What up Crocs
On April 25, 2023, Crocs released its 2022 Sustainability report and announced that it was pushing back its net-zero target from 2030 to 2040 after recording a 45% increase in absolute emissions year-on-year. Representing 245K metric tons of CO2e, this increase from the previous year was due to the company’s continued growth and data transparency. 75% of this total footprint was due to the Crocs brand itself, with the remainder attributed to other divisions primarily from acquisitions.
Crocs is and will not be unique in making adjustments when data transparency shines a light on must-have change areas. Scope 3 reporting has been most challenging, in particular Category 1 (upstream purchased goods and services) and 11 (downstream use of sold products). Most companies thus far have used the least accurate method of Scope 3 calculations via the spend-based approach associated with Defra estimates in order to comply with initial reporting. The ironic part of spend-based Scope 3 reporting is that, if your company grows year over year, your CO2e impact actually INCREASES even if nothing changes with materials, processes, or suppliers. Two other methods provide more accuracy and success probability for meeting Scope 3 targets: AI-powered predictions and actual data from bill of materials and transaction data.
Image: Three methods to calculate and report GHG Scope 3 impact
The urgency has become acute for product manufacturers because time is running out to meet 2030 net-zero targets. If products have an average of a 3 to 5 year design cycle, that means companies have 1 or maybe 2 chances to impact sustainability metrics sitting here in 2023. Leading companies like Apple and Ford are forcing changes. The Wall Street Journal estimates that over 10,000 foreign companies will be impacted by EU sustainability rules including the legal impact of the Corporate Sustainability Reporting Directive (CSRD).
Image: Apple sustainability strategy with materials, processes, and suppliers
Transformation across industries and enterprise stakeholders requires a collective will for change, urgency for response to customer demands, transparency in data sharing, and design changes for built-in benefits. Home appliances transformed how electricity needed to be delivered into homes. Mobile phones transformed how applications needed to be developed and delivered across telecom networks. Climate change is requiring how manufactured products need to have granular visibility into sustainability impact and better decision tools for materials, cost, and supplier risks.
Companies not implementing sustainable business strategies will be the real crocks.