🌐 From A to Zero: Amazon's journey towards their 2040 goal

Amazon has released its 2023 Sustainability Report. It provides a detailed look at the company's ongoing efforts to reduce emissions and work towards their Net Zero by 2040 target. 

In this blog, we'll be exploring two important questions:

1. What can we learn from Amazon’s emission reduction efforts and their approach to the Scope 3 challenge?
2. What insights can we gain from a deep dive into Amazon’s Carbon Accounting Methodology?

In a nutshell: 

• Amazon can’t reduce their scope 3 emissions without their suppliers doing the same, this is true for any company. They will be asking their suppliers for their emissions data and decarbonisation plans this year. Supplier engagement is the only path forward to meet any scope 3 target. 
• Amazon’s carbon accounting isn’t perfect, but the transparency in their disclosures provides some understanding of the boundary, data quality and methods adopted. This transparency is crucial for building trust and accountability, while acknowledging there’s certainly work to be done here.

The Numbers - A Breakdown of Amazon’s Carbon Footprint  

Key Stats 

Amazon's overall emissions were 68.82mmt (million metric tonnes) for 2023, which represents about 43 million round-trip flights from New York to London.

Amazon’s carbon emissions intensity for 2023 was 80.8 grams of CO2e per $ of gross merchandise sales (GMS). That is, for every dollar of GMS* 80.8 grams of carbon emissions are emitted. To put that into perspective, if a $100 book was sold on Amazon.com, there would be 80.8 * $100 = 8,080 grams = 8.08 kg of CO2e emitted associated with the book being sold via Amazon.com (this doesn’t include the emissions emitted from the production of the book).

*GMS represents the total dollar amount sold via their ecommerce platform i.e. the sales activity on ecommerce rather than Amazon’s revenue from their fees.

Reductions Achieved so far

• A 3% absolute carbon emissions reduction year on year (YoY) between 2023 and 2022
• A 11% reduction in Scope 2 emissions YoY
• A 5% reduction in Scope 3 emissions YoY
• A 13% reduction in CO2e per dollar of gross merchandise sales YoY

Amazon’s carbon emissions intensity figure has dropped from 93.0g CO2e per $ to 80.8g CO2e per $ year on year, and dropped from 122.8g CO2e per $ from their baseline year. This signals some progress in decoupling emissions growth from business growth (net sales grew 12% in FY23).

Despite these improvements, it's important to note that Amazon's overall emissions have increased by 34% since the company committed to net-zero emissions in 2019, from 51.17mmt of CO2e to 68.82mmt. This growth presents a significant challenge as Amazon pursues its ambitious goal of achieving Net Zero by 2040.

How did they do it? 

Scope 2: 11% Reduction

One of the key achievements this year, significantly contributing to the 11% reduction in Scope 2 emissions, was Amazon's progress on their carbon-free energy sources goal. In 2019, Amazon had set a goal to match 100% of the electricity used with renewable energy by 2030. This goal covers all data centres, logistics facilities, physical stores, corporate offices, on-site charging points, and financially integrated subsidiaries.

Amazon reported that they have achieved this goal in 2023, seven years early, where 100% of the electricity consumed by Amazon is matched with renewable energy sources.

💡What does “matched” mean?

It doesn’t actually mean all of Amazon’s operations are now using 100% renewable energy. 

When we delve into the fine print of their Carbon Methodology’s Renewable Energy Methodology as well as EY’s Independent Accountants’ Review Report over the specific subject matter, being “100% of Electricity consumed by Amazon’s global operations matched by renewable energy sources”, we find the word ‘matched’ is referring to the 500+ renewable energy projects they have purchased renewable energy certificates from renewable energy projects they have invested in, plus, any renewable energy they have purchased from the grid.

Basically this means Amazon is purchasing and generating an equivalent amount of renewable electricity to the total amount of electricity they consume in their operations. It’s also important to note that the renewable electricity generated or purchased by Amazon isn’t necessarily in the same location or at the same time as Amazon’s consumption.

Their renewable energy projects include solar, wind, nuclear, geothermal, and battery storage initiatives across 27 countries, representing more than 28 gigawatts (GW) of carbon-free energy capacity. Once they are all operational, these projects are expected to generate more than 77,000 gigawatt-hours (GWh) of renewable energy each year - enough energy to power 7.3 million homes for a year and an increase of 35% from 57,000 GWh in 2022.

As the world's largest corporate investor and purchaser of renewable energy, Amazon's investments are positive as it not only benefits its own emission reduction efforts - particularly in planning for the energy needs of its data centres - but also promises to create jobs and improve renewable energy accessibility for communities in the coming years.

