A lot has been written about the environmental cost of an Amazon package, from the time it’s picked from a fulfilment centre shelf to the moment it’s handed over by the delivery driver on the doorstep.
And in the wake of plenty of criticism, the online giant has been taking steps over the past few years to mitigate the carbon emissions of its downstream business, from hydrogen-powered forklifts and the electrification of its delivery fleet to the weight, flexibility and size of its packaging so that it takes up less room in vans.
But in its 2022 sustainability report, released this July, Amazon has begun to look more closely at an item’s upstream journey, long before it even reaches the fulfilment centre. The company has now committed to update its supply chain standards to require its suppliers to share their carbon emissions data and set themselves clear carbon goals.
“Our potential for impact across our supply chain is big because it spans building materials, transportation, technical equipment, products and packaging,” the Amazon report reads. “We will use our size and scale to benefit businesses that are committed to decarbonising by providing products and tools to both track emissions and help decrease them.”
This pledge comes into effect next year, giving those suppliers time to put in place the right reporting measures on scope three emissions – the indirect greenhouse gases that come from sources not directly controlled by Amazon, but are still a consequence of its business operations.
What will it take to reduce scope three emissions?
Of course, reporting and reducing scope three emissions would be a significant challenge for any business, let alone one the size of Amazon. So, how can it realistically go about this?
“The supply chain partners of a large business are likely to span different sectors, locations and business sizes, so recognising that diversity will be important,” says Luke Pate, an economist and sustainability expert at forecaster and consultancy Oxford Economics. “And different supply chain partners will be at different points in their sustainability journey and face different barriers to measuring and reducing their emissions.”
The supply chain partners of a large business are likely to span different sectors, locations and business sizes
One option for a business of Amazon’s scale to cut through and put a squeeze on scope three emissions is through knowledge sharing. For example, Amazon could leverage what it has learned from its successful downstream sustainability practices, like packaging redesigns and the application of green hydrogen, and use that to help upstream suppliers apply the same practices, where relevant.
“Business case tools exist that identify options for interventions, like energy efficiency and vehicle fleet upgrades and estimate the savings and carbon reductions associated with them,” adds Pate.
Won’t tackling scope three emissions cost the Earth?
These kinds of interventions aren’t cheap, however, and Pate warns that the smaller and medium-sized enterprises (SMEs) that often make up the supply chain may be prevented from taking action to reduce their emissions by high upfront costs.
“Large businesses could help their SME suppliers by promoting off-the-shelf tools and signposting resources which identify government funding and support for environmental performance improvements, or directing them towards low-carbon energy suppliers. The giants could flag these to their suppliers, or even distribute their own signposting resources.”
More directly, corporations could support SMEs to land loans with favourable terms, which is a route currently being used by fashion house Gucci to help its suppliers cover the costs of reducing their emissions. Ikea, on the other hand, directly finances on-site investments required by its supply chain partners to switch to renewable energy.
Why collaboration matters in supply-chain emissions
The big players are also beginning to realise that building alliances with other like-minded organisations that share the same role in the supply chain is another way to ensure they can begin to make good on their promises to deliver against net zero.
Collaboration like this not only ensures that competition doesn’t drive unnecessary emissions upstream, but also helps foster a shared expectation from big business on how and why suppliers should reduce emissions, by giving them no alternative but to do so.
Currently, it’s not compulsory to report on all scope three emissions… But there will be regulatory change
Alliances like this already exist: for example, the Supplier Leadership on Climate Transition, which was set up in 2020 to enable large businesses such as PepsiCo and Mars to support their suppliers to reduce emissions by paying them to attend seminars on baking emission-reduction plans into everyday operations. There are 12 participating businesses in the alliance, bringing with them upwards of 1,200 representatives from 400 of their supplier firms.
Emulating this approach, Amazon recently joined the zippily titled Zero Emission Maritime Buyers Alliance (Zemba) as a founding member, along with other names like Patagonia and Tchibo. Zemba’s goal is to accelerate the commercial deployment of zero-emission shipping, which makes up a significant portion of Amazon’s scope three responsibility.
Could other businesses try a similar approach?
But while it might be in the interests of well-resourced, high-profile players to take on responsibility for other organisations’ emissions, can the same be said for smaller operations that still carry scope three burdens?
“Currently, it’s not compulsory to report on all scope three emissions for all companies,” explains Andrew Tasker, associate director for environmental impact assessment and sustainability at multinational environmental consultancy RPS Group, “But I think there will be regulatory change either from government or through service bodies.”
And there is a definite return on any time and money spent on tackling scope three emissions, even if it’s not immediately apparent. “Companies can avoid risks within their value chains, unlock innovations and get a better idea of their carbon footprint, allowing for more accurate reporting,” explains Tasker.
“It can also reduce operating costs, and companies are better able to protect their business from the risks that come with emerging carbon restrictions from governments and regulatory bodies.”
No wonder Amazon wants in.
