Microsoft launches initiative to counter 30% rise in Scope 3 emissions since 2020
The company’s carbon footprint is growing because of demand for its new data centers.
Microsoft has adopted more than 80 measures to counteract a 29.1 percent increase in its greenhouse gas emissions since 2020, predominantly driven by its new data centers.
The company‘s Scope 1 and 2 emissions — those closely tied to the company’s operations, manufacturing and use of power — have decreased 6.3 percent since the 2020 baseline. However, its Scope 3 output (indirect emissions from customer purchases and other supply chain categories) climbed 30.9 percent in the same period.
The company’s emissions rose 3.8 percent year-over-year in fiscal year 2023. It was the third consecutive increase since the world’s largest software company announced a 2020 goal to become “carbon negative” by 2030, Microsoft disclosed May 15 in its FY2023 environmental sustainability report. That goal commits Microsoft to canceling out the effect of its carbon dioxide, water consumption, waste production and land use by the end of the decade.
For the year ended June 30, 2023, Microsoft reported 17,162,000 metric tons of carbon dioxide equivalent emitted, compared with 16,538,000 in fiscal year 2022. As was the case for the past three years, all of that increase came from Scope 3.
The weight of concrete, steel and IT equipment
Microsoft executives attribute the increase primarily to its new data centers.
“Our challenges are in part unique to our position as a leading cloud provider that is expanding its data centers,” said Microsoft President and Vice Chair Brad Smith and Microsoft CSO Melanie Nakagawa, in the foreword to its environmental report, published May 15. “But even more, we reflect the challenges the world must overcome to develop and use greener concrete, steel, fuels and chips. These are the biggest drivers of our Scope 3 challenges.”
Microsoft rivals Amazon and Google aren’t due to publish their next environmental progress reports until July. Both made methodology updates that affected their last reports that make exact comparisons difficult, but they also have pointed to data center construction — accelerated by demand for artificial intelligence services — as a growing challenge to energy, waste and water goals. Google would have reported no change in Scope 3 emissions for fiscal year 2022 in the absence of its methodology change. Amazon reported a 0.7 percent decrease for Scope 3, citing its ability to reduce construction emissions.
Microsoft’s Scope 3 accounts for about 96 percent of its total emissions. Of that, three-quarters are related to purchased goods, Nakagawa told GreenBiz in an interview. “I think it’s important to highlight, we are very aware of what our challenges and opportunities are,” she said. “We’ve started to put in place initiatives and efforts to get our hands around the size of the challenge we have before us, and what the opportunities are to turn that emissions curve down across our suppliers and value chain.”
The company launched a company-wide initiative to reverse that trend, Nakagawa said. That strategy includes more than 80 “discrete and significant measures,” including a new requirement that requires “high volume” suppliers — those with which it most frequently does business — to use carbon-free energy by 2030. It previously required them to reduce absolute emissions a minimum of 55 percent by that timeframe.
Microsoft adopted stricter emissions disclosures by certain suppliers in the summer of 2023. (Amazon is embracing similar measures.) Emissions data is also part of Microsoft’s procurement criteria — division heads are charged an internal fee for emissions, including those of their suppliers. “The more that they can make informed decisions that are lower-carbon, the better off they will be in terms of the fee impact they’ll see on an annual basis,” Nakagawa said.
The 80 initiatives are spread across five priorities set by the Microsoft Climate Council. The group is chaired by Smith and includes Nakagawa and business leaders from across the company. The priorities are:
Use digital technology, including artificial intelligence, to gather insights and automate the management of electricity and water consumption. For example, Microsoft is an investor in LineVision, which makes software that helps free up electric grid capacity.
Increase the efficiency of data centers’ use of water.The company’s massive new data center in Wisconsin, for example, will be cooled with a closed-loop, water recycling system that uses new water only in rare circumstances.
Use its purchasing power for new solutions, including lower-carbon computer servers, steel, electricity and concrete. In April, for example, Microsoft put more money into LanzaJet, which makes sustainable aviation fuel, through its $1 billion Climate Innovation Fund.
