging advanced technologies like AI can multiply the efficacy of these efforts, as shown in BCG's findings indicating a higher likelihood of substantial benefits when AI is used in emission optimisation.

While the path towards net zero appears daunting, strategic efforts and sustained commitment hold the promise of making substantial progress in reducing carbon footprints across industries.

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