Scope 3 Emissions, as explained in our earlier article, are the CO2 emissions caused by the upstream and downstream processes that any company requires to source, manufacture, distribute and sell its products. When companies are sincere about trying to minimize their carbon footprint, they must include this wide-ranging and considerable contribution to their emissions total. Centralizing all Scope 3 data can be challenging and time-consuming due to a lack of visibility into their supply chain and partners.
How do you find out your Scope 3 Emissions Score?
There are several significant challenges to a company calculating its Scope 3 score without using a platform that can capture all its necessary decarbonization information. First and foremost, there can be issues of honesty and transparency in the reporting of ancillary businesses – suppliers, distributors, and sales outlets. Incentives must be developed to make it beneficial for contributing companies to accurately report their carbon emissions.
It can also be difficult to know where to place the boundaries around the carbon footprint a company should hold itself accountable for. Should it, for instance, include the costs of mining rare earth metals used in electronic components? Should recyclability and user behavior be taken into consideration? Implementing a Decarbonization platform can help companies normalize their data, so they are looking at all vendors equally to help their journey on improving Scope 3 emissions score.
The Greenhouse Gas Protocol (GHG) has identified 15 separate components to the Scope 3 calculation. Here’s a brief description of each one:
- Purchased goods and services – upstream suppliers emissions in servicing a business’s contracts.
- Capital Goods – i.e., the carbon footprint of purchased plants, machinery, and vehicles.
- Fuel- and energy-related activities (not included in scope 1 or scope 2) used upstream in the supply chain.
- Upstream transportation and distribution – emissions from transportation of raw materials or supplies.
- Waste generated in operations.
- Business travel – of all company personnel upstream of distribution.
- Employee commuting – regular fuel and travel emissions of staff.
- Upstream leased assets – warehouses, factories, etc.
- Downstream transportation and distribution – getting products to the consumer.
- Processing of sold products – packaging, postage, warehousing, etc.
- Use of sold products – the carbon cost of a product in use (i.e., an automobile, a microwave oven).
- End-of-life treatment of sold products – landfill, denaturing, or recycling carbon cost.
- Downstream leased assets – carbon footprint of premises.
- Franchises – carbon cost of running franchised outlets.
- Investments – carbon cost of any invested wealth.
As you can see, calculating Scope 3 emissions accurately is a significant undertaking, requiring a dedicated project team. Companies would do well to build sustainability audits into all their accountancy and procurement practices so that they are continually pulling in complete and accurate information from all upstream and downstream partners.
Once such processes become regularized, they will no longer seem like an imposition or onerous task. And, as we shall see, if sustainability can be shown to affect the bottom line, then it is easier to argue for these processes to become as mandatory as diversity or ethical employment audits.
What’s the difference between Upstream and Downstream emissions?
The only real difference between these two areas of concern is that companies may have greater control over upstream components. Most businesses are free to select between suppliers and manufacturing partners. A customer’s product use is hard to control, and recycling may be dependent on local government provisions.
Both upstream and downstream elements are equally contributory to the Scope 3 carbon footprint.
How can Scope 3 emissions be reduced?
There are several approaches to Scope 3 emission reduction. Companies will usually need to focus on more than one strategy to ensure their attempts are effective. Here are some broad guidelines:
- Businesses must first secure stakeholder buy-in, including suppliers, distributors, and sales functions. This will make securing accurate data easier. Companies must avoid partnering with businesses that don’t respect the goal of reducing net emissions. A key message to emphasize is that, since Scope 3 emissions make up the majority of a company’s carbon footprint, its net score will not be significantly diminished by focusing on Scope 1 and 2 emissions alone. Scope 3 calculations are where the real value of environmental impact reduction lies. That is why companies must have visibility into their partners’ emissions, which can be hard to achieve without a decarbonization platform.
- A company can begin by setting a baseline target for its first year. In that first year, it will be sufficient to accurately measure their Scope 3 emissions and compare them to that baseline, to develop short- to medium-term reduction goals, a decarbonization tool can easily track their progress throughout the year.
- Once a business has fully surveyed the carbon emissions both upstream and downstream, it will be able to identify from where most of its emissions originate. The Scope 3 categories outlined above will form a useful guide in making this determination.
- Partner companies who most contribute to a business’s emissions total can then be identified. Those companies can either choose to work with their client to reduce emissions or they may find themselves having to rebid for business when current contracts expire. Inevitably, environmental impact carries more weight in bidding applications than in previous years.
- Based on a company’s progress, decarbonization platforms can offer the ability to buy carbon offset credits to get immediate improvements to their scope 3 score.
Why should a company work towards reducing its Scope 3 emissions?
As we’ve seen, Scope 3 emissions constitute the lion’s share of a business’s carbon footprint. Addressing Scope 3 emissions demonstrates a real commitment to the cause of environmental impact reduction. This leads to positive PR for the company making such a commitment.
It should inevitably lead to efficiency savings in the supply and distribution chains too, since waste is reduced, and unnecessary costs are eradicated. For instance, there’s a higher carbon cost to sending out fleets of half-empty trucks. By collaborating more efficiently with logistics firms, these wasteful aspects of distribution can be reduced.
When companies work towards reducing their carbon footprint, this creates a “sustainability differentiator.” In other words, they stand out in the marketplace as a brand leader for environmental protection. This can convey competitive advantage, as more environmentally committed consumers select their brand over less virtuous alternatives.
In the public sphere, companies actively trying to work towards a net zero approach will secure more column inches, more positive airtime, and greater social media approval. Brand reputation increases as greater sustainability is achieved.
This in turn affects the bottom line. It should be very possible for companies to both reduce their environmental impact and remain profitable, even if there are short- to medium-term costs incurred during the transition to doing greener business.
Use of fourth-wave technologies to drive carbon emission innovation
Data analytics, AI, and automation can all help systematize the value chain and reduce inefficiencies. Business intelligence can be used for research into low-carbon suppliers, methods of manufacture that reduce emissions, and product designs that last longer, reducing end-of-lifecycle costs.
Evalueserve Decarbonization Product can help you measure your Scope 3 emissions, show which partners are decreasing your score the most, and find new potential vendors with their current score and pledged reduction targets.
Talk to one of our experts or reach out to us at SCDecarb@evalueserve.com.
