Episode 25: Supply Chain Emissions & Walmart's Project Gigaton with Zach Freeze

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This episode is sponsored by Walmart.

Episode Intro Notes

What We’ll Cover

• What are supply chain emissions?

• Why should we care about supply chain emissions?

• What is Walmart’s footprint?

• What are Walmart’s sustainability initiatives?

• Why did Walmart decide to focus on supply chain emissions?

• What is Project Gigaton?

• Are other companies addressing supply chain emissions?

• About our guest, Zach Freeze

What Are Supply chain emissions?

• The easiest way to define supply chain emissions is to say what it’s not is because it’s kind of a big catch-all. Supply chain emissions are all of a company’s emissions that are not 1) direct emissions from owned or controlled sources or 2) indirect emissions from the generation of energy that the company purchases/uses. So supply chain emissions are all of a company’s indirect emissions that do not come from the energy it purchases/uses.

  • Often times you’ll see this broken down into scope 1 emissions (direct emissions from owned or controlled sources); scope 2 emissions (indirect emissions from the generation of energy that the company purchases/uses); and scope 3 emissions (all of a company’s indirect emissions that do not come from the energy it purchases/uses).

  • Consider the example of a pint of ice cream at Walmart. Scope 1 emissions would include those from operating Walmart owned vehicles that transport the ice cream to the store. Scope 2 emissions would include the energy Walmart buys to light up the freezer featuring the ice cream. Scope 3 emissions would include those involved in growing the feed for the cows supplying the milk.

• This episode is focused on Scope 3 emissions. They are the hardest to address because they come from sources not under a company’s control and often involve many different suppliers/emitters. In the past company’s were mainly focused on how they could reduce their own emissions, their own water use, their own energy use, etc., but companies are now taking on this much more difficult area to address that is also rich with opportunities for emission reductions. 

• Most companies that are measuring their Scope 3 emissions are doing so with Greenhouse Gas Protocol’s Technical Guidance for Scope 3 Emissions. It breaks Scope 3 emissions into 15 categories. Eight are upstream (prior to product arriving at the reporting company) and seven are downstream (after the product leaves the possession of the reporting company).

Why should we care about supply chain emissions?

• According to the EPA, organizations’ supply chains often account for more than 75 percent of their greenhouse gas emissions.

• These emissions are important to address since according to climate scientists, if we want to keep temperature rise below 2 degrees Celsius, global carbon dioxide emissions must be cut by as much as 85 percent below 2000 levels by 2050.

• So if companies want to effectively reduce their GHG emissions, they need to do an inventory of Scope 3 emissions since it’s more than ¾ of their GHG emissions.

What is walmart’s footprint?

• Walmart sells a lot of stuff. So much so that in the last fiscal year its revenue was $485.9 billion. Its profit was about $2 million every hour. This includes selling 1 billion pounds of bananas per year!

• The average Walmart Supercenter sells 140,000 items. Consider all the players involved in the supply chain of each of those products - how do you even communicate with all these suppliers about emissions?

• Lord knows we could go on and on about Walmart stats and get into social issues as well, but our focus is going to be on the environmental impact of the goods they sell, specifically how they are engaging their suppliers to reduce that environmental impact.

What are Walmart’s sustainability initiatives?

• Walmart’s sustainability journey started in 2005 after Hurricane Katrina when Walmart was able to deliver goods to those in need faster than federal and state agencies. This experience led Lee Scott, CEO of Walmart at the time, to ask in the first ever company speech to be livecast to all its stores: “What if we used our size and resources to make this country and this earth an even better place for all of us: customers, associates, our children and generations unborn? 

• As part of this speech, Scott announced three environmental goals: 1) to be supplied 100% by renewable energy; 2) to create zero waste; and 3) to sell products that sustain our resources and environment. Did Walmart have a detailed plan to meet these goals? Not so much Scott said, “"These goals are both ambitious and aspirational, and I’m not sure how to achieve them — at least not yet. This obviously will take some time."

• Walmart today has even more ambitious goals and with timelines:

  • Emissions reduction goals

    • Walmart has said it will reduce its absolute Scope 1 and 2 emissions by 18 percent by 2025, and it will reduce its Scope 3 emissions by one billion tons (one gigaton) between 2015 and 2030. More on this Scope 3 goal in a minute.

  • Renewable energy goals

    • Get half of its energy from renewables by 2025 with an ultimate goal of 100%

  • Zero waste goals

    • In terms of progress on this, at the end of FY2017, Walmart diverted 82% of materials previously considered waste from landfills.

Why did walmart decide to focus on supply chain emissions?

• Well for one, as we discussed, it’s a big part of their footprint. Thus, doing an inventory helps them identify risks to their business and engage their value chain partners in GHG management. 

• Also, for those committed to science-based targets, taking responsibility for value chain emissions is a requirement. A science-based target is one based on climate science rather than one the company abstractly decides is reasonable to achieve. In other words, science-based targets are ones in line with the decarbonization necessary to keep global temperatures from rising more than 2 degrees Celsius compared to pre-industrial temperatures. Walmart was the first retailer with an approved science-based emissions goal, and Project Gigaton is part of meeting its science-based target (16). 

• Also disclosure of Scope 3 emissions impacts a company’s CDP score. CDP is a global disclosure system where companies and governments self-report their emissions. CDP then translates the self-reported data into analyses and an overall score. Finally, its network of investors and purchasers, representing over $100 billion, use CDP’s analyses and scoring to make decisions.

What is Project Gigaton?

• Project Gigaton is an initiative to eliminate one billion tons (one gigaton) of CO2 equivalent emissions from its supply chain by 2030. To reach this goal, Walmart will ask its suppliers to voluntarily participate in the initiative and will provide them with a toolkit to find ways to reduce their emissions.

  • The toolkit is a digital resource filled with research materials, videos, and other info to help suppliers on their way to emission reductions. It highlights the business case for reducing emissions and gives companies the tools they need to set goals and then measure progress.

• Walmart is working with WWF, EDF, and other environmental NGOs to bring their expertise to the project. Walmart has said that it appreciates how these NGOs push them to be more aggressive.

• There are no plans to communicate in the store on which products are participating in Project Gigaton, aside from some messaging on tvs in the electronics section of their store. However, the company will report publicly on progress towards its goal and has asked participating suppliers to get third-party verification of their results.

Are other companies addressing supply chain emissions?

• You betcha. Walmart is not the only one looking at supply chain emissions. In 2016, 89 major corporations, who in total have $2.7 trillion in purchasing power, used CDP to engage its suppliers to address emissions. 

• Of the 4,300 suppliers that responded to the CDP’s survey, $12.4 billion in savings were reported. And that’s just in 2016. The largest cost savings came from better product design (⅓) and waste diversion and recovery (28 percent).

• One example of another company taking Scope 3 emissions seriously is BMW Group. It has more than 13,000 suppliers spread across 70 nations. First, BMW incorporated CDP disclosures into annual supplier performance reviews for its 100 largest vendors. Then it set transparency goals and now 70% of what BMW spends its money on is accounted for by CDP-related disclosures.

About our guest, Zach Freeze

• Senior Director of Strategic Initiatives in Sustainability at Walmart. 

• He got his B.S. in Chemistry from Arkansas Tech University and a M.S. in Operations Management from the University of Arkansas.

  • Ok, we’re guessing he has a lot of Arkansas pride.

• He started working at Walmart in 2006 as a project manager in Hazardous Waste and has steadily worked his way up. 

• In his current role, he is responsible for product sustainability in Walmart’s general merchandise and consumables categories and working on supply chain initiatives.