That’s more than five times the carbon removal offsets Microsoft bought in fiscal year 2022. It could match that amount during the current fiscal year: Microsoft signed its largest carbon removal deal to date in early May with Stockholm Exergi. It covers 3.33 million metric tons of carbon removal for 10 years starting in 2028.
For accounting purposes, carbon offsets are retired as they are generated. For fiscal 2023, Microsoft retired offsets related to about 605,000 metric tons of CO2 equivalent, which enables the company to claim it is carbon neutral.
As the fashion industry continues to grapple with the far-reaching impacts of the pandemic, it has become clear that the ability to swiftly respond to changes in the supply chain is a defining factor in achieving success.
On 6 June, 2023, SHEIN hosted a webinar that discussed how digitalization and agile supply chain models are helping fashion industry players gain a competitive edge in today’s market.
Panelists:
Donald Tang, Executive Vice Chairman, SHEIN
Divya Demato, CEO & Co-founder, GoodOps
Veronique Yang, Managing Director and Senior Partner, BCG
As the world recovers from the standstill that was the pandemic, the customer purchase decision process has changed, as have the products being prioritized. Customers are demanding greater product variety, including more responsible options and faster product fulfillment to feed their desire for almost instant gratification. Veronique Yang, Managing Director and Senior Partner, BCG, said consumers are demanding more inclusive products with speedier delivery. She added that the growth of ecommerce channels during the pandemic has also driven customer demand for speedier delivery times – while holding expectations on quality and price.
“Consumers are becoming quite demanding and less forgiving, and the battle for those hearts and minds has intensified. And the battle has moved online,” added Donald Tang, Executive Vice Chairman from SHEIN. He further referenced results of a recent survey of over 2,500 SHEIN customers, where 87% reported shifting to more affordable fashion choices as a result of inflationary pressures.
With increasing global economic pressures, there has been a notable shift in supply chains, with companies increasingly having to adapt their models to survive. Said Divya Demato, Co-Founder and CEO of GoodOps, “These changes were happening before the pandemic, but the pandemic exacerbated it.” This was echoed by Donald Tang, who shared SHEIN’s business model of on-demand production. Veronique Yang further explained that companies are rethinking their global supply chain network – diversifying their supply bases “and sometimes even changing their supply chain models to prevent disruption.”
This drove the conversation towards the topic of resilience, which all speakers agreed was fundamental for the advancement of the fashion industry. While Donald Tang further shared how SHEIN had made it its mission to empower the supply chain since the start of SHEIN’s business, whether it was by funding their adoption of new tools and technology, or providing training and up-skilling to their workers, or even offering flexible settlement terms that are much shorter than the 90-days standard of the industry. Veronique Yang also added that resilience required creating more openness and transparency across the entire value chain – from suppliers to retailers. “They have to work together to problem solve the potential frictions… and digitization is a big part of that.”
Speaking to the recent report, Creating Agile Supply Chains in the Fashion Industry | BCG, Veronique Yang shared key learnings from BCG’s research:
Digital technology can help improve performance across three measured commercial areas: balancing cost, speed to market and quality
Digitalization helps streamline supply chain tasks and save time for suppliers. For example, an online fabric ordering database and order system makes it effortless for suppliers to carry out material preparation ahead of production
People think it’s hard to control quality while keeping cost down. In reality, a digital system can predict and pre-empt potential quality issues, containing them from the very start of the value chain.
Donald Tang agreed, adding how on-demand fashion enables a brand to minimize waste while addressing the “fashion trilemma” – offering the broadest amount of choices, with frequent refresh while addressing inventory management. In this way, bespoke production can actually cost less than mass production.
Divya Demato countered that while there could be fewer articles of clothing upstream, fashion brands still need to consider downstream and post-consumption. She raised a call to innovation and investments in technologies and materials to support more sustainable fabrics for upstream.
In closing, speaking to forward looking change, Veronique Yang added: “Fashion industry companies – you have the responsibility and power and influence and to shape this together.”
In the short Q&A segment, there was much interest in SHEIN’s ability to replicate its business model in other markets. Donald Tang invited Marcelo Claure, Chairman of SHEIN Latin America, who was in the audience, to share about his plans and experience in rolling out manufacturing for SHEIN in Brazil.
