Decarbonization has become a front-and-center issue to nearly everyone: customers, business leaders, regulators, and investors—to name a few. But not all aspects of decarbonization have been addressed equally, especially in certain industries amid transformation such as the automotive sector.
While large automakers and the companies that supply them with key components have made progress decreasing Scope 1 and Scope 2 emissions by 8% and 9%, respectively, since 2017, Scope 3 emissions, remain a challenge. Scope 3 include the greenhouse gases emitted throughout the supply chain (upstream) and those emissions generated consuming a product (downstream). These contrast with a company’s direct (Scope 1) and indirect (Scope 2) emissions, the latter generated by purchased energy.
Even leading automotive original equipment manufacturers (OEMs) have only reduced their upstream Scope 3 emissions by 2% since 2017, while Tier 1 suppliers have actually increased their Scope 3 emissions (upstream) by 5% during the same time frame, according to recent Bain research. This data includes the average of leading companies that chose to report (it is not required), which means that the broader industry’s Scope 3 emissions are likely even greater (see Figure 1).
Figure 1: Suppliers are falling behind original equipment manufacturers in their Scope 3 upstream decarbonization journey, with increased pressure expected.
The decarbonization challenge and opportunity
Why have upstream Scope 3 emissions, in particular, remained a challenge in the automotive sector even as other types of emissions, including downstream Scope 3 emissions, are addressed? There are several reasons. First, supply chain decarbonization requires a transpare
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