Alan Riley, Director at epi Consulting, discusses the challenges of reducing Scope 3 emissions and the steps to meet emissions targets head-on.
Big brands like Microsoft and Unilever have recently been removed from SBTi’s (Science Based Targets Initiative) net zero validation processes due to a failure to submit adequate Science-Based Targets.
This highlights the struggle many companies face in meeting strict net-zero standards, largely due to challenges reducing Scope 3 emissions.
Seemingly recognising the Scope 3 challenge companies are facing, in April the SBTi announced its consideration of environmental attribute certificates, such as carbon credits, for Scope 3 abatement, a controversial decision that prompted an open letter from SBTi employees demanding the CEO’s resignation.
The Scope 3 challenge
But why is Scope 3 such a challenge? It boils down to control. Scope 3 encompasses greenhouse gas emissions throughout a company’s entire value chain, constituting the bulk of its emissions. Unlike Scope 2, which can be influenced by reducing energy consumption or transitioning to green energy, and Scope 1, which can be mitigated through actions like adopting electric company vehicles, Scope 3 mostly lies beyond a company’s direct control.
Scope 3 emissions are influenced by diverse factors such as supplier production methods, employee travel patterns, and the availability of low-carbon materials and renewable energy in the supply chain. But significant reductions in Scope 3 emissions are achievable with the right approach, based on analysis, prioritisation, and engagement.
Identify the main emissions sources
The first step is to identify the major sources of Scope 3 emissions based on some high-level estimations. Although key emissions sources can vary by industry, a recent CDP report showed that use of sold products (57%) and purchased goods and services (17%) were most commonly cited as companies’ key emissions hotspots, and so screening to identify the significant sources is generally a straightforward exercise.
Prioritise suppliers
In epi’s experience, the primary Scope 3 categories are tied to a company’s supply chain. For instance, a retailer selling electronics often finds its “Use of Sold Products” footprint determined by the energy efficiency built into those products.
Similarly, the “Purchased Goods and Services” footprint hinges on the types and quantities of raw materials and components chosen for manufacturing. Consequently, the crucial next step for most companies in addressing Scope 3 emissions involves engaging with their highest-emitting suppliers.
Consult with Procurement or Supplier Management teams to grasp the company’s recent spending and compile a supplier inventory. This can be done through desk-based analysis of annual purchases, combined with industry-average emissions factors or supplier-specific emissions data. This approach yields a prioritised list of top-emitting suppliers, forming the basis for direct collaboration on emissions reduction efforts.
Pursue maximum impact …
Aiming for maximum impact is a better place to start than simply going after low-hanging fruit. A few suppliers contribute significantly to your emissions. Collaborating with these can greatly reduce your overall Scope 3 footprint. Start by working with supplier companies on life-cycle assessments (LCAs) for your key products or services. These assessments track the environmental impact from raw material extraction to product disposal, identifying opportunities to enhance sustainability.
… ask suppliers to pick low-hanging fruit first
While some product level improvements can require completely redesigned products or a new generation of a product, asking suppliers to switch over production facilities to green energy is often the quickest way of slashing their impact on your Scope 3 footprint.
New green regulation suggests that switching to green energy is likely to be something companies will have to do anyway. Given that, it makes sense to ask suppliers to commit early and lock in long-term contracts that will prove cheaper in the long run. This is also something Tier 1 suppliers can in turn cascade to their suppliers throughout the supply chain.
Keep talking to your supply chain
This lies at the heart of any Scope 3 strategy. Companies must nurture their supplier connections to advance climate awareness, maintain sustainability alignment, and jointly lower emissions without disrupting operations.
At epi, we’ve had a lot of experience driving collaboration in the telecom sector, orchestrating webinars and aligning efforts among companies united in pursuing sustainability. The primary objective is to foster a collective understanding among all involved companies as integral components of one ecosystem, each playing a role in reducing Scope 3 emissions.
Lean in
Developments in the last few years make it clear that we’re moving into a lower-carbon, more sustainable future, where taking responsibility for Scope 3 will become a hygiene factor. Companies that dig their heels in will find themselves at risk of incurring penalties, not just in legislative terms, but in terms of brand equity and reputation.
Those that lean into these changes, on the other hand, will establish themselves as leaders, as forward-thinking organisations, and as fundamentally different to industry peers. Although it may seem daunting, we have outlined some simple steps that companies can take today to tackle Scope 3 through engagement and collaboration.
