Can you see your Scope 3?

In brief

• High Tech companies need transparent and granular data to drive more focused efforts and faster progress toward their emission-reduction goals.
• In the High Tech industry, 86% of upstream Scope 3 emissions sit outside their Tier 1 suppliers. It's critical to have visibility beyond this tier.
• Accenture research isolates the biggest sources of Scope 3 emissions. Data, AI and technology are required to accelerate supply chain decarbonization.
• In our Total Enterprise Reinvention research, 46% of companies say climate and environmental issues are driving their reinvention strategies.

High Tech companies are working tirelessly to achieve their climate change goals. It's a process rooted in entity-level complexity, often in less transparent – and therefore less measurable – data. Efforts to date have been mainly focused on reducing emissions directly attributed to their organization, called "Scope 1" emissions. In doing so, they may inadvertently be omitting the biggest driver of their emissions.

Like others across the industry, these companies lack visibility into one of the other biggest sources of emissions: their upstream supplier base. These suppliers are responsible for the greatest amount of what's referred to as "Scope 3" emissions. The current lack of visibility precludes companies from fully accelerating their progress in reducing their emissions, increasing supply chain sustainability, and lowering their overall carbon footprint.

Insights from Accenture Research help to change the equation. Their proprietary data analysis provides supply chain network visibility beyond Tier 1. This information is invaluable for geographically diverse and supply chain-dependent companies like those in the High Tech industry. Our research provides a new lens that allows High Tech companies to see what's strategically important to their supply chain – and where to focus their efforts and identify the main drivers of upstream emissions ("hot spots") across industries and geographies. Some industries have upstream emissions that greatly outweigh their direct emission. Central to this idea is the High Tech industry, its Scope 3 emissions are 24 times greater than Scope 1 (i.e., the emissions that High Tech companies directly control or own, such as emissions associated with fuel combustion in boilers, furnaces, and vehicles).

Companies that embrace Total Enterprise Reinvention are creating long-term, sustainable value ahead of their peers. Putting AI-powered insights and the digital core at the heart of reinvention and creating a boundaryless flow of data between teams are essential steps in achieving key environmental goals, such as reducing Scope 3 emissions and fulfilling net-zero commitments.

Getting visibility into the source of Scope 3 emissions

• Most Scope 3 emissions are generated by Tier 2+ suppliers. High Tech industry upstream emissions are a significant portion of its total. On average, 86% of High Tech companies' upstream emissions come from Tier 2+ suppliers, with nearly 62% coming from suppliers in Tier 3 and beyond. These companies also have a complex, multi-tier supplier network – meaning less visibility into the sources of upstream emissions. High Tech companies tend to rely more on complex, global networks and, thus, have less visibility into their upstream emissions than other industries. Therefore, it's critical for High Tech companies to focus on gaining visibility first, mapping suppliers at the different tiers, and then working with suppliers that contribute the most carbon to reduce their emissions.

• Upstream emissions sources vary significantly by tier For High Tech, our analysis found that almost 41% of emissions beyond Tier 1 suppliers comes from utilities – not surprising, given the business's power and natural resource intensiveness. For instance, the Tier 1 hot spot for High Tech companies is metal processing suppliers, accounting for 29.5% of emissions. In Tier 2, the hot spot is the petroleum and natural gas sector, which generates 17.6% of emissions. High Tech companies can start by identifying and targeting the right hot spots to make the largest impact quickly.

• Globally dispersed supply networks make it more difficult to get visibility to Scope 3 emissions. The High Tech industry faces similar emissions challenges in different regions. For example, for the European High Tech industry, most upstream emissions—51% of the total—across multi-tier suppliers most of the upstream emissions overall are generated in that industry’s home region. As we move further upstream, to Tier 3 and beyond, Asia assumes a larger role in supplying key High Tech inputs and raw materials. With a larger proportion of further upstream emissions coming from suppliers abroad, companies will find it more difficult to gain the required visibility to trace and audit those emissions.

• A supplier's location greatly impacts an industry's Scope 3 emissions. Understanding the exposure to the emissions profiles of different countries across the supplier base is vital to creating supplier selection strategies to avoid exposure to increased emissions due to geography. For example, when comparing the Indian and US metals industry it becomes clear the consumption of energy raw materials (petroleum and natural gas and coal) by the Indian metals industry is far greater than the corresponding industry in the United States. That’s because the iron and steel industry—the main metal production industry in both countries—is powered by different sources in each. In India, the energy raw material (mainly coal) supplying industry comprises 77% of all upstream emissions. In the United States, it’s only 10%.

With these insights, High Tech companies can take several strategic routes. They can:

• Identify where and how they should allocate their time and resources to reduce emissions.
• Determine how to embed visibility into their broader supply chain capabilities.
• Integrate more effectively sustainability into their supply chain sourcing activities, including category planning and supplier selection. And they can understand how to work together with others to reduce emissions and create a more resilient supply chain.

The challenge of reducing emissions is enormous. But it’s not insurmountable. With the right combination of visibility, actions and collaboration, we can reach our goals and create far better supply chains. We can build supply chains that are good not just for business, but also for society and the planet.

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