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T H E T R A D E A N D C L I MATE CH AN G E N EX US
To appreciate the challenges facing large firms sourcing from global value chains, it is useful to understand the basics of carbon reporting. As discussed earlier, emissions are categorized in three groups: scope 1, scope 2, and scope 3. Scope 1 and scope 2 emissions are relatively easy for a firm to report (and easier to affect because they are under the firm’s direct control). Scope 3 emissions are more challenging, both for reporting and achieving emissions reductions. The longer and more complex the value chain, the more difficult it is to identify and calculate scope 3 emissions.15 The issues that Walmart faced with implementation of its Project Gigaton provide valuable insights in this context (box 5.3). The experience of large firms such as Walmart and Unilever suggests that business carbon management programs need to address two important issues: first, gaining a better understanding of emissions along complex value chains and implementing appropriate solutions; and second, convincing the public that they are implementing credible measures to solve environmental problems. To address these challenges, firms have joined forces, sometimes with nongovernmental organizations, to pool resources and allow independent bodies to contribute to the design and implementation of
BOX 5.3 Implementation Challenges for Business Carbon Management: Walmart’s Project Gigaton For large and diversified companies such as Walmart, most carbon emissions are probably scope 3 emissions. These emissions originate not in Walmart’s distribution centers and stores but during the production, transporting, and consumption of the many products destined for Walmart’s shelves. Working with nongovernmental organizations, Walmart has identified six areas with the greatest opportunities for reducing emissions: energy use, sustainable agriculture, waste management, deforestation, packaging, and product use. Walmart reports that it has worked with the World Wildlife Fund on the overall concept and design of Project Gigaton and with other nongovernmental organizations—including the Environmental Defense Fund, Conservation International, the Nature Conservancy, the Sustainable Packaging Coalition, and the Carbon Disclosure Projecta—to connect suppliers to measurement methodologies, guidance, and practical tools to help them to reduce emissions. Walmart has specified accounting methodologies for each area.b Connecting with suppliers is key to the success of Project Gigaton in terms of emissions reduction. Suppliers set up an account within the project and report their progress each year according to established measurement methodologies. They then receive guidance from Walmart and its partners. More than 1,000 suppliers have signed on to Project Gigaton; in the first two years of the project, they have reported a total reduction of 94 million tons of CO2 emissions. Walmart reports that, while it plans to enlarge the scope of areas for reduction, it faces difficulties. Nearly 80 percent of reported reductions are in energy use, while progress on deforestation and sustainable agriculture requires “influencing a disparate set of actors far upstream in the supply chain, addressing interdependencies and barriers in complex social and economic systems, and gaining alignment with others regarding methodologies for measurement and action.” Walmart is working with suppliers and nongovernmental organizations to support the development of tools to enable some improvement in these areas. In its environmental reports, Walmart does not identify the extent to which it is seeking to reduce emissions in its global supply chains compared to its US sources. a. A not-for-profit organization that runs a leading global disclosure system. b. For information on Walmart’s Project Gigaton, see https://www.walmartsustainabilityhub.com/climate/project-gigaton.
