Six top tips for getting to grips with your organisation’s Scope 3 emissions
Most organisations find that a significant proportion of their total emissions footprint is indirect, making Scope 3 emissions a key focus for the net-zero transition. But how can these emissions be accurately measured and reported - and reduced at the pace needed?
These were the questions which edie sought to answer during its latest masterclass webinar, which was hosted on Thursday 23 September in association with Carbon Intelligence.
The 60-minute session, which is now available to watch on-demand, was attended by hundreds of professionals, providing information on processes from gathering and analysing your Scope 3 data, to engaging key stakeholders and suppliers in ways which support net-zero carbon commitments.
Here, edie rounds up six of the speakers’ key takeaways, which should serve to inform and inspire businesses of all sizes and sectors, regardless of where they are on their journey to address Scope 3 emissions in line with climate science.
1) Understand how to build the business case for reducing Scope 3 emissions
Setting the scene as the webinar began, Carbon Intelligence’s associate director Annabell James emphasised the importance of addressing Scope 3 emissions – not just in terms of environmental benefits, but in economic risks that will doubtless interest any board.
She said: “Scope 3 typically accounts for about 90% of a business’s overall emissions impact, and this really means it is a key area of climate-related risk now and in the future. As such, it’s become a hot topic with investors, regulators and other stakeholders.
“We’re increasingly seeing Scope 3 being included in upcoming regulatory requirements, such as the Task Force on Climate-Related Disclosures (TCFD) reporting requirement. It’s also necessary for any business wishing to set a credible science-based target and net-zero strategy.
“We can no longer afford to ignore Scope 3 emissions if we wish to be seen by our stakeholders as having a credible approach to sustainability and tackling climate change.”
Notably, the Science-Based Targets initiative is increasing the minimum temperature pathway ambition for verification to 1.5C, from the “well-below 2C” minimum at present. For targets to be verified in line with 1.5C, if a business’s Scope 3 emissions account for 40% or more of its total annual footprint, targets must be developed to address at least two-thirds of Scope 3 emissions.
As well as posing risks if not addressed, the speakers also encouraged listeners to frame decarbonisation as a potential “catalyst for change” that can improve supplier relationships, reputation and employee engagement.
2) Read the Greenhouse Gas Protocol
There are multiple guidelines and standards which businesses can follow to map their Scope 3 emissions, but James explained how the GHG Protocol specifically can be used.
The Protocol is overseen by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). It covers both upstream and downstream emissions and is used by the vast majority of large businesses disclosing to CDP, making it widely recognised.
Downstream sources of emissions covered by the Protocol are:
- Leased assets
- Transport, logistics, distribution
- Processing of sold products
- Use of products
- End-of-life treatment for products
Upstream sources of emissions covered by the Protocol are:
- Purchased goods and services
- Capital goods
- Fuel and energy
- Transport, logistics, distribution
- Business travel
- Employee commuting
- Waste from operations
- Leased assets
“Not every single category will be relevant to your organisation – this will be dependent on your business model and the sector you operate in,” James noted. She said that, for most businesses, purchased goods and services are likely to represent a significant proportion of Scope 3 emissions. For Avara, the other organisation represented on the panel, purchased goods and services account for 61% of the Scope 3 total.
3) Establish a data hierarchy
Research presented at the World Economic Forum by Carbon Intelligence concluded that a lack of high-quality data, shared from suppliers and other actors along the value chain, is the most common challenge in managing Scope 3 emissions. As has been said many times, you cannot manage what you cannot measure.
Without quality data, James explained, estimates are often used, which can reduce accuracy and does not necessarily lay the foundations for strong engagement. She recommended that businesses use spend-based analysis of emissions “hotspots” to ensure that data collection and related engagement is meaningfully targeted, in the first instance. From there, larger businesses should expect in-depth Scope 3 modelling to take a minimum around two years.
“The ultimate aim with those key suppliers is to get to a point where they are actually providing you with lifecycle assessment emissions data on the products and services they provide to you,” James said.
Avara’s sustainability manager Sophie Oldfield also emphasised that, without strong data on the environmental footprint of the supply chain, decision-makers will not be adequately informed to properly balance environmental sustainability with the other parts of the ESG agenda – or its own financial ambitions.
Avara, Oldfield explained, has developed a data roadmap to improve the quality and quantity of data over time, from the least granular spend-based estimates in the GHG Protocol, to a hybrid approach, to purely supplier-specific data. Priority to improving granularity has been given to feed and farming emissions, which account for around half of its Scope 3 footprint.
4) Understand that supplier engagement is not a one-size-fits-all activity
Grouping suppliers in terms of spend, emissions and business models is likely to improve engagement, James argued, as solutions can be better targeted.
Suppliers with high emissions and a good track record on sustainability, she explained, will benefit from light-touch engagement. Those with high emissions but which are just beginning their sustainability journey, or which are in hard-to-decarbonise, high-ESG-risk sectors, will need more in-depth engagement and may need to be provided with bespoke tools and resources on measuring and reducing emissions.
Avara’s Oldfield added that having a vertically integrated supply chain can make supplier engagement simpler. The business uses contract and company-owned farms, all of which are managed by its agriculture team, which conducts regular audits, not only to check on climate impacts but on biosecurity and bird health.
She also spoke about how benchmarking can be used to motivate suppliers to improve and to identify specific areas for decarbonisation potential, noting that all efforts to reduce Scope 3 emissions are “ultimately dependent on collaboration”. Beyond the motivating, reporting and engaging piece, Oldfield emphasised, suppliers may need support to change product or packaging design or to upgrade equipment and processes.
5) Consider investing in digital data management tools
“What we’ll see over the next decade is that the volume of data engagement that will be required [will grow], meaning data cannot sit in spreadsheets forever,” said James.
“Businesses are going to need to be able to accurately track their data on a regular basis; monitor how they are engaging with suppliers; measure engagement impacts; use data insights to identify decarbonisation opportunities, and have a way of accurately reporting to key stakeholders with confidence.”
To that end, Carbon Intelligence is in the process of developing a data management solution and is currently in the early adopter phase.
Corporates in a range of sectors, from retail, to agri-food, to technology firms and built environment giants, are already using other digital tools to collect and store data and to engage suppliers. Such tools have proven particularly helpful amid Covid-19, as lockdown restrictions have made site visits and supply chain visits more challenging.
Moreover, data management tools can help businesses avoid greenwashing accusations, giving them the ability to provide up-to-date, detailed and accurate information.
6) Remain flexible with accounting and disclosure approaches
Looking to the future, Carbon Intelligence’s James had a word of caution for the audience. She said: “Greenhouse gas accounting is developing all the time; it’s not as mature as other forms of accounting. Methodologies, approaches and data sources will vary between companies.” But she emphasised that this state of play may well change at a pace.
To this point, the UK Government has not yet made the reporting of Scope 3 emissions mandatory, but strongly encourages this disclosure under Streamlined Energy and Carbon Reporting (SECR). Governments including the UK’s have been pushed by green groups to do more to standardise emissions disclosure, so professionals may see rapid changes in this field in the coming years.
The full masterclass webinar is available to watch on-demand here.