A company’s environmental impact goes beyond simply the scope of its own direct operations. According to the UN Global Compact, Scope 3 emissions make up an incredible 70 percent of the average corporate value chain’s total emissions. Hence, there is a need to address these emissions with robust sustainability strategies.
These emissions are the result of activities from assets not controlled or owned by the organisation scope 3 reporting. However, the organisation still indirectly affects its value chain. While they remain a hidden challenge in corporate climate action, Scope 3 is incredibly important in the journey to net zero.
What are Scope 3 emissions?
Scope 3 is arguably the trickiest to understand of all the scopes further illustrating the need to demystify this topic with sustainability elearning. The reason for this is that all the emissions associated with Scopes 1 and 2 go here.
This category does not record the emissions of the company itself but those emissions the business is indirectly responsible for throughout its value chain. This could include the associated emissions from purchasing products from its suppliers or the emissions from its products when customers use them. With all of this in mind, Scope 3 is the largest and most significant category of emissions.
How do these emissions differ from Scope 1 and 2?
The world has recognised the need for us to reduce our greenhouse gas emissions, but what are Scope 1, 2, and 3 carbon emissions, and how do they differ? Scope 1 emissions cover the greenhouse gas (GHG) emissions a company creates directly.
For example, whilst running its vehicles and boilers. By contrast, Scope 2 emissions are the emissions the business creates indirectly, such as when the energy it buys for cooling and heating buildings is being produced on its behalf.
Why are carbon emissions important in corporate sustainability?
For the vast majority of businesses, Scope 3 accounts for over 70 percent of their carbon footprint. To paint a picture, for a company that manufactures products, there will typically be high carbon emissions from the extraction, manufacture, and processing of the raw materials.
Businesses also generally have considerably less control over how Scope 3 is dealt with. You can devise solutions to curb emissions with current suppliers or make changes within your supply chain. In saying that, in most areas, suppliers will have a lot of influence on how emissions are reduced through their own product design and purchasing decisions.
Committing to reach net zero will entail tackling Scope 3. Committing to managing Scope 1 and 2 emissions will not be enough to achieve net zero. In other words, businesses will need to manage their emissions footprint by scale, and how much control they have over the source will be an excellent way to begin addressing them.
Scope 3 emissions are also a valuable risk-management tool. In other words, mapping them enables businesses to comprehend their emission hotspots and determine which parts of their value chain are inherently more vulnerable to risk from