Global food retailers increasingly turn to their suppliers for decarbonization

In an effort to reach the Paris Agreement's goal of reducing global emissions and limiting global warming to 1.5 degrees Celsius above pre-industrial levels by the end of this century, food retailers are focusing on reducing their scope 3 (or indirect) emissions, which account for 95% of their total emissions. Currently, over 85% of the top 15 food retailers worldwide have set targets for scope 3 emissions, including both emissions reduction and/or supplier engagement targets.

In recent years, scope 3 emissions reduction targets have become more complex and detailed, and the number of supplier engagement targets has generally increased. Although this makes food retailers' targets more tangible, it also complicates the tracking of reported progress. Progress toward achieving these targets varies significantly among retailers, as accurately measuring emissions using supplier-specific (primary) data is challenging. For retailers to meet their decarbonization goals, supplier engagement is essential. Suppliers who assist retailers in achieving scope 3 objectives are likely to gain a competitive advantage while those who do not fall behind.

While there is no one-size-fits-all approach to engaging suppliers, we have identified the core strategies that retailers use. Primarily, retailers use incentives, like knowledge sharing, collaboration, co-investment, adapting product mixes to lower-carbon alternatives, and financing. But in some cases, retailers use penalties in their strategies. Supplier engagement is vital, and suppliers should prepare for increased expectations from retailers, who are increasingly using incentives and demanding that their suppliers set their own targets and share primary data, especially as near-term scope 3 deadlines approach.