How Can Businesses Reduce their Scope 3 Emissions through sustainable and transparent supply chain?

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Warnings from the latest IPCC report for a holistic action to reduce GHG emissions rapidly and urgently if we want to avoid irreversible climate conditions.

The IPCC report mentioned that we are on the right track to reach 3.2°C of warming by 2100 from the pre-industrial levels. But it also concludes that nations could cap warming to 2°C by transitioning to clean energy as well as a green economy that could cut down 25% of global emissions by 2030.

Businesses and private sectors play a significant role to limit warming to 2°C or even 1.5°C limits. But they must act now and consider the impacts and climate risks throughout their operations, most importantly their supply chains. Emissions from supply chains are around 11 times higher than the businesses operational emissions, which shows that impactful interventions in reducing in this area can be significant to achieve limit goals.

Scope 3 emissions refer to all the indirect carbon emissions which occur in an organizations or business’s value chain. While Scope 1 and 2 emissions are those directly emitted by the business’s operations, Scope 3 is outside – both downstream and upstream. For most companies, Scope 3 makes up the greater part of their total emission. Many UK organizations report 80% falls under Scope 3 and some as much as 97% of their total emissions (Edie Explains, 2020).

Reducing Scope 3 emissions is crucial for a business net-zero transition and surely address the climate crisis issue that we are facing at the moment. But how can companies’ accurately measure, report, and reduce their Scope 3 emissions?

The following are some insights on how businesses of all sectors and sizes need to urgently act on their Scope 3 emissions, in order to achieve a net-zero emission.

1. Understand and familiarize the Greenhouse Gas Protocol. Private and businesses should read several guidelines and standards to guide them to map their Scope 3 emissions. Protocols cover Upstream emissions protocols include purchased goods and services; capital goods, fuel, and energy; transport, logistics, distribution; business travel; employee commuting; waste from operations; leased assets. Whereas downstream emissions that cover: investments; franchises; leased assets; transport, logistics, distribution; use of products; and end-of-life treatment of products. (Depending on sectors – application may be varied).
2. Identify and analyze how to establish the business case for reducing Scope 3 emissions. Reducing Scope 3 emissions need to address environmental, social, and economic risks. Scope 3 emissions need to be included in upcoming regulatory and disclosure requirements.
3. Acknowledge and understand that supplier engagement is not a standardized action. This includes clustering suppliers in terms of emissions and business models, in order to improve engagement as part of the solutions can be better targeted together with producers and suppliers.
4. Plan, develop and establish a data rank. Private and businesses should have high-quality data coming from suppliers and actors along the supply chain and value chain which will be vital to measure their emissions.
5. Establish and improve transparency and traceability of the supply chain. Private and businesses need to utilize digital data management tools that will enable them to accurately track their data on a regular basis; monitor how they are handle and engage with suppliers; measure engagement impacts; use data insights to identify potential decarbonization opportunities, and accurately key stakeholders reporting.