The Scope 3 Emissions Challenge

Apr 25, 2016 | Blogs

Scope 3 emissions are impacts which occur along the value chain of a product or service. They are typically outside of a company’s direct control and as a result can easily be forgotten, “out of sight out of mind”. But the secret to managing scope 3 emissions is to look for the business opportunities along the value chain.

Scope 1 and 2 – what makes these so simple?

For many companies measuring, reporting and reducing Scope 1 and 2 emissions through setting reduction targets is a familiar exercise. Scope 1 are direct GHG emissions from sources controlled by the company, such as gas for heating and emissions from company vehicles. Scope 2 are indirect GHG emissions from the consumption of purchased electricity, heat or steam. Both Scope 1 and 2 are relatively easy to measure and reduce as a company has control over its use of these emissions, for example in an office we can decide to turn off the gas heating in warmer months (Scope 1) and turn off the electric lights during non-working hours (Scope 2). However, when it comes to thinking about reducing Scope 3 emissions, the task can seem far more daunting.

What exactly are Scope 3 emissions?  

Scope 3 emissions are all indirect emissions which are not included in Scope 2. These occur along a value chain, both upstream with suppliers and downstream with customers. Take a pair of jeans for example. There are emissions from the purchase of the raw materials like cotton which go into making the jeans. Then there’s all the fuel which is used in transporting materials from suppliers and the finished product to customers. If an employee takes a car, bus or train into work, if a sales person flies to see a potential customer, this is also Scope 3. Even if we decide that we no longer want the jeans, how they are disposed or recycled and what emissions are generated as part of this process is Scope 3.

You can see that even with a product as every day as a pair of jeans, there is a myriad of Scope 3 emissions along the value chain. Identifying what these are can become very complicated, very quickly!

So, why bother?

Mars have estimated that a whopping 86% of its emissions are Scope 3. Whilst you might think that Mars is the exception rather than the rule, according to some estimates, more than 80% of the GHG impacts for most companies occur outside of their own operations. From an environmental and business perspective, managing Scope 3 emissions becomes crucial. If we can find meaningful and measurable reduction targets, then this could represent not only the biggest opportunity in terms of potential emission reductions, but also potential financial savings.

How to go about reducing Scope 3

It is important when it comes to setting targets that these are based on an accurate and thorough GHG inventory. Companies like Mars who have calculated their Scope 3 emissions have taken the first step.

A second important step is for companies to identify which Scope 3 emissions are most material to their business operations and which they have the greatest control over. If we revisit our jeans example, the manufacturer may estimate that suppliers of raw materials such as cotton are the biggest emitters in their value chain, after all, think of the energy that goes into growing, harvesting and processing the cotton. One opportunity here would be to contact suppliers and request that they measure their own emissions and set their own reduction targets. If employee travel is a big emitter, companies can encourage employees to use public transport, thereby increasing the energy efficiency of products or services.

Science based targets

Something which is gathering a lot of noise at the moment is a relatively new joint initiative by CDP, the UN Global Compact (UNGC), the World Resources Institute (WRI) and WWF called ‘Science based targets’. The initiative calls for corporates to commit to targets which take into account the science required to restrict global warming to less than 2 degrees pre-industrial levels.

When considering Scope 3 targets, the initiative states that it only expects companies to set targets when their Scope 3 emissions make up more than 40% of total emissions. In addition targets must be “ambitious and measureable with a clear time-frame”.  Impressively, a number of companies have already calculated their Scope 3 science based targets, such as Kellogg who commits to reduce absolute value chain emissions by 50% between 2015 and 2050.

What’s the business case for tackling Scope 3?

First and foremost it makes sound business sense. Initiatives such as those mentioned above in the supply chain and employee travel can result in measurable reductions in carbon and also produce additional benefits such as improving supply chain resilience and increase in business efficiency, which can lead to a decrease in operating costs and increase in margins.

Secondly, companies who are working to reduce their Scope 3 emissions have the opportunity to differentiate themselves from their peers and competitors. To position themselves as innovative, conscientious and forward looking organisations, and reduce impacts along the value chain is an excellent story to be reporting on externally.

Finally, Scope 3 can no longer be ignored. It is at times easy to forget that impacts extend beyond direct activities, however “out of sight, out of mind” can no longer be an excuse. With such a high percentage of carbon emitted from activities along the value chain, and with the so many potential benefits from reducing this carbon, it is fast becoming a business imperative to measure and reduce Scope 3 emissions.