IT is soft yet supportive, moisture-wicking, breathable, and flexible – offering a second-skin feel that provides freedom with every movement.
The fit of each piece of athleisure from this renowned brand flatters and streamlines the body, boosting confidence for anyone who wears its products.
Whether for workouts or casual wear, the brand's gear offers the perfect balance of comfort, performance, and style, making anyone feel ready for any activity.
However, this “luxury” comes at a steep price for both consumers and the environment. To produce its athleisure wear, which has amassed a cult-like following, the brand has accumulated significant Scope 3 emissions.
According to its 2022 impact report, its Scope 3 emissions – indirect emissions from its supply chain – have grown to 1.2 million tons of carbon dioxide. These 2022 emissions are nearly double the company’s 2020 Scope 3 emissions.
This has led to environmental advocacy group Stand.earth filing a legal complaint against the Canadian brand, specifically targeting its ESG strategy outlined in October 2020. Part of this strategy included promises to ensure that at least 75% of the company’s products would contain sustainable materials and to reduce freshwater use by 2025.
The legal complaint argues that the brand’s marketing misrepresents its environmental efforts, implying that the brand has a net positive impact on the planet. The company had claimed that “our products and actions avoid environmental harm and contribute to restoring a healthy planet” and “by adopting and evolving practices and mindful solutions, we enhance the products we offer and contribute to restoring the environment.”
It was also highlighted that the company’s climate and environmental footprint—particularly from its value chain—is both significant and growing. This could lead to a loss of customer trust and loyalty, ultimately impacting sales and revenue.
Does it matter?
Scope 3 emissions have come under greater scrutiny in recent years. This term, introduced by the Greenhouse Gas (GHG) Protocol, refers to indirect emissions generated beyond a company’s direct control. Unlike Scope 1 and Scope 2 emissions, Scope 3 emissions encompass both upstream and downstream activities across 15 distinct categories. Thus, making it notoriously difficult to measure and manage.
Harvard Business Review had reported that Scope 3 emissions are the “fatal flaw” in GHG reporting as companies have been encouraged to exert influence over emissions that they don’t control directly. It was stated that the difficulty of tracking emissions from multiple suppliers and customers across multitier value chains makes it virtually impossible for a company to reliably estimate its Scope 3 numbers.
However, ignoring Scope 3 can tarnish a brand’s reputation, particularly when customers are becoming more conscientious of the environmental footprint of the products they buy. According to KPMG’s Unlocking the Scope 3 Opportunity study, tackling Scope 3 emissions will be critical to achieving any kind of climate goal as they typically make up 70% to 90% of a company’s carbon footprint.
Without a robust Scope 3 reporting practice, organisations cannot obtain accurate emissions data necessary to fully decarbonise its supply chains.
Waging war against emissions
Addressing Scope 3 emissions is essential for achieving sustainability goals, as these often account for the majority of a company’s carbon footprint. A critical first step is engaging leadership by ensuring the C-suite and board understand the implications of Scope 3 emissions and their impact on business areas. Establishing cross-functional steering committees can help align efforts across the organisation.
Measuring emissions is equally important, with a focus on identifying hotspots within the value chain and prioritising decarbonisation initiatives in those areas. Companies should also model supply chain risks to understand how climate change and other disruptions may pose specific vulnerabilities, enabling swift action to address these challenges.
Opportunities for low-carbon initiatives, particularly in product design, sourcing, and production, can help manufacturing companies build resilient value chains. Collaboration with suppliers is another critical component, as helping them measure emissions and assess the return on investment for decarbonisation supports broader sustainability goals.
Lastly, exploring partnerships with external organisations, such as NGOs, industry associations, or educational institutions, can deepen research and innovation, accelerating the development of sustainable solutions.
Meanwhile, KPMG recommends that once a company has set the necessary targets and the corresponding framework to measure, assess and monitor its Scope 3 emissions, the next step towards decarbonisation will require changes that can tangibly reduce GHG production within the organisation as a whole.
Best practices that can help companies focus on specific themes include establishing organisational ESG governance; setting up an ESG or Sustainability Committee; utilising emissions KPIs or scorecards; linking sustainability progress to executive incentives; and establishing dedicated climate-related taskforces or working groups.
Advancement through collaboration
Collaborating with external organisations can provide a crucial edge for companies aiming to accelerate their decarbonisation efforts, particularly when specialised expertise is required. Key partners may include NGOs, industry associations, universities, government entities, and external consultants, each offering unique benefits.
KPMG’s study demonstrates that companies in the Asia Pacific region show a strong preference for partnerships with NGOs (40%) and industry associations (36%), while engagement with government entities (14%) and universities (11%) remains relatively low.
These choices often reflect the environmental and cultural dynamics of specific countries. For example, businesses in China and Japan gravitate toward government partnerships due to the central role of policymakers in shaping environmental regulations.
Conversely, companies in Australia and South Korea favour NGOs, indicative of a robust civil society driving climate advocacy. Australia also stands out for its reliance on external consultants, signaling a strong demand for independent expertise.
However, the study points out that the region’s limited collaboration with universities and research institutes suggests missed opportunities. Tapping into these institutions’ deep knowledge of climate science could significantly enhance Scope 3 emissions measurement and decarbonisation strategies.
Reduce from within
To successfully decarbonise, companies are recommended to address the core drivers of their environmental impact, particularly their Scope 3 emissions, which stem from the purchase of inputs and the sale of outputs.
The KPMG report stated that these emissions often represent the largest share of a company’s carbon footprint. To tackle Scope 3 emissions, companies need to retool several aspects of their operations, such as product design and innovation; product energy efficiency; sustainable sourcing, sustainable packaging
In Asia Pacific, 48% of companies prioritise sustainable product design and innovation, as they have more control over these processes compared to sourcing sustainable materials (41%) and packaging (41%).
Japanese and South Korean companies lead in decarbonisation due to factors like resource scarcity, a focus on technological innovation, and government regulations promoting energy efficiency. These efforts, combined with sustainable design, sourcing, and packaging, will be key to achieving significant decarbonisation in the region.
Downstream versus upstream
Reducing Scope 3 emissions hinges on a company’s ability to engage stakeholders across the entire value chain, including suppliers, distributors, and consumers. A robust supply chain engagement strategy builds trust and facilitates effective communication, which is critical for accurate emissions monitoring and implementing meaningful change. Common engagement themes include transparency, incentives, capacity building, and governance.
In the downstream supply chain, companies can cut emissions by optimising logistical networks, such as relocating production sites closer to key consumption centers. Customer engagement also plays a significant role, whether through direct efforts like educational campaigns and reward systems or indirect approaches such as policies and marketing. Companies in Asia Pacific show a preference for direct customer engagement over methods like surveys.
In the upstream supply chain, companies wield significant influence, particularly over tier-1 suppliers. Many multinationals now require suppliers to adhere to strict sustainability standards, a trend extending deeper into supply chains.
For Asia Pacific companies, 66% have integrated environmental and social criteria into their supplier onboarding process, showcasing growing ESG awareness in procurement.Continuous engagement is vital, as compliance at onboarding may wane over time. While 63% of companies regularly assess or audit suppliers, only 26% prioritise those demonstrating sustainability certifications or actions.
This suggests a tendency toward punitive measures rather than collaborative strategies. Leading practices include phased ESG requirements, training programmes, and active supplier engagement to build capabilities.
In Asia Pacific, 57% of companies have invested in supplier training to improve environmental and social performance reflecting a growing recognition of the need for a supportive, partnership-based approach.
What will happen?
As businesses confront the challenges of the next two decades, addressing Scope 3 emissions will be critical. Companies will need to balance dual roles as both suppliers and customers, necessitating accurate and transparent emissions measurement and reporting.
Evolving regulations and increasing customer demand for verified carbon footprints underscore this urgency. However, these shifts present opportunities for businesses to improve operations rather than just meeting compliance demands.
Investing in advanced data collection and analysis capabilities will enhance emissions tracking and enable smarter decision-making across supply chains. Such digitalisation efforts can drive operational efficiencies, strengthen reputations, and yield benefits beyond sustainability.
By engaging deeply with their value chains, companies can better understand their full GHG impact and implement strategic solutions that contribute to meaningful climate action.
Forward-thinking organisations adopting best practices in operational excellence will not only ensure compliance but also create lasting value and help shape a sustainable future. Tackling Scope 3 emissions is both a responsibility and a strategic advantage.