If there’s one takeaway from the pandemic, it’s that an agile supply chain can make or break a company.
The pandemic exposed supply chain vulnerabilities that caught many fashion brands and retailers by surprise. Companies that didn’t have the agilities to pivot around isolated problems, solid supplier relationships to gain access to limited resources, or supply chain visibility beyond Tier 1 to appease an increasingly demanding consumer, were left out in the cold. Shifting consumer priorities also put pressure on fashion brands to produce faster, more broadly, more sustainably and without added cost—a four-way challenge if there ever was one.
The webinar “Agile Supply Chains: The Future of the Fashion Industry,” outlined how nimble supply chains offer a major competitive advantage, including improved customer responsiveness, faster time-to-market, reduced inventory holding costs and enhanced collaboration with suppliers. The discussion tapped into the knowledge of Donald Tang, executive vice chairman of global fashion and lifestyle e-retailer SHEIN; Veronique Yang, managing director and senior partner, Boston Consulting Group (a recent study outlined SHEIN’s supply chain advantages); and Divya Demato, CEO and co-founder of sustainable supply chain consultancy GoodOps.
Achieving supply chain agility is not easy, but digitization that empowers suppliers along the value chain to be more efficient, self-sufficient and make smarter choices is a sure path. It also requires a cultural shift and revolutionary rethink on the scale of Henry Ford’s auto assembly line, Walmart’s everyday low prices or Amazon’s overnight shipping.
And with consumers wanting more, more, more—from endless trend options to more inclusive sizing—brands must strike the delicate balance of creating more while keeping production waste to a minimum. This can only be achieved by really knowing what the customer wants, then using shared information and services, material economies of scale, and sharp manufacturing technology to do it efficiently.
“We reimagined the supply chain, which is a daunting task, and we have done it by digitizing the small- and medium-sized factories to give them visibility to see their own capacity, continued order flow and seamless efficiency. [We also] give them better liquidity because we pay them very fast and give them volume discounts on the raw materials,” said Shein’s Donald Tang. “All these benefits help them make better choices in terms of investments and how they run their factories.”
It comes down to collaboration and shared goals, so all stakeholders are on the same page. “The pandemic also drove the different parties of the ecosystem—suppliers, manufacturers, brands and retailers—to work together to solve frictions and problems,” said BCG’s Yang. “And digitalization is a very important foundation to enable that.”
Digitization links the chain
To get the best commercial performance out of the supply chain, companies must balance cost, speed to market and quality, said Yang, who noted SHEIN’s accurate demand forecasting, digital sampling to reduce inefficiencies, and new DTC approaches.
As fabrics account for approximately 65 percent of a garment’s costs, SHEIN takes steps to help all its suppliers, no matter their size, optimize their textile buys. Based on market forecasts, SHEIN consolidates the fabric early on, then digitizes fabrics so its suppliers can instantly and easily place orders. Digital analysis then looks at which factory is optimized for an order, reducing redundancy and wait time.
On speed to market, digitalization streamlines production and orders, removing admin and coordination time, while preset criteria creates alignment with all players. On quality, a digital feedback system helps “identify and contain” quality issues.
“People think it’s very hard to control quality when you’re trying to control a call center, but with the digital system, you can feed all the quality issues back into the system. And then this can lock into the average crux of the supply chain,” Yang said. “So starting from the design, you are already pre-answering the potential quality issues.”
Sustainability must drive end of life
As most of fashion’s impact happens upstream, it’s up to the brands to cut production waste and harmful emissions—without passing along the costs to consumers who say they are willing to pay more for sustainable goods but don’t always demonstrate that with their wallets. SHEIN’s on-demand agile supply chain facilitates sustainability by effectively addressing over-production through the alignment of production with customer demand, responsive order fulfillment, reduction of excess inventory and waste, and enhancement of overall supply chain efficiency.
But there’s also an urgency to explore what is happening downstream, especially since fashion demand isn’t going away. And more fashion merchandise coming into the world means more must be dealt with on the other end.
