Scope 3 emissions: The elephants in the room
Scope 3 emissions — all the indirect emissions that a company generates over the course of its operations, from raw material extraction down to end consumer and disposal — are comfortably the biggest source of emissions for virtually any business. Despite the importance of reducing them, the disclosure of Scope 3 emissions is not currently compulsory in most countries and cases. However, COP27 highlighted the problem with this model for actually making a meaningful difference to the damage we’re causing and suggested that current voluntary reporting schemes, like CDP, should be established as mandatory.
As of May 2022, we have a 50/50 chance of exceeding the 1.5° Celsius global warming limit that will allow us to maintain a liveable future on this planet — and CO2 emissions still trending upwards. As of November 2022, over 80 percent of global emissions are supposedly covered by “net-zero pledges.” If that’s the case, how come we’re peering over the precipice, rather than slowly edging back from it?
“The bad news is that too many of the net-zero pledges are … little more than empty slogans and hype,” said former Canadian Minister Catherine McKenna, Chair of the United Nations High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities.
“Right now, the planet cannot afford delays, excuses, or more greenwashing. Why is greenwashing so bad? In part, because the stakes are so high. It’s not just advertising; bogus net-zero claims drive up the cost that ultimately everyone would pay … through huge impact, climate migration and their very lives.”
The sheer scale of Scope 3 means we are unlikely to meet our shared goals without meaningfully addressing our value chain emissions; Scope 3 includes emissions from all business travel and employee commuting, all purchased goods and services, all transportation and distribution both up- and downstream, all investments, all leased assets, waste disposal and any emissions generated in the use of sold products and services.
With that in mind, it’s no surprise that best existing estimates place Scope 3 emissions somewhere between 80 percent and 97 percent of total emissions for a large business. For the average large consumer company, 80 pecent of total emissions sits in the upstream supply chain.
Much like with Scopes 1 and 2, many businesses have already begun tackling the areas of Scope 3 they can more easily influence. This includes initiatives to reduce employee business travel, implement more effective waste management processes or establish cycle-to-work schemes that reduce commuting emissions.
The areas that sit further outside of the control of the organization have received comparatively little attention, by contrast, as external stakeholders are more difficult to influence. As a result, businesses will face an uphill battle to make meaningful reductions when the tide of regulation and legislation turns to make Scope 3 reporting and action mandatory.
Procurement and supply chain step up
When we take into account that the majority of total corporate emissions sit in the upstream value chain, it becomes clear that meaningful action on Scope 3 cannot be accomplished without effecting widespread change in the supply base. One Vizibl enterprise customer has calculated that in order to reach Net Zero emissions across all scopes, they must be able to exert influence six layers deep in their supply chain.
As a result, procurement and supply chain departments have a huge task on their hands. Sitting at the interface between the business and its wider ecosystem, these functions are fast becoming strategically central to the sustainability agenda. Indeed, the growth of ‘Sustainable Procurement’ in listed member skills on LinkedIn exploded in 2021, with over 330,000 such profiles by mid-December, a month after COP26 wrapped up.
This increased integration of the procurement and sustainability functions reflects the truth that new challenges frequently require new ways of working. While procurement has long excelled at managing cost, quality and compliance, addressing Scope 3 emissions requires the expansion of this traditional skill set. Now, procurement must balance the benefits of cost optimization against the value of increased sustainability to the overall business and work more effectively to influence supply chain stakeholders.
Getting started on Acope 3 reductions with Vizibl
As governmental and investor pressure increases on companies in order to keep the planet in line with below 1.5° Celsius warming, reducing Scope 3 emissions through supplier collaboration is going to be the only option for most big businesses. And procurement is going to take centre stage — being the key link between the business and its suppliers is the first step in establishing active, collaborative relationships that can lead to emissions reduction projects, while also feeding into internal corporate strategy and commitments to the move towards net zero.
However, this is a long journey that must start today if you’re to have any chance of meeting these goals. Where do you begin?
Our paper, Scope 3 reduction through supplier collaboration: 8 steps to get started, has the answers you’re looking for. From defining your scope to measuring, tracking and reporting, we take you through eight practical steps to truly moving towards a net-zero strategy before the end of this decade.