Amazon enters the matrix to pinpoint supply-chain emissions

Amazon is the latest company to test an analytical approach that can illuminate emissions data that’s often hidden within supply chains. By shining a light on flows of commodities and connections between companies, the approach can help tailor programs aimed at supporting suppliers in decarbonizing.

Amazon’s Scope 3 emissions, which include emissions from its supply-chain, totaled 50 million metric tons of carbon dioxide equivalent in 2024, close to three-quarters of the company’s footprint. Figuring out which suppliers in that ecosystem to engage with in order to drive down emissions is a challenge that the company has been working on for some time, said Chris Roe, who leads Amazon’s work to reach net zero by 2040.

Amazon also needed to better understand where those emissions come from, added Roe: “We need to dive deep into not just the companies but the commodities that are core to deeper tiers of our supply chain.”

Into the matrix

To do so, Amazon adapted what’s known as an input-output (IO) model: a matrix that describes how different sectors of an economy are connected. Among other things, policymakers use these models to estimate the likely impact of specific projects, such as a stimulus package or a city hosting a major sporting event. 

When combined with environmental data, IO models can also generate spend-based emissions factors, a widely used, if crude, tool for estimating the emissions associated with purchases of everything from construction materials to semiconductor chips. In this case, Amazon tweaked the process to preserve the supply-chain data in the IO model. This creates a series of data points describing the emissions generated by the network of companies that sit behind Amazon’s direct suppliers.

“Spend-based approaches get thrown under the bus because we’ve only tried to use them one way — and that one way is really limited,” said Tim Smith, founder and CEO of TASA Analytics, a consultancy that uses a similar analytical approach and counts Microsoft among its clients. “There’s a lot more richness in this data that is available and useful.”

Intervention points

Armed with a more detailed picture of where its emissions come from, Amazon is now considering how to use the data to shape its supply-chain decarbonization efforts, including programs that support suppliers in accessing renewable energy. 

“This science-based model allows us to identify where to focus our efforts within the supply chain to pursue these decarbonization opportunities most effectively,” said Roe. “It also gives us the ability to estimate the emission reduction potential when our suppliers take action on carbon-free electricity adoption.”

Companies can also use the method to collaborate with peers, because even the wealthiest cannot afford to decarbonize an entire supply chain, noted Smith. “You can start building a coalition of the willing,” he said. “And I think that’s the next step of how to scale implementation.”