“Sustainability is very challenging. Yes, there can be less waste upstream, but how many articles of clothing downstream are going into the world?” said GoodOps’ Demato, noting that only a miniscule percentage of fashion is recycled, and even garments made from recycled bottles don’t remove fashion waste from landfill. “What can we do upstream with more sustainable materials to help what happens downstream? From a circularity perspective, we have to think about the entire system. That’s a very critical piece in this entire conversation.”
As a major fashion retailer, SHEIN is taking this seriously, but concedes it must be a global effort.
“It’s all going to come down to whether we work together or not, because if we tried to do these things separately, then everybody will fail,” said Tang.
One sustainability action SHEIN recently took was to partner with Queen of Raw, a company that sources existing materials from brands and retailers looking to responsibly clear out their excess fabric inventory rather than have it go to waste in landfills. The company says that diverting 1 million yards of fabrics from excess inventory would set SHEIN on the trajectory to become one of the global leaders in repurposing deadstock materials, helping conserve water and preventing the creation of carbon dioxide equivalents that would have been generated through conventional production methods.
“We have to take bigger steps to really address that through a point of view,” Tang added. “If you can find a way to do well while doing good, and do good while doing well, that’s a great resource.”
The global pandemic has pushed many companies worldwide to improve the sustainability within their supply chains. GoodOps CEO Divya Demato is leading the charge, as they consult with some of the world’s largest companies, exploring new ways to improve their sustainability practices and gain competitive advantages by going green.
PARIS & NEW YORK–(BUSINESS WIRE)–EcoVadis, the world’s most trusted provider of business sustainability ratings, today announces the winners of its sixth annual Sustainable Procurement Leadership Awards program. Winners were announced at the EcoVadis Sustain 2022 virtual conference.
The EcoVadis Sustainable Procurement Leadership Awards recognize companies who are leading the charge in engaging and integrating sustainability into their relationships with trading partners around the globe.
“Each year our nominees exemplify what it means to drive positive environmental and social change through their sustainable procurement initiatives,” said Pierre-François Thaler, Co-CEO, EcoVadis. “While every nominee is making great strides within their sustainability journeys, this year’s program winners stand out for the exceptional progress they are making to create a more sustainable future for our planet and its people.”
Winners were selected based on their EcoVadis scorecards published in 2021. This year’s nominees were evaluated on strategy and approach, procurement integration, scale and coverage, and program results across three main categories:
This award was given to two companies. It acknowledges excellence in engaging trading partners in sustainability initiatives and honors best-in-class examples of driving internal engagement to roll out global sustainable procurement programs.
The jury panel noted key attributes leading to Schneider Electric’s winning selection, including an integrated Supplier Sustainability Program (SSP) strategy and engagement, contribution to the United Nations’ Sustainable Development Goals (SDGs), a focus on working conditions and human rights, strong and sustainable supplier relationships, and more.
Dan Bartel, Chief Procurement Officer, Schneider Electric
“Sustainability is at the core of our mission and purpose, and our global supply chain plays a central role in Schneider Electric’s decarbonization strategy. The Zero Carbon Project is how we are engaging our top 1,000 suppliers to enable climate action. By creating this community of suppliers, they can benefit from best practice sharing as well as get access to our energy management and sustainability expertise. Our suppliers are able to reduce their carbon emissions and we in turn reduce our Tier 3 emissions — it’s a win-win. We are delighted and humbled with this recognition from EcoVadis.”
The jury panel also recognized W.R. Grace for its ambitious goals aligned with the United Nations’ SDGs, top management support and program leadership to cascade sustainability criteria into functions, processes and performance, creation of a Global Responsible Sourcing Committee, alignment with the Grace Responsible Mineral Approach with OECD Due Diligence standards, and more.
Chris Schult, VP of Strategic Sourcing, W.R. Grace
“Responsible Sourcing is a key pillar advancing Grace’s global sustainability objectives. Working with EcoVadis enables us to engage with our global value chain in ways that were simply not possible before. This engagement allows Grace to ensure that our raw materials are sourced responsibly and that our suppliers meet the highest standards of transparency thereby building both a responsible and resilient supply chain.”
Read the full profiles of the expert jury members and details on the key attributes of these winning programs here.
This award recognizes individuals with outstanding contribution to driving a sustainable procurement initiative forward within their company. The award is nominated and selected by the EcoVadis team based on sustainable procurement program results and demonstrated excellence in program strategy and execution.