You can explore where Amazon has invested carbon-free energy projects using the map on https://sustainability.aboutamazon.com/climate-solutions/carbon-free-energy?energyType=true

That 5% reduction in their Scope 3 emissions - how did they do it?

Amazon's Scope 3 emissions, which accounts for 75% of their total reported emissions, saw an overall reduction of 5% YoY. This decrease was primarily due to lower emissions from building construction (note the -13% movement for Capital Goods) and a strategic shift towards using Amazon's own logistics providers instead of third-party ones. This shift contributed to a 7% increase in Amazon’s Scope 1 emissions (as mentioned by Amazon on page 11) and also corresponded to a reduction in reported Scope 3. Amazon reported that 29 of their building projects in 2023 used lower-carbon concrete and steel materials, reducing embodied carbon by 79,500 metric tons of CO2e - equivalent to taking 17,200 cars off the road. 

Although this is a step in the right direction Amazon still has a long way to go. 

Acknowledging Scope 3 emissions lie beyond their direct operational control and the crucial role suppliers play in achieving their 2040 net-zero ambition, Amazon communicated very clearly in this year’s report what their expectations are from their suppliers.

"We will prioritize our business toward those who provide their plans and results on their path to net-zero carbon emissions.”

Source: Amazon 2023 Sustainability Report, page 13

Amazon’s Supplier Engagement Approach

In 2023, Amazon announced they will require all suppliers to report their greenhouse gas emissions and in this year’s report, on page 13, they have stated they expect their highest-emitting suppliers - those accounting for 50% of its supply chain emissions globally -  to provide a plan for how they will decarbonise their operations and demonstrate real progress over time. 

💡What support are they providing suppliers?

Amazon announced in July 2024 their new “Amazon Sustainability Exchange” platform, a free, publicly available website that democratises Amazon’s guidelines, playbooks, science models, and other resources to help other companies make meaningful progress toward net-zero carbon emissions.

It includes resources that may help suppliers get started with carbon accounting:

• Playbook for Carbon Measurement and Reporting
  • This essentially sets out requirements for GHG accounting under the GHG Protocol as a guide.
  • Note the focus on audit readiness which is further support for the fact that most suppliers will need this finance teams or accountants involved:

“Maintaining transparency and traceability throughout the data management process is crucial in ensuring the long-term auditability of the organization's emissions inventory. This involves clearly documenting the data sources, calculation methodologies, assumptions, and any adjustments or estimates made, creating a comprehensive audit trail that can be scrutinized and validated by internal and external stakeholders. By prioritizing data quality, verification, and assurance, organizations can demonstrate their commitment to transparent and responsible emissions reporting. This, in turn, enhances the organization's credibility, strengthens stakeholder trust, and helps to position the company as a leader in the transition to a lower-carbon future.”

• Case Studies: For example - How Amazon’s Transportation Services (ATS) developed a carbon emissions measurement and reduction program for its inter-facility transportation and logistics business (“middle mile”) 

Now for the carbon accounting nerds - breaking down their carbon methodology

Let’s dive into the Amazon Carbon Methodology Paper to understand how a complex beast like Amazon approached calculating their GHG numbers.

Emissions Boundary

Amazon.com, Inc. owns 100+ subsidiaries. This is the section that provides clarity as to which operations have been included in the emissions assessment and calculated as part of Amazon’s carbon footprint. 

The listed dot points appear to focus on Amazon’s key operations, covering their logistics, fulfilment centres, their branded products, AWS (AWS extract summary here), physical stores, corporate office, and not necessarily everything under the sun, most notably their investments arm. 

Transparency over potential restatements

Amazon has acknowledged and transparently communicated to their stakeholders that reported numbers may change as measurement techniques evolve and data quality improves.

This is going to be common across most GHG inventories as businesses start measuring their Scope 3 emissions and strive to enhance data quality, transitioning from spend data to activity or supplier specific data. These changes should be encouraged; the ultimate benefit of higher quality emissions data is to reduce noise and provide a clearer understanding of the impact of business activities, enabling strategic decisions that move the organisation towards its net zero goals. 

Reliance on Spend

The majority of Amazon's Scope 3 emissions calculations still rely on financial data aka the spend method, particularly for Purchased Goods and Services, Capital Goods, and even Transportation emissions where fuel and distance information isn't available. 

Spend-based calculations often serve as a useful starting point but it is not possible to credibly track progress to net zero without spending less using this method (that’s not exactly Amazon’s corporate strategy). The use of activity data is often the first step in improving data quality before transitioning to supplier-specific emissions data.

