Sustainable Views: Tackling Scope 3 emissions – reality check on decarbonisation

Hello and welcome back to the Sustainable Views podcast from the Financial Times Group, where we discuss all things sustainability related. My name is Philippa Nuttall, editor of Sustainable Views, and I'm your host for today. Today, I'm delighted to be here with a great set of speakers. We have Kathleen McLaughlin, CSO at Walmart, and Jeremy Oppenheim, Managing Partner at Systemiq. And today we're going to be tackling some tricky questions around Scope 3 emissions. We're particularly excited as well about this set of podcasts because we're recording them in conjunction with We Mean Business, the progressive business coalition. So welcome to both of you, Kathleen and Jeremy. Great to have you with us today. So to start, Jeremy, perhaps you can explain to us exactly what we mean by Scope 3 emissions and why tackling them is quite so important.

Terrific. So look, Scope 3 emissions are the indirect emissions from a company's upstream and downstream value chains. So it embraces the suppliers of a company as well as their customers. Why do they matter? They matter because they can account for up to 95% of a company's total measured emissions. And on average, They're about 3/4 of a company's emissions. So they're a huge, if you will, component of the overall greenhouse gas emissions of a company. They're challenging because companies have no direct control over many of these emissions. I mean, that's the point. They're scope 3, not scope 1 or 2. And often we find that these scope 3 emissions are located in those parts of the value chain that are quite hard to abate. So it's not that they are the easy stuff, they're often the harder stuff, which may be why they were, if you will, put into the value chain and taken out of direct operations in any event.

So Kathleen, you're CSO at Walmart. Can you explain what percentage of your emissions are Scope 3 emissions and what you're doing to try and reduce them?

Yeah, well, as Jeremy said, Scope 3 represents the emissions from any indirect influence of any organization or any company. So for a retailer, typically Scope 3 represents 95 to 99% of the emissions footprint. And those emissions are the emissions generated in producing any product and in using any product that a retailer sells. And so for a typical retailer, those emissions span 6 different sectors, you know, industry and, and land-based energy and land use systems. So everything from power, so all the utilities that generate and, you know, power that any supplier might be using or any customer plugging in a toaster in the wall in Iowa, the emissions from that power company will be considered part of the retailer's Scope 3. So it's really an accounting metric if you want to think of it that way.

So super complicated, and it sounds like a total nightmare. So what are you doing at Walmart to try and address some of these emissions? What steps have you taken?

Well, what we've done is two things. One, engage our suppliers, and then the other is engage our customers in shifting methods of production in the case of suppliers and, you know, assortment options for customers to lower that footprint. For example, in 2017, we launched a project called Project Gigaton, which is our initiative to engage our suppliers across all the categories that we sell and all the value chains that those items represent, everything from electronics to apparel to meat and dairy to produce, you name it, if we sell it, we're engaging suppliers in those categories to undertake practical projects that can reduce emissions all along the value chain, which, you know, depending on the category, might be 5 or 6 stages going from a farm, let's say, to, you know, a manufacturing facility to trucking to another facility for finished goods to the retail to the customer. So we started this project, Project Gigaton. We asked our suppliers to engage. We identified the biggest concentrations of emissions in value chains. And, you know, for us, those would be energy, waste, packaging, transportation, product design, regenerative agriculture. And we identified practical projects that suppliers could undertake with their suppliers in the value chain to reduce or avoid or sequester carbon. And then with customers, what we've recognized is the Scope 3 metric only accounts for items that use energy in terms of the customer stage of the lifecycle footprint. So we focused on those assortments to offer energy-efficient items, Energy Star items, and so on, you know, because that's really the main thing we can do in terms of customer. Emissions that they're generating in their household by using products that consume energy.

And are you seeing concrete results? I mean, have you seen since 2017 emissions reductions in your Scope 3 emissions because of this work?

Yeah, I mean, what's terrific is to date we've had over 5,900 suppliers engage in practical projects that they are pursuing and reporting on. We've supported them a number of ways, and to date they've delivered over 1 billion metric tons of emissions reduction. Or avoidance or sequestration through these kinds of projects. And it's everything from improving energy efficiency in a factory to adopting renewable energy, you know, shifting their power source, to redesigning a product to be more energy efficient or have lower emissions, to working on regenerative agriculture. So fertilizer optimization with farmers, cover crops, no-till, initiatives, packaging reduction, those kinds of projects. And we worked really closely with Environmental Defense Fund, with CDP, with World Wildlife Fund to figure out what the biggest concentrations of emissions are and what are some ideas for suppliers to pursue and how could they measure those reductions. So we've been really happy with the progress so far. And, you know, our initial goal, we called it Project Gigaton because we wanted to achieve a gigaton by 2030. And we hit that late last year.

And Jeremy, Kathleen's taken a very complicated situation and made it seem all quite manageable and exciting even in terms of the innovative projects that are being put in place. And what do you see as the main challenges for companies in terms of dealing with Scope 3 emissions?

Well, of course, the main challenge is that we don't have enough Walmarts in the world. Because if everybody behaved like Walmart, then we'd tackle this one and we would have Kathleen leading the charge across multiple value chains. But I mean, jokes aside, the hard piece of this is a combination of the following. The first is that many of the things that Kathleen has described are good for the business over 3 years or 5 years, but not all of them are good for the business this year. So even in cases where you have energy efficiency stories where the payoff is quick or fertilizer optimization stories, some of them that generate benefits in year, but quite a lot of them need a bit of patience and need a big, if you will, upstream or downstream customer in Walmart's case saying, all right, we're with you and we're backing you and we're encouraging you and we're providing you with the tools. And in some cases, we'll give you a longer-term offtake agreement because "Because if we do that, then it's bankable. And if it's bankable, then you can finance that 2, 3-year time." And sometimes it's longer than 2 or 3 years to get the paybacks to work. So it's having that enlightened, if you will, player at the heart of the value chain that is willing to provide the suppliers with, if you will, the tools, the know-how, the incentives, the encouragement, the capital, All of that stuff, right? So there is, I think, an essential economics of this. I mean, this is not about just all the accounting and the reporting and all that stuff that I think, frankly, does everybody's head in, does my head in. This is about creating supply chains and through to end use with customers that work better, right? And that is about aligning interests. Along that value chain in such a way that all the actors can get, if you will, an environmental benefit, which is important because we're all driving towards that goal. But it is also one in which there is actually the potential for an improved, if you will, performance. And whether that comes from efficiency and optimization, and there are 1,000 examples of that, or it comes from innovation. And some of the innovations I think are stunning, that are potentially going to come through. It does actually require that fundamental alignment of interests amongst the players.

Kathleen, go ahead.

Well, I was just going to give, you know, a couple examples of that. So let's just take agriculture, for example. There are some initiatives that suppliers or farmers can take that may even be cost reducing. In their current production and not compromise yields. So take, for example, fertilizer optimization. You mentioned that, Jeremy. Farmers don't want to waste fertilizer. So there's been tremendous innovation around farming equipment and methods and so on. And most farmers today would do some form of optimizing their fertilizer. So it's putting the right amount in the right spot that lowers emissions versus just applying fertilizer liberally across the entire field. It also saves the farmer a lot of cost. So that's an example of a change that can be made that's better for everybody, better for soil health, better for the farmer, better for the yields. It's lower cost, obviously lower emissions. But take a different intervention, let's say controlled release fertilizer, which requires a fair amount of technology, or let's say using biodiesel for the on-farm machinery and equipment. That's still at the early stages. And some of those options may either not be available at any kind of scale, or they may be extremely expensive. And so if you look across the entire suite of options that would be available today to lower emissions just from agriculture, some of them are immediately, you know, available and attainable, and then others just, they're just more difficult. So we need more innovation as well. And, you know, for some of these practices, Jeremy, to your point, if you were to adopt a whole suite of, let's say, regenerative agriculture practices, in the long term, your yields will improve, the soil health will be better, you'll have less nutrient runoff into waterways. There are all kinds of benefits. Nutrition is even better according to many studies, but there may be a 2-3 year period where the yields fall a bit. And so, you know, how do you help a farmer get through that? Transition. And ultimately, for us to decarbonize value chains collectively, you're talking about a massive energy transition. That's still the lion's share of emissions come from energy. And you can do all kinds of innovations all along the chain, but ultimately it's going to come down to the nature of those electrons. How are they generated? And the emissions that come from energy production.

I think it's a great example, Kathleen, that energy one. And just to pick up on it for a moment, because when we about, for example, with fashion companies. They, of course, again, their Scope 3 emissions are 95% of their emissions. And that ranges from the kind of the inputs in terms of the raw materials, but it also is a large proportion of them is what goes on in the kind of manufacturing of textiles and then the translation of that into garments. Now, what happens, of course, with many of the kind of the big brands that we all know and love is that they are They're all sourcing from a range of factories, of course, right? And sometimes it happens that a particular brand will have 100% of a factory, but on the whole, they're 20% of the output of factory 1 and 15% of factory 2 and on and on and on. And so there's a piece, and I think you used the word, Kathleen, of collective, right? Some of these solutions will work much better when there are forms of collective action that are somehow kind of brought together in ways that allow for a factory to know that its top 5 customers that represent 80% of its sales are willing to, if you will, collaborate just enough so that there's a contract in place that would allow that factory owner to go and actually shift from brown electrons to green electrons. And in some cases all the way through, maybe a PPA or it might be actually direct solar. But this is where you need a degree of coordination amongst the, if you will, the major companies that historically has not been the way of doing business.

And how do we get this coordination or this collaboration or even the incentives that Kathleen's mentioned? I mean, is this a role for government? I mean, within the EU, In particular, we've seen various pieces of legislation where tracking, measuring, reporting on Scope 3 emissions is going to become mandatory. In the US, this has been more difficult to get agreed. And Jeremy, how important is legislation, or how important is this for business to take a role and lead on this, given that obviously Walmart's taken a role, but other companies may not take a similar approach?

Look, I think it's in hand. Governments will do more. If they believe that this is something that companies are getting behind and can create value from in the way that Kathleen just described. So when you believe that it's possible to drive on-farm versions of optimization, whether it's inputs or it's shifting the crop mix, when you believe that you can actually drive renewable energy into factories in a way that is actually good for multiple reasons and doesn't dramatically change the economics, once you have those proof points, then it becomes, I think, a lot easier for governments to come through and then provide the regulatory frameworks that allow for scaling up to happen. So to my mind, this is not an either/or. This is about where we can creating this ambition loop between the cases where we can show what happens when companies do, if you will, apply this kind of advanced scope 3 driving value creation through kind of the approach that they take to managing the whole system. And then it gets reinforced by the right either incentives or regulatory mechanisms to actually take that approach to scale.

One thing that's been extremely helpful has been positive policies that encourage and enable the kinds of innovation and transition that are required in energy systems, you know, industrial systems, agricultural systems, and so on. So you just look at the US, for example, with some of the infrastructure bill and the IRA and so on. And there's enough known in the world right now about what are the concentrations of emissions in any value chain, what are the sources, and they really do come down to energy systems, practices, you know, in agriculture and so on. And so what I think is exciting is governments investing in the technologies, the innovation, supporting, you know, the evolution around these technologies rather than, I think, you know, one of the things you were mentioning, Philippa, was like maybe more regulation about measurement and disclosure. And I think there's, it's not necessarily adding value for every company to go try to estimate the emissions of every item at every stage separately. You know, the amount of resources off doing that when we actually know, we know by sector there's a, a simpler top-down approach where, you know, you know, in electronics manufacturing, where are the emissions concentrated, you know, in apparel, broadly speaking. So rather than go try to measure for every individual unit of, you know, item that's out there on retailer shelves, instead, let's take a look at value chains holistically and have innovation focused on, on, you know, what matters. So for example, I'm looking, Jeremy, as you were talking about the, the apparel chain. You know, for a typical retailer, there's 5 different levels of supplier, 5 different tiers. So there's the, the retailer, then there's the immediate supplier, which, you know, might be an apparel manufacturer distributor. There's then, then their suppliers, which might be textile fiber producers or dye manufacturers or utilities, again, providing power for their factories. And then the suppliers to those suppliers are sometimes farmers, crop growers, or producers of PET, you know, that might go into polyester material, for example. And then the suppliers to those suppliers might be fertilizer manufacturers, seed growers, oil and gas companies producing chemicals to go into synthetic, you know, fibers and so on. And then there's suppliers to those people, seed aggregators and so on. So those are all parties to the Scope 3 emissions. There's enough work done on that value chain to know, to Jeremy's point, the lion's share of the emissions are coming from the mills, that are creating the textiles and using energy, you know, to do that and using water and so on. There's some upstream in the agricultural production, you know, fertilizer and the COVID cropping and that sort of thing we, we talked about. There's a bit in transportation. So why not identify those and say, gosh, we need innovation around zero-emissions transportation. What could be done around energy grids in countries that are producing textiles? And how to help transition in countries based on their electricity sources and energy grids and so on. And the kind of innovation that needs to be done there, it's at the scale of entire electricity grids. You know, it's not one startup shoe manufacturer figuring out how to solve this, you know, on their own.

So, Kathleen, for you really, what you're saying is that basically, you know, we don't need any more regulation that's going to demand that we report more, that companies put these figures on bits of paper, what you'd like to see is more money, more finance going into innovative solutions to help countries outside the US or the EU decarbonize their grids, etc. That's where the money and the effort should be going rather than this idea of reporting and actually measuring.

No, I think reporting is important. I'm with Jeremy. It's, it's and, right? We, this is, we're talking about transforming the systems that really economic systems, You know, technology systems, manufacturing systems. So I do think it's helpful to have multiple interventions that can accelerate transforming those systems and definitely having some agreement on how to measure and report. My point is though, and we can talk about this a bit, when it comes to Scope 3, right now, the reporting is a modeling exercise. We can do it at an order of magnitude level across broad categories based on industry averages and so on. It's gonna take years before we would have any precision that would say this particular t-shirt versus this other t-shirt and exactly what happened in the 5, 6, 7 stages back in the chain where, you know, the further back you go, you're, you're fragmenting more and more across so many providers that may change month to month. You know, an individual supplier may shift their source of textiles month to month, or they may switch suppliers. And so trying to get perfection about tracking it at the level of an individual item. That's what I'm talking about versus saying, you know what? Yeah, let's measure broadly speaking what's happening in the apparel chain. Where are those emissions concentrated? Broadly speaking, you know, if the innovation is significant enough, it should start to bring down the industry average. That's what we should be focused on.

And Jeremy, obviously Kathleen's talking about Walmart, which is a massive company. She's just mentioned Procter Gamble, but most Most companies in the EU at least are, and I think in the US as well it's the same, are SMEs. They're small, medium-sized businesses which don't have necessarily the competency, the finance to change or to implement or to innovate because they're just focused on their bottom line and keeping the business going. Do SMEs need a different approach to dealing with Scope 3 emissions?

Well, SMEs cover a multitude of different types of enterprise, including the farms and many of the companies that Kathleen has just been describing, because of course Most, I don't want to say most, but a huge proportion of SMEs are suppliers into Walmart and others' supply chains. So the answer to what do they need to do is going to be what do they need to do to meet the requirements of their major customers. And that is going to drive to a very large extent how they behave. And if we get this right, it will drive their efficiency and it will drive their, if you will, potential sources of of innovation. And hopefully, it will actually take burdens away. I mean, let me just give you an example. I mean, at the moment, when you look at what happens for a number of agricultural items like coffee, cocoa, whatever, you'll get every single customer having slightly different specs with different certification schemes and with different programs. And all of it creates, if you will, a set of costs and effectively taxes, often that get borne in the end by the smallest player in the system. And with questionable impact in terms of what these certification systems really tell you. So what I'm hoping will happen is that at least in the way that Kathleen has described, you know, on an 80/20 basis, we get some of the bigger buyers to come together and go, we're going to get rid of all these different, if you will, standards and certificates and schemes and consolidate around, you know, one or two things that we can actually place some trust and reliance on. And if we did that, actually, I think SMEs would benefit.

How do we actually make that happen when we've got such massive global supply chains with different countries or different companies with their own standards?

We do. And it's— and there's always this risk that we head in the wrong direction given some of the geopolitics at the moment. But we also find that there are markets which are— the world is a bit sort of lumpier than you might imagine. So in a sense, you look at the textile industry in Bangladesh and you'll find a very significant opportunity for the big fashion industry players to come together, not across the world, but in that location and in specific clusters. And I'm sure this is what you're doing at Walmart and going 80/20, these are the places where We think we could make a difference by coordinating our activities a bit better. The same is obviously true for things like cocoa and coffee and those agricultural commodities. So it will depend. I mean, if I take one other example, I mean, there aren't 10,000 steel mills in the world. They're actually a relatively small number. And what we know is that if we come together, and you'll be probably the big Australian iron ore producers, and I'll give you a specific example where you have BHP and Rio that aren't known for working together. It's not the kind of the day-to-day behavior, but they are coming together with BlueScope as a voluntary initiative to actually accelerate the production of green steel. And that's particularly important for them because Australian iron ores are actually not best suited, if you will, to the new green steel technology. And so they're coming together with BlueScope and they're trying to find ways to actually— is this the case of working with a downstream player? Because of course Rio and BHP are the upstream players, to change what's happening and to enable Bluescope to step up and become a good buyer of Australian iron ores as a, if you will, potential green steel producer. So look, I don't want to sort of pretend that everything's a win-win, and I'm sure Kathleen wouldn't want to do that either. This is complicated territory. As with any shift, it's undoubtedly going to create some winner and loser effects. But there are, I think, in the mix of all of this, there are ways in which I think small and medium enterprises linked up to, if you will, some of the more progressive players can really benefit from the shift.

I was going to say, it's one of the things that we've tried to do in Project Gigaton is enable the smaller suppliers to make progress. You know, the larger ones often have their own resources and can drive innovation and so on. But where we've been able to provide supports, I mentioned these different arenas of action. So energy efficiency and renewable energy, agriculture, packaging, waste, transportation, product design. For each of those, we've provided different kind of supports to help smaller players, first of all, even measure their emissions and set some goals, but then pursue them. So for example, one of the things we did is we launched a renewable energy procurement opportunity for suppliers in the US, uh, in 2020. And then we did our first deal in 2022, which was with Ørsted and their Sunflower Wind Farm in Marion County, Kansas. And we had half dozen or so suppliers participate in that procurement. It's 12 years. It'll be 250,000 megawatt hours per year of power. That's equivalent to half a million cars off the road per year. And that's just one example. There were suppliers that didn't have their own renewable energy procurement teams that wanted to participate. So, you know, that's, that's an example. And there are another 250 that are in the program now just learning about how to do procurement on their own. So I think in these consortia, people getting together, providing tools for the smaller players to make progress. Because ultimately, one of the levers, Philippa, that I think makes a big difference is companies want to be competitive, right? They want to be pursuing and using the best practices. And they look around to see what others are doing. And they say, ooh, I could do that too. And sometimes they need a bit of help. So for sure, there's regulation. For sure, there's policy. But a lot of it's just simply it becomes the practice. It becomes the best practice. And so retailers, others can help facilitate that knowledge sharing and adoption and scaling of these better practices.

But is this also a role for governments in terms of you, you have got the sort of financial capacity to support the smaller suppliers, whereas a smaller company may not, may need the backing if they're going to, for example, move to regenerative agriculture, they need support from a government so that if, for example, their yields reduce or there are other issues that arise because they've changed transport or something, is that where government should be stepping in to actually surprise some kind of sort of safety net for these companies so that they can change?

Yeah, and the USDA has a suite of grants available that they call Climate Smart Agriculture Grants for exactly that reason. So if you're a producer in Nebraska and you need help with some of this transition, there are grants available to help you do that.

And Jeremy, I wanted to ask also in terms of obviously a lot of supply chains we're importing from Asia or Africa into Europe or the US where there isn't a lot of renewable energy in the grid, where factories aren't operating very efficiently. What's the role then of companies to actually create change, to bring more renewable energy, for example, onto the grid in some of these countries?

Well, I mean, there are different options here. I mean, The challenge with this will be, I mean, and let's, Philippa, not sort of pretend that this is all going to play out in a smooth way. I mean, Europe is now putting CBAM in place.

Perhaps you could just explain CBAM very quickly.

So the Carbon Border Adjustment Mechanism, which essentially will require in certain specific sectors companies to demonstrate what carbon intensity of that or the emissions intensity of their imports are. So into, for example, the steel sector would be, or cement, so that if it's produced from outside Europe and imported into Europe, but produced in a more carbon-intensive way, then they will have to pay effectively a tariff to compensate for that in line with essentially European carbon price. Levels. So, you know, that is undoubtedly going to start to have an effect, right? Because we will. And when you combine that with some of these other European regulations and, you know, with all the various four-letter acronyms that we all love and know, with CSRD and endless other versions of that, you know, we are going to I think you have to combine those. If Europe in particular, and I know this is more of a European story than a US one, but the US of course is going with its own forms of protectionism. But if Europe wants to be a leader on the shift to net zero and it wants to do so in a way that is positive and creates positive incentives, for developing countries. I think it has to put in place measures that combine, if you will, these border adjustment mechanisms with additional public as well as private financing. So I think this is where what I think Kathleen was describing in terms of what the US government is doing on climate-smart agriculture, we have to do the same internationally. I mean, Europe imports a very large proportion and the UK in particular, because imports a higher proportion of its food internationally. It imports a very large proportion of its steel and other energy-intensive and emission-intensive products. So we've got to, I think, combine our, if you will, desire to really use trade as an instrument to internationalize our climate policies with the willingness to put, if you will, different forms of public finance in to help de-risk the private capital that of course needs to go in at scale. And to cut a long story short, I mean, the primary place it has to go in is exactly where I think Kathleen was also arguing. It has to go into the power system and it has to go into the grids. Because if we electrify, if you will, and help developing countries electrify their economies faster on the basis of clean electrons, it will solve somewhere between 40% and 60% of the challenge for most of these countries, and in particular in the sectors where they're exporting.

Thanks, Jeremy. And Kathleen, before we finish, I wanted to ask you about carbon credits and whether Walmart— we've heard kind of the actual decreasing of emissions, but various companies, and there's been a lot of controversy recently around whether carbon credits should be used for Scope 3 emissions. Is Walmart using carbon credit?

No, we're not. So we haven't talked about our emissions goals for Scope 1 and 2, right? Those are the emissions we generate directly through our operations from, let's say, refrigeration or onsite fuels. And Scope 2, which is emissions from our electricity purchases to power our own stores and clubs and distribution centers and so on. And of course, our trucks, the energy for our trucks. So we set a goal to get to zero by 2040 without using Offsets, because we believe in that timeframe, the sources of our emissions are addressable. We ought to be able to mitigate those emissions and get them down to zero. Now, not all the technologies that are available are heavy tractors, for example, tractor trucks. We don't have a solution yet given the way we run those and how heavy they are, but we're working on it. You know, we're trying to drive the innovation that would get us there by 2040. So we've decided not to use them. Now, that said, I do think there is room in the broader societal transformation that we're undertaking to get to zero across the planet. We're going to need some innovation on both capturing carbon and using nature and expanding natural systems, forests, undegraded lands, and so on. Those can all be helpful part of the solution, and we will probably need that. So offsets could be a useful mechanism to flow capital toward innovations that can help us collectively get to zero more quickly. What people get concerned about is two things. One, distraction. So instead of innovating to mitigate the emissions you should be mitigating, you're off doing offsets instead. And obviously that, that's not helpful. And two, how real are those offsets? Are they permanent? Are they additive? Would they have happened anyway without you? You know, what's the validity of the amount of emissions you think you're sequestering? Those are all very important questions. So, you know, the controversy's not without reason and there's a lot to work through for that. But I do think ultimately we need that as part of the solution. We're never going to get there. I don't know, Jeremy, what you think.

Yeah, Jeremy, I was going to pose the question to you. I mean, we're seeing a lot of black and white thinking at the moment around offsets and carbon credits. And where do you see this in terms of scope 3 emissions?

Oh, look, we need all of the above, right, is the shortest version. So we clearly need to do exactly what Katharina said, which is to drive the decarbonization of our own value chains. And I know it's a little bit religious to say that, but it remains true, right? But it's not enough. Let's not pretend that that is going to get us to where we need to be because we are firmly, I'm afraid, in overshoot territory. I mean, we have broken through effectively 1.5. And so anybody who wants to sort of live with the orthodoxy that we're still trying to stay under is just kind of not dealing with the, and not addressing risk properly. So we are firmly in territory where we need to combine, if you will, driving deep decarbonization through these value chains with the fact that we will have to essentially do carbon removal at very large scale. And we need to build an industry that is roughly the size of the oil and gas industry to do carbon removal over the next 25 years. And that is a staggering thought, but that is roughly the scale of it in terms of the tons, the 8, 10 gigatons that will need to be removed every year by 2050. None of that will happen without a payment mechanism for carbon dioxide removal, and that will require carbon credits. You will have to pay for carbon one way or another. And the same is true in a different form in the matter of nature.

And in terms of scope 3 emissions then, and making sure we do what Kathleen said, that, you know, the main focus should remain on removing, on reducing emissions, on companies reducing emissions, not offsetting offsetting them. How do you ensure that companies remain focused on reducing emissions, reducing scope 3 emissions rather than sort of putting their eggs in the basket of carbon removal and offsets?

Well, I think we need to essentially, I mean, do two things. One is I think we need to really reward those companies that do actually drive their emission reduction. And there are different ways to reward them. I mean, I don't know whether you get a capital market signal at all as Walmart from the fact that you're driving more resilient, better managed supply chains. I would hope that that would be the case. I don't know whether it's the case. You tell me, Kathleen. But we have to reward companies in effect by actually building, if you will, better businesses. And that should be at the heart of this whole thing. And I think we have to also just keep on reinforcing the core proposition, this carbon agenda that we're pursuing. And just to be very clear, is one where in a world that had the right policy settings, Philippa, we We would have a proper carbon price across the board. So all emissions would be, if you will, or at least for major companies, for the top 1,000 companies in the world, would be subject to carbon price. And all of these versions of, if you will, reducing your emissions over time and transition pathways ignore what sits under the curve effectively. So I think there's a very good case for making sure that we combine rewarding, if you will, better business practices on the one hand with a clear and honest recognition of the fact that we do actually need to pay for all the carbon that's emitted during the next 20 to 30 years because we're frankly running out of budget.

Thanks, Jeremy. So quick last question then to you, Kathleen. Do you get a capital market signal at Walmart for moving ahead with emissions reductions?

You know, I don't know about that specifically. It would be hard to parse out of our, you know, our stock price. But what I'll tell you is our investors ask us when we meet about what is your climate strategy, what's your plan, what progress are you making? And to Jeremy's earlier point, it's long-term as well as short-term improvement. And the kinds of innovation that we're helping drive enhances supply chain resilience, It manages shifts in cost structure over time. It drives innovation that customers like because it encourages new product design and, and solutions for customers. And so the more that we can describe these innovations in terms of long-term as well as short-term, they like that. It makes sense. So, you know, I think it's just the mark of an innovative company. If you're working on this and you're really trying to engage suppliers and drive change, It's just consistent with our culture overall and how we run our business in general.

Can I just add one last point to that? Simply that there's a tendency sometimes in the climate and environmental community to allow the perfect to be the enemy of the good or even the very good. And so, I mean, there's been a case recently, I mean, Unilever being an obvious one where they've sort of, if you will, adjusted that they had super ambitious targets. And as everybody is aware, they've adjusted those targets to deal with what they've learned in the last few years. And their targets are still ambitious and ones that are industry-leading. And I think one of the things when we talk about creating incentives for companies to keep on this agenda and drive it forward in the way that Kathleen described, in ways that Maybe you can't get a capital market signal, but you can create a lot of other signals that you can attract better talent and better suppliers by, if you will, being one of the progressive players in the system and competing successfully for the best employees and the best suppliers and the best customers is part of the game here. But I think one of the things that we can do is the broader, if you will, environmental community is also to go out of our way and really celebrate the success and acknowledge that it's not perfect. It's not that everything that I suspect, not everything that Walmart does is absolutely perfect, Kathleen. Maybe there've been some failures as well that we can learn from.

Stop revealing dirty secrets, Jeremy.

Well, but all that said, let's absolutely get behind those companies that are choosing to lead the way and choosing to build new business practices and choosing to demonstrate what is really possible and pushing governments and other other players in the industry to get behind this agenda, because that is how we create, if you will, the, the ambition loop that we're going to need here.

Great. Thank you to both of you. Thank you, Jeremy. Thank you, Kathleen. It was really great to hear such positive stories and sort of ways that we can move forward rather than pointing out everything that's wrong with what's happening. So thank you very much for being with us. That was the Sustainable Views podcast from the Financial Times Group. If you want to read more about all things sustainability related or listen to other podcasts from Sustainable Views, please visit our website sustainableviews.com.