Regarding Brad Adams, Compliance and Sustainability Manager, John Deere
“We are honored to accept the Outstanding Program Leadership award from EcoVadis, recognizing the outstanding efforts of Brad Adams and our Supply Chain Sustainability team. John Deere is committed to delivering outcomes to all stakeholders that are both more economic and more sustainable through our Smart Industrial strategy and recently launched business and sustainability goals. Our suppliers are a critical part of our journey to unlocking the innovation necessary to provide more sustainable solutions and technologies to our customers.” Jill Sanchez, Director of Sustainability, Deere & Company. Learn more about their goals and program here.
“On behalf of the whole Indirect Purchasing team of Auchan Retail, it’s a great honor to receive this award from Ecovadis. This award is a recognition for all the hard work that has been done already, and clearly demonstrates the positive impact of our Global sustainable procurement program. A warm thank you to all our purchasing and CSR teams worldwide, which all contributed to that success. Also, thank you to EcoVadis for your dedication in improving sustainability in our supply chain, and beyond, to our wide community of trusted suppliers and partners.”
This award is granted to companies who demonstrate the highest percentage of rated companies improving their sustainability performance. This category was not open for submissions and was instead granted based on the EcoVadis data.
Dave Ingram, Chief Procurement Officer, Unilever
“Unilever is pleased to share this award and achievement with both EcoVadis and our suppliers, in recognition of the partnership and collaboration required to make improvements to our supply chain. Our Responsible Sourcing Policy is the fundamental starting point for Unilever’s ambition to make sustainable living commonplace, and Ecovadis supports this journey by helping to identify where our partners can improve and progress on environmental and social commitments. Ultimately this award is the result of the hard work of our partners, so a big thank you, and congratulations to all our suppliers for your efforts.”
Sandro Avila, Operational Planning, Logistics and Supply Chain Director, Klabin
“It is an honor to be granted the Best Portfolio Performance Improvement award by EcoVadis, which has become a key partner in advancing the sustainability agenda. This award demonstrates the Company’s investments for a renewable future, such as the implementation of the Sustainable Supply Chain Management Program, which helps and fosters our suppliers in advancing with responsible socio-environmental practices. To EcoVadis, thank you very much for your support in improving sustainability in our supply chain.”
In addition to these awards, EcoVadis also recognizes a selection of small- and medium-sized rated companies (i.e., suppliers and trading partners) across the globe who achieved exceptionally high performance in their EcoVadis rating in the past year. Learn more on the EcoVadis 2022 Sustainability Leadership Awards page.
About EcoVadis
EcoVadis is the world’s most trusted provider of business sustainability ratings. Global supply chains, financial institutions and public organizations rely on EcoVadis to monitor and improve the sustainability performance of their business and trading partners. Backed by a powerful technology platform, EcoVadis’ evidence-based ratings are validated by a global team of experts, and are adapted to more than 200 industry categories, 160 countries, and companies of all sizes. Its actionable scorecards provide benchmarks, insights, and a guided improvement journey for environmental, social and ethical practices. Industry leaders such as Amazon, Johnson & Johnson, L’Oréal, Unilever, LVMH, Salesforce, Bridgestone, BASF, and ING Group are among the 90,000 businesses that collaborate with EcoVadis to drive resilience, sustainable growth and positive impact worldwide. Learn more on ecovadis.com, Twitter or LinkedIn.
“Above all we understood we went way too far. Our reckless actions have burned the house we live in,” says Gucci creative director, Alessandro Michele.
Angeli Mehta explores the troubling reality facing the fashion industry in her recent article in Ethical Corporation: “‘Pandemic forces fashion industry to take stock.”
The dire conditions facing manufacturing communities, due to abrupt cancellations of apparel orders from global brands, is accelerating the already critical crisis.
Highlights from the report include:
The average market capitalization of apparel, fashion and luxury brands dropped almost 40% in the year to the end of March.
McKinsey expects “a large number” of global fashion companies will go bankrupt in the next 12 to 18 months.
