Climate Change Pressures Mount for Amazon Sellers and Suppliers

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As major corporations like Amazon intensify their efforts to reduce their carbon footprint, they’re exerting pressure on their suppliers to follow suit. Starting in 2024, Amazon will require its suppliers to share emissions data, set emissions goals, and report on their progress, aligning with the actions of other industry giants like Microsoft, Walmart, and Apple, who are demanding that their suppliers accelerate their decarbonization efforts.

The growing demand for eco-friendly practices isn’t limited to businesses alone; consumers, investors, regulators, and governments are all driving firms towards greater progress and transparency. This mounting pressure from corporations, in turn, trickles down to their suppliers.

The emissions generated by businesses typically fall into three categories: Scope 1 emissions from their direct operations, Scope 2 emissions from purchased energy sources, and Scope 3 emissions, which encompass indirect emissions from suppliers and customers using their products. A study by the non-profit CDP revealed that Scope 3 emissions account for an average of about 75% of all emissions across major industries.

Companies have a greater degree of control over their suppliers compared to other sources of indirect emissions. For instance, while a consumer goods company can’t dictate how consumers use its products, it can choose to work with environmentally conscious suppliers.

Decarbonization requirements are becoming increasingly stringent. For example, Salesforce now mandates that suppliers disclose Scope 1, 2, and 3 emissions, deliver carbon-neutral products and services, and submit annual supply scorecards. AstraZeneca’s suppliers are also expected to report emissions data to the CDP and establish science-based emissions reduction goals.

Although Amazon doesn’t formally incorporate suppliers into its Scope 3 emissions calculations, it effectively addresses this by requiring suppliers to report their emissions and set reduction goals, which can then be monitored. The increasing complexity of these requirements poses challenges for third-party sellers and suppliers, especially smaller ones who may lack the resources to meet the tracking and reporting demands.

Many small and medium-sized business owners express a high priority for reducing emissions, but a lack of skills and funding presents significant obstacles. Tracking emissions data is a demanding task, which can incur considerable upfront costs and time investments.

Amid economic stress factors such as recession fears, higher interest rates, and labor market challenges, small businesses have often prioritized their employees and financial stability over sustainability. Nevertheless, suppliers, both large and small, will need to adapt to these new requirements soon, as the pressure from corporate, political, and investor spheres increases.

Big companies are also focusing more on their supply chains due to the challenges they face in achieving their emissions reduction goals. A significant portion of emissions originates from suppliers, a fact emphasized by recent reports, which found that a majority of the world’s largest corporations are either not making progress in emissions reduction or are increasing their emissions.

While more companies are making carbon reduction commitments, the results in terms of disclosures and emissions reduction are not yet evident. With suppliers being a major source of emissions, the scrutiny on supply chains is set to intensify.

In conclusion, as the world grapples with the challenges of climate change, the pressure is mounting on businesses of all sizes, from global giants to small suppliers, to reduce their carbon footprint and adopt eco-friendly practices. This paradigm shift is driven by the expectations of consumers, investors, and governments, and it is reshaping the way companies approach sustainability and environmental responsibility.

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