By Harriet Assem, Technical Director, ESG and Sustainability at ITPEnergised
With tackling climate change top of the global agenda, we're seeing companies around the world making great strides in reducing their Scope 1 and Scope 2 emissions. Companies from all industries are clamouring to demonstrate their green credentials, aware that a robust climate strategy is crucial to their future success. And, with increasingly savvy consumers only wanting to deal with sustainable firms, as well as increasing climate and ESG legislation and investor pressure, being green isn’t just the right thing to do – it’s also good for business.
However, while there’s much good work being done, there’s still plenty of room for improvement. Indeed, to achieve net zero, progress must be made in managing and tackling Scope 3 emissions, which can represent a large proportion of an organisation's total greenhouse gas (GHG) emissions – and are by far, the trickiest to measure, manage and reduce.
There has been plenty of controversy around Scope 3, not least confusion over exactly what this means. Also referred to as value chain emissions, Scope 3 covers indirect emissions – so everything that happens in all aspects of a supply chain. Take Innocent Drinks for example (one of the companies leading the way) – its direct emissions (so Scope 1 and 2) could come from its buildings, electricity, and business travel (as well as other sources). But its Scope 3 emissions could cover all the steps to get the drink into the hand of the customer — such as how their suppliers transport their fruits and vegetables, management of waste materials and sourcing bottles. Their material Scope 3 obligations could travel all the way through to how its drinks are stored on shop shelves, to the process used for the disposal or recycling of finished bottles.
Tackling Scope 3 emissions is undoubtedly a big and daunting challenge, but it is vital that businesses do just that as they transition towards net zero.
But how do they get it right? And crucially, where should they start?
Learn from what’s already out there
One of the most often cited issues around Scope 3 emissions is that they are such an unknown. Most companies haven’t measured the impact of their environmental footprint to this extent before so naturally, it’s difficult to know where to start.
The good news is that guidance and protocol already exist. For example, the SBTi value chain report provides details on best practices in Scope 3 greenhouse gas (GHG) management. Companies can also harness established systems like the (GHG) Protoco l which, amongst other things, offers a Corporate Value Chain Standard Online Course to help companies get started. In addition, the GHG Protocol provides tools to help develop comprehensive and reliable inventories of GHG emissions. And perhaps most importantly, it supplies the world's most widely used greenhouse gas accounting standards to date.
Identify support as required
There are also industry experts, like ITPEnergised , who can help. As with any large-scale business change initiative, the help of trusted partners and advisors is critical to success. It is important to choose your experts wisely, partnering with firms who can help you navigate and validate this complex landscape, and that will support you at every step. Any decent partner organisation will take time to understand the individual needs of your business and develop strategies specific to your needs, rather than trying to shoehorn your business into set models.
The importance of setting boundaries
Scope 3 can feel like an insurmountable challenge, not least because it’s so broad. But as is the case with every move towards a sustainable future, it’s important to set boundaries and make goals achievable and measurable.
We tell our clients that, as part of the GHG Protocol methodology, they need to include material emissions. It’s important for them to make a start as part of the wider net zero journey and it may take a few rounds before they will have a credible baseline, which includes all Scope 1, 2 and 3 emissions. Focusing on those elements that present the greatest risk and that you can most accurately measure, and influence, is key.
Transparency is also important. Companies that engage with their customers, prospects, and the wider industry on their progress against objectives will be most trusted to deliver on sustainability goals – and will avoid accusations of ‘greenwashing’ which have blighted others.
From ensuring you gain buy-in internally, to getting commitments from everyone in the external value chain to help meet your goals, meeting Scope 3 commitments is a group effort.
It’s important that the suppliers and partners you work with understand their central role in helping you meet your targets – and crucially, what’s in it for them if they do. Being part of this process will help them to meet their own climate strategy and wider ESG ambitions, as well as demonstrating they’re a strong (and long-term) partner or supplier to their own customers.
Delving into the data
So, how do companies get to grips with measuring something so hard to track and control?
For large companies particularly, it will be an organisational challenge to track down all the figures needed. Securing primary data may not always be possible, so companies may need to rely on secondary and tertiary data, i.e., estimations and benchmarks. This is where your industry partner can play an important role by helping gather the data and work out the optimum way to calculate Scope 3 emissions reflective of your specific business activities in line with best practice. Informed assumptions and educated estimations are going to be the order of the day in order to work out the current state of play and ascertain what ‘success’ looks like.
Important too is best practice sharing and collaboration between companies. It might have become a business cliché that companies are better when they work together, but as they venture into the unknown with projects like this, it's more pertinent than ever.
Waiting isn’t an option
In summary, meeting Scope 3 obligations is not always easy, but it is essential for companies working towards becoming truly ‘net zero’. An abundance of caution and honesty is required – greenwashing accusations are on the increase and so the need for transparency and stakeholder buy-in has never been greater. The most successful companies don’t claim they can run before they can walk, and openly communicate their methodology and roadmap to net zero to ensure transparency.
Companies looking to quantify and address Scope 3 emissions are seen as leaders in their field – building trust with their stakeholders whilst also managing and reducing supply chain risk and monopolising on the opportunities created as a result. They can also reduce operating costs and better protect their business from the risks that will inevitably come from the transitional and physical risks associated with climate change.
Tackling Scope 3 can also result in companies creating wider environmental and social benefits – for example, a commitment to using electric vehicles for deliveries can help a company contribute to the local air quality in the regions where they operate. Additionally, there are societal benefits for companies who can prove they’re on the road to reaching net zero as it can encourage consumers to ‘buy local’ – supporting local communities, employment, and the economy.
Today, investor pressure, likely future legislation and savvy consumers wanting to ‘buy green’ is driving the agenda, so having a robust and transparent net zero strategy will provide competitive advantage to those who get it right. Ultimately, we believe that although there's much complexity around Scope 3, waiting simply isn’t an option; as the window to address climate change narrows, it’s critical for companies to start their Scope 3 journey now and lead the way.