A key takeaway here is “we don’t have emissions data from suppliers” or “we don’t have activity data organised” should not mean your company isn’t carbon accounting - start with spend data if you need to, nearly every organisation in the world is, including Amazon. Improve on it over time. 

Amazon's current reporting lacks clarity as to what extent they have incorporated supplier-specific emissions data or primary data in calculating their emissions.

It would be informative to see the ratio of spend vs activity vs primary data, as well as what portion of their supply chain they have engaged so far. Disclosing such information would give users an understanding of the limitations and uncertainties associated with the estimated emissions calculated. 

Amazon has indicated that their supplier engagement is still a work in progress. With the expectation that their top 50% highest-emitting suppliers will need to report to Amazon, it will be interesting to see the progress in next year's report.

“We have identified a list of the highest-emitting suppliers directly supporting our operations, and expect those suppliers, who collectively contribute more than 50% of emissions globally to Amazon’s Scope 3 footprint, to provide a plan for how they will decarbonize their operations and demonstrate real progress over time. We will prioritize our business toward those who provide their plans and results on their path to net-zero carbon emissions.” 

Source: Amazon 2023 Sustainability Report, page 21

Employee Commute

Amazon's method for calculating emissions from employee commutes involves extrapolating data from a ‘representative sample’ rather than surveying all employees. This approach, while practical, may not fully reflect the commuting habits of the entire workforce, potentially impacting the accuracy of their emissions data. Although it is support for “start somewhere” though for most organisations. 

Again, it would have been helpful to disclose the uncertainty associated with this extrapolated estimated employee commute emissions. In contrast, Microsoft’s disclosure has provided an understanding as to the limitations and uncertainties associated with the calculation - the representative sample is 38% of global headcount, details have been provided for assumptions around fuel usage and WFH habits. An extract is below. 

Amazon Devices and Packaging 

Amazon's devices and packaging seem to be where the majority of their Scope 3 effort is concentrated. Even a giant like Amazon can’t do it all, they have to prioritise efforts for where they can make the most impact. It would be helpful to understand how Amazon has assessed the materiality of their emissions sources.

Amazon also shared - "Our research team creates emissions factors for each device by aggregating the carbon emissions from the manufacturing, transportation, and device end-of-life phases." Given that customers who purchase these devices may need to account for the emissions in their own scope 3 accounting, it would be beneficial if Amazon provided these primary emission factors, without them, every customer is using spend data too.

Their Devices Product Carbon Footprint Methodology outlines the parameters of what's included - a cradle-to-grave calculation covering materials and manufacturing, transportation, use, and end-of-life phases for each device.

What does market-based method for Scope 3 mean?

Currently, the GHG Protocol provides no standard guidance on using a market-based approach to calculate Scope 3 emissions, despite requests for clarification in the GHG Protocol's Scope 3 Survey Feedback. Amazon's approach incorporates emissions data from suppliers who are using renewable energy (where they can account for their Scope 2 emissions under the market-based method) into their Scope 3 calculations where applicable. This method may have contributed to the reported reduction in emissions.

To implement a market-based method, assumptions must be made about what the suppliers Scope 3 emissions entail. This can lead to two scenarios: either Amazon has made educated estimates about their suppliers' scope 3 emissions, or their scope 3 emissions have been excluded and they are using their scope 1 and 2 only.

Given the impact this method has, it should be clear what has occurred here.

Getting on with it

Even though Amazon has not made progress on reducing their baseline emissions from 2019, what we can learn from their climate leadership is that they’re getting on with it and they know they need emissions data from their suppliers in order to move forward. It is great to see Amazon use their stage to draw the world's attention to Scope 3 emissions and the need for businesses in the supply chain to measure their emissions. 

“Climate change also has the potential to disrupt global supply chains and change the ways businesses operate today. We have an opportunity—and responsibility—to use our size, scale, and resources to do our part to solve global challenges.”

Source: Amazon 2023 Sustainability Report, page 9

We’ve only touched on a few from our short analysis, but even from this small excursion into the fine print, you can see how important it is that calculation methodologies and assumptions are disclosed. It provides companies with a more realistic picture of what the numbers mean. You can expect this focus on methodology, accuracy and detailed disclosures to continue - not because the world is getting wrapped up in reporting over action but because the quality of data is so low that credibly tracking progress is impossible. Being able to account for reduction that flows from these initiatives is also key in continuing to build the business case, demonstrating carbon ROI is part of the real world for most companies, rightly or wrongly. 

We’re curious to hear your thoughts on this story! 

Just reach out to us if you'd like to share!

‍For all related sustainability reports, visit https://sustainability.aboutamazon.com/reporting