How Nike, McCormick and others are taking on supply chain emissions

Collaborating with suppliers to reduce Scope 3 footprints was a common theme at the Economist Impact's Sustainability Week U.S. conference.

WASHINGTON — For Nike Chief Sustainability Officer Noel Kinder, Scope 3 emissions are "one of the things that keep me up at night."

Scope 3 is a category comprised of a company's indirect greenhouse gas emissions up and down the value chain, from materials and supply chains to the end use of a product or service. The sportswear giant's supply chain represents more than 90% of the company's climate footprint, making it among the very top sustainability issues facing Nike.

Scope 3's share of emissions at Nike is standard for the fashion industry and most other sectors in the economy. Many companies are just beginning the complicated task of tracking their Scope 3 footprints, not to mention reducing them.

Data, supplier partnerships and creativity are key to tracking and reducing emissions in the supply chain, several corporate executives noted last week at the Economist Impact's Sustainability Week U.S. conference in Washington, D.C

During a panel on corporate efforts to achieve net zero emissions, Kinder pointed to two primary levers Nike can manipulate to reduce its supply chain emissions.

The first is what he called the "feedstock" — i.e., the materials such as polyester, leather and rubber that the brand's products are made from. The other lever is the energy it takes to convert that material into finished product, and which is supplied to grids where Nike sources its goods.

"Today, collaboration among brands, collaboration across industries has become really, really important to us," Kinder said.

He added: "We can send a collective demand signal in places like Vietnam and Indonesia, to say, ‘We have these Science Based target goals. Our Scope 3 is really the largest component, the most meaningful. We need to collectively signal that demand so that our suppliers can use renewable energy to fuel their operations.’"

Nike has looked to on-site solar power at overseas production facilities, Kinder noted, adding, "Which is really great, but it doesn't have the generation capacity to cover our entire footprint."

What's needed, then, is for more sustainable energy feeding grids in heavy producing companies, which Kinder and others hope will happen as more brands work to reduce their Scope 3 emissions and create demand for that energy.

While Kinder noted the importance of industry collaboration, others also pointed to how crucial collaboration with suppliers is to Scope 3 reductions.

For spice company McCormick & Co., Scope 3 accounts for more than 95% of greenhouse gas emissions. That means key factors in reducing the company's overall footprint are outside of the company's direct control.

"So you need to make sure you have partnerships with your suppliers," Michael Okoroafor, chief sustainability officer for McCormick, said on a panel focused on Scope 3.

Okoroafor pointed to the company's participation in the Supplier Leadership on Climate Transition program. The collaborative provides vendors with training and mentorship — financed by brands — to develop a strategy to reduce greenhouse gas emissions in line with global targets.

McCormick doesn't just have a supply chain, it is a key player in the supply chain of others. That includes some of the largest food retailers in the world, who can impact the climate goals for an entire ecosystem of companies.

"In our own case, we don't have a choice," Okoroafor said. He pointed to Walmart and other large retailers that are pushing for more sustainable products and are working to reduce their own Scope 3 emissions. "This customer, this retailer, they hold the key to the kingdom," Okorafor said. "You’ve got to make sure you comply."

Investors can also influence a company's path and speed toward Scope 3 reduction. They also indirectly create an impetus for buyers and suppliers to share data on emissions.

Nancy Mahon, chief sustainability officer for The Estée Lauder Companies, noted that her company's shares are held in several climate investment funds, and investors regularly ask the company to produce specific information about its footprint.

"If you can't produce it, they can't invest in you," Mahon said. "We're able then to go back to our suppliers and say, ‘This is the reality we're facing.’"

Brand marketers can also drive sustainability initiatives in supply chains, Mahon noted. Marketers might say, "I want to make XYZ claim on XYZ product," Mahon said. "The environmental team says that's possible or not possible. And then we go back to the supplier and say, ‘What would need to be true in order for us to make this claim?’"

Simple communication with suppliers can also drive progress on climate. Dave Duncan, vice president of sustainability at digital manufacturing solutions company PTC, said the company goes through its spend data and reaches out to suppliers about their path to emissions reduction.

"‘Are you committed, yes or no?’" Duncan said, describing conversations between his company and suppliers. "Frankly, those are the phone calls driving the exponential increase in commitments."