Corporate Climate Emissions: Out of Sight, Out of Mind

I first heard the term “climate outsourcing” when I was writing a research paper back in high school. While researching global warming and its impact on international relations, I discovered that developed countries, including the United States and Japan, have outsourced more than half of their greenhouse gas emissions to the developing world. Stunned by this fact, I read more reports and found out that major corporations in the U.S. like Microsoft and Walmart have been cheating on their climate commitments by transferring their supply chains overseas. Yet they continue to advertise their carbon neutrality achievements — a behavior known as “greenwashing.” Take Procter and Gamble (P&G). While the company has reached its goal of reducing 50% of its carbon footprint by 2030, this abatement only constitutes 2% of its total GHG emissions if they consider the emissions from a product’s entire life cycle.

These emissions generated from the supply chain overseas are called “Scope 3 emissions” — indirect emissions that a company has responsibility for but doesn’t directly own. Shockingly, the Scope 3 sector sometimes contributes as much as 80%.) or more of a company’s total emissions.

Climate outsourcing not only increases the difficulty of countries who are producing supply chain emissions to reduce their own carbon footprints, but also leads to more overall emissions in the world. For example, a Carnegie Mellon study found that U.S. manufacturers who outsource a computer to be produced in China create three times as many emissions than if it were manufactured stateside.

This strategy of supposedly reducing carbon emissions by outsourcing supply chains also disincentivizes investment in critical clean tech. A study posted on Principles for Responsible Investment discovered that corporations that have outsourced their carbon footprint more often have fewer innovative environment-related patents compared to those who have not.

Fortunately, as this elaborate greenwashing strategy has been discovered by more people, firms are now obliged to include Scope 3 emissions in their net-zero goals. In 2023, the Science Based Targets initiative began to require companies to be responsible for their indirect emissions if they contribute to more than 40% of the total emissions.

Nevertheless, even with these improved regulations, recent emissions reduction results from major corporations are disappointing. This year, Microsoft, P&G, Unilever, Walmart, and 235 other companies failed to reach their net-zero targets. The biggest obstacle? Reducing Scope 3 emissions.

To ensure corporations can reach their carbon reduction goals while holding them accountable, further actions should be taken. First, stricter regulations are needed to promote accurate emissions disclosure. Moreover, companies should educate their suppliers to help them better understand their roles in emissions reduction and how to do benchmarking and measurement. It is important to give them basic tools to guide them through a sustainable operation assessment. Further, clearer and more nuanced guidance is required. Current guidelines are too generic and vague to be effective. And, in terms of downstream emissions, some of the responsibilities could be transferred to end-consumers by raising product prices. Last, but not least, the climate crisis is a global issue, so international collaboration is essential for nations to hold each other accountable.

Words by Maria Ding, RCC Stanback Fellow