In 2016, WRAP estimated the fashion industry global supply chain waste was 800,000 tonnes, even before any clothing reached the consumer. In the UK alone that year 300,000 tonnes of clothing went to landfill.
The industry accounts for 10% of global carbon emissions.
McKinsey’s survey of North American and western European sourcing executives reveals not all brands are taking steps to support their supplier base. And only 19% are providing pre-payment for orders, even though 64% of respondents said this action would have a significant impact.
The pandemic has increased consumer interest in sustainability: a survey of consumers carried out in Europe and the US in March suggested 20% of them want to support local business, and in Europe 16% said they’d be buying more socially and ecologically sustainable clothing in future.
Consumers have also taken note of efforts by brands to look after their employees, contributing items like PPE, or donating to their communities.
The Textile Recycling Association fears that unsold stock will take the place of secondhand clothing in many markets in eastern Europe.
Pierre-Francois Thaler, Co-founder and Co-CEO of EcoVadis, perfectly articulates the new business imperative – sustainable supply chains – in his piece in Future of Sourcing, “The Growing Business Criticality of a Sustainable Supply Chain.”
Key insights include:
88% of studies found companies adhering to social or environmental standards showed better operational performance, with 80% showing a positive impact on stock performance.
Sustainably minded shoppers will spend $150 billion on sustainable products by next year. That’s $14-22 billion more compared to prior years, pointing to new sales opportunities for businesses that prioritize sustainability in product devleopment.
Sustainable supply chain practices reduce costs by 9-16% and create a 15-30% increase in brand value. 73% of CEOs report sustainable business builds trust and reputation.
Ignoring ESG exposes investments to huge risks and erodes returns. This behavior has wiped out $534bn of valuation in the last five years.
Supply chains are moving in a more sustainable and transparent direction for industries around the world. While this global movement is evident to many, there are still companies, even countries, who remain in the dark ages. The shadow economy of Italy is a stark example. According to a recent New York Times article, sophisticated craftsmanship and hard labor in Italy is often underpaid and overworked. For example, seamstresses for high-end luxury fashion brands can be paid as low as €1 per meter of fabric they complete. The seamstresses and garment makers for these companies often go without contracts and are uninsured. In southern Italy, the most one seamstress has ever made is €24 on a garment. This is a fraction of the articles she produces that often sell for €800 – €2,000 euros for luxury brands. With a rise in transparency, how much will consumers tolerate from a company before they de-risk and humanize their supply chains?
Congratulations to ABLE for launching a bold and disruptive campaign in fashion – publishing factory worker’s wages. Based on a rigorous supply chain audit performed by GoodOps, brands can evaluate their supply chains for potential risks. ABLE is a social enterprise focused on uplifting women out of intergenerational poverty. They are taking bold steps towards transparency to ensure their social impact marketing aligns with actual business practices. Their big dream is brands sharing their worker’s wages on the label of each garment the same way nutritional facts are labeled on food.
ABLE believes consumers will demand change once informed on the human cost of their purchases. ABLE wants brands to take the #PublishYourWages challenge to lift more women out of poverty globally. GoodOps is proud to have designed and led the sustainable supply chain audit for this powerful and ground-breaking initiative.
Learn more about their revolutionary campaign to change the fashion industry in Fast Company. #PublishYourWages #ShesWorthMore #livefashionable
De-risk your supply chain and strengthen your social / environmental impact through a custom supply chain audit – learn more about our services here: GoodOps.
Are better wages the new competitive advantage? Today, Amazon, a pioneer and innovator in commerce, media and technology, is unleashing their latest innovation: an industry leading minimum wage for all full-time, part-time and seasonal workers in the United States. Effective November 1st, the company will offer its 350,000 employees a minimum of $15 an hour. Although the pay increase is still a dollar short from federal livable wage, currently $16.07 per hour, Amazon is taking their criticism and transforming it into a competitive advantage. As Amazon raises wages, they are also pushing for federal law to follow their lead. If successful, Amazon will once again be ahead of the curve, as this cost will already be incorporated into their operations while other companies struggle to balance their finances. Also, as more companies seek to position themselves around social issues, Amazon has taken the lead on a topic that meaningfully and powerfully engages both their workers and consumers.
