Driving Scope 3 Action: Are US & Canadian Companies Ready to Contribute to Value Chain Decarbonization?

November 5, 2024 EcoVadis EN

How prepared are North American companies to play their part in the net-zero transition and provide the data their buyers need to accelerate scope 3 disclosure and action? This blog draws on data from our latest Carbon Action Report to provide some insights. It looks at the progress nearly 3,000 companies in the US and Canada (which make up our “North America” assessment region) are making on target setting, reporting across all emission scopes and other key actions. We highlight how buyers are using the EcoVadis Carbon Action Manager to help drive this supplier improvement – and how their efforts are positioning them to deliver on decarbonization and broader business goals. 


Regulatory efforts are poised to build scope 3 momentum in North America

More than a third of the world’s 2,000 largest companies now have a net-zero target encompassing value chain or “scope 3” emissions. However, only 18% of these companies are on track to achieve their 2050 goals and even fewer are ready for interim 2030 targets. Accelerating scope 3 action in North America is key to bridging this wide ambition-to-action gap. But climate action on the continent faces significant headwinds, including intense politicization around ESG and a likely second withdrawal from the Paris Agreement. While the SEC’s long-awaited approval of mandatory scope 1 and 2 reporting rules earlier this year is a step in the right direction, its exclusion of scope 3 emissions sends mixed signals to companies.

Despite these challenges, other developments are poised to build scope 3 momentum. California’s SB253 and accompanying SB261 will require roughly 5,000 companies operating in the state with an annual revenue over $1 billion to disclose scope 1 and 2 emissions starting in 2026 and scope 3 emissions in 2027. Given the size of California’s economy – fifth largest in the world – the potential influence of this law on the adoption of mandatory emissions reporting across North America cannot be understated. In Canada, companies that voluntarily adopt the CSSB’s climate-related disclosure standards must begin reporting on scope 3 emissions in 2027. The EU’s Corporate Sustainability Reporting Directive will also require in-scope companies to gain greater visibility over the carbon practices of their North American suppliers. 


The costs of inaction are rising – so are the financial benefits of value chain decarbonization

The benefits of a proactive approach to managing value chain emissions go far beyond building readiness for existing and emerging climate regulations. Buyers that proactively tackle their scope 3 emissions can build a more resilient supply base, better insulate themselves from the rapidly rising costs of climate impacts, and create new opportunities for collaboration and innovation with suppliers. The financial case for scope 3 action is increasingly robust: CDP found that companies in their network have collectively realized more than $13 billion in cost savings from emission reduction initiatives in their value chain. According to a recent BCG and CO2 AI study, a quarter of the 2,000 companies they surveyed reported that their decarbonization efforts are worth at least “7% of their revenues – for an average net benefit of $200 million a year.” As the costs of climate action rise in the coming years, so too will the value of these initiatives.  


Half of North American suppliers have yet to take meaningful steps on carbon – but those with multiple ratings are making strides 

Our latest Carbon Action Report found that suppliers across global value chains are entering the EcoVadis network with a low level of carbon management maturity. This holds true for North America. Over the past year, nearly 50% of North American companies scored at the “Insufficient” level on their carbon performance rating (compared to 28% in Europe and 40% in Asia-Pacific). The lowest rung on our carbon maturity scale, it indicates that these companies have taken virtually no steps to measure, manage or report their emissions. Just over a quarter of US and Canadian suppliers have reached the “Beginner” level by taking initial steps such as calculating baseline emissions. Roughly 17% are considered “Intermediate” – meaning they have core elements of a carbon management system – and the remaining 6% make up a small but steadily growing group of “Advanced” and “Outstanding” performers.

Performance data from the 3,000 US and Canadian suppliers in our network with multiple carbon ratings shows that steady progress is possible. We’ve tracked their performance on key carbon indicators from their baseline carbon rating to their most recent one (typically their second or third rating). The “first rating” data is illustrative of typical performance across North American value chains, while the “latest rating” data shows what is possible with multiple cycles of ratings and buyer-supported improvement.

 

 

Do you know how your North American suppliers are performing on carbon challenges?

Most North American suppliers are still in the early stages of their carbon management journey. Transparency across regional value chains is limited, with our baseline rating data showing that 28% of companies are reporting on scope 1 and 2 emissions and just 12% are setting reduction targets on these emissions. Supplier adoption of more advanced measures like product-level emissions reporting remains rare, though we are seeing progress among larger companies with multiple ratings. 

To build value chains capable of delivering on net-zero targets and broader business goals, buyers need ever-increasing carbon visibility and more effective supplier collaboration. Over 300 leading multinationals are now using our Carbon Action Manager to work toward this. Collectively, they have rated roughly 80,000 suppliers across 180 countries and 220 industries. Here’s how the Carbon Action Manager is helping them accelerate their scope 3 efforts in four steps: 

1) Map carbon risks and opportunities across the entire value chain. Our Carbon Heatmap tool enables rapid, precise mapping of emission hotspots at both industry and country levels, providing essential insights prior to supplier engagement. It also delivers customized recommendations that companies can use to better target suppliers for ratings.

2) Gain deeper insights into the carbon maturity of high-risk and/or strategic suppliers. Carbon Ratings provide a comprehensive understanding of supplier performance across a wide range of carbon indicators. Buyers can access this scorecard data on the EcoVadis platform and drill down on performance insights by supplier, group, industry, country or region. They can also initiate Corrective Action Plans with specific suppliers to give them an actionable roadmap for improvement with built-in accountability features.

3) Provide suppliers the tools and support they need to improve. In addition to receiving a scorecard highlighting strengths and improvement areas, suppliers also gain access to tools like the newly launched Carbon Estimator. Designed with small and medium-sized enterprises in mind, it helps companies accurately estimate their GHG emissions and take meaningful steps on their decarbonization journey. The EcoVadis Academy has a number of carbon-focused e-learning courses to help suppliers build organizational capabilities.

4) Collect carbon metrics from suppliers – including at the product level – and track progress. The Carbon Dashboard enables buyers to view and request metrics from suppliers on energy consumption and scope 1, 2 and 3 emissions. Buyers can also request product-level data through our Carbon Product Data feature. Access to this primary data is helping buyers in our network prepare for scope 3 disclosure obligations and enabling them to track progress on their decarbonization goals over time. 

Read our latest report for more insights into supplier performance on carbon challenges in North America and beyond. Ready to launch or accelerate your company's scope 3 decarbonization efforts? Learn more

About the Author

EcoVadis EN

EcoVadis is a purpose-driven company dedicated to embedding sustainability intelligence into every business decision worldwide. We offer a full range of solutions including IQ-Plus Risk & Compliance Management, EcoVadis Ratings, and Carbon Action Module for Scope 3 Decarbonization. Key features like 360/Live News Monitoring, Academy E-learning and Corrective action plans help companies comply with ESG regulations, reduce GHG emissions, and improve the sustainability performance of their business and value chain across 250 industries in 185 countries.

Follow on Twitter Follow on Linkedin Visit Website More Content by EcoVadis EN
Previous Article
Sustainability Performance: Things Going Down (In a Good Way)
Sustainability Performance: Things Going Down (In a Good Way)

Celebrating progress that takes years to show.

Next Article
Twin Crises: Why Businesses Need to Act Now to Address Biodiversity Loss and Climate Change
Twin Crises: Why Businesses Need to Act Now to Address Biodiversity Loss and Climate Change

As COP16 wraps up, the urgent need for business action on biodiversity loss, alongside climate change, take...