How to Achieve Scope 3 Reduction
Achieving scope 3 reduction requires looking at emissions that are upstream and downstream of your core operations. It also means partnering with suppliers and customers to reduce emissions.
Companies that successfully tackle their climate risks and build a sustainable future are often seen as a better long-term investment. The key to success is having a clear strategy, measurable goals, and the right capabilities in place.
Growing sustainability concerns from investors
Across industries, stakeholders are putting unprecedented pressure on businesses to act on climate change. As a result, many companies are working diligently to improve their sustainability performance and reporting. A major focus for many organizations is reducing upstream and downstream Scope 3 emissions.
Upstream emissions cover external parties that supply, produce or transport raw materials and components used by a company. These include suppliers, contractors and other vendors. Downstream emissions include the use, disposal or recycling of sold products. Companies that successfully reduce their upstream and downstream Scope 3 emissions are better positioned to meet the requirements of ESG reporting frameworks and other standards.
For many companies, reducing upstream and downstream scope 3 emissions involves working with their suppliers to help them adopt more sustainable production practices. This can be a long-term project that requires collaboration between the two parties to achieve desired results. It also entails understanding the full range of upstream and downstream carbon intensity concentrations (also called heat maps), which require primary data gathering from suppliers and customers to understand the true picture of current emissions.
Increased demands from customers and industry peers
As sustainability becomes more important for customers and industry peers alike, many are demanding greater transparency of their suppliers’ Scope 3 emissions. This has put unprecedented pressure on businesses to act.
Successfully reducing Scope 3 requires a comprehensive strategy and significant commitment. It involves defining clear strategies, developing detailed plans, embedding specific organizational capabilities, building emission-tracking approaches and systems, and developing certifications for products. It also requires extensive collaboration across the organization and with supply chain partners.
It can be difficult to implement a Scope 3 reduction strategy because the process is often complex and time-consuming. One major challenge is the gathering of primary data, which can be a huge burden on internal resources and requires navigating legal barriers to sharing sensitive information. Another challenge is the complexity of calculating and quantifying the full scope of emissions. This can require a level of data granularity that’s not always available, such as the use of primary source energy consumption data and location-specific emissions factors.
A surge in new climate change regulations
The urgency of climate change has put unprecedented pressure on businesses to act. Investors, customers and industry peers are demanding that companies be transparent about their sustainability efforts and work toward reducing greenhouse gas emissions. This includes addressing Scope 3 emissions, which represent the majority of most organizations’ carbon footprint.
The challenge of calculating and reporting Scope 3 emissions can be daunting for businesses. The data required to do so is often scattered across many different databases and requires a rigorous approach to data collection and analysis. It also requires a high degree of collaboration with suppliers.
For example, a winter jacket can have components manufactured in over 30 countries, including the cloth from one company, zippers from another, and elastic trim from yet another. Those global supply chains can make it challenging to understand the true impact of a particular product.
In order to meet disclosure requirements, companies need to have a clear understanding of their full scope of emissions. This includes assessing where emissions hotspots lie in their value chain and prioritizing reduction strategies accordingly.
Massive global shifts in public opinion
A global shift in public opinion has put unprecedented pressure on businesses to act. Rather than being seen as passive bystanders, companies are now expected to play an active role in helping address the climate crisis by working with customers and suppliers to craft sustainable solutions.
Many companies have focused on reducing their direct greenhouse gas emissions, known as Scope 1 and 2. However, indirect emissions from supply chains, transportation and usage of purchased goods and services are much harder to quantify (Scope 3), and often make up the majority of a company’s total emissions.
For this reason, it’s critical for companies to work collaboratively with their value chain partners to build capability, get an accurate baseline and take meaningful actions to reduce scope 3 emissions. This approach will lead to more flexible, resilient and future-proof supply chains and help support the achievement of a range of other sustainability goals, including those related to social impact and compliance with ongoing regulatory issues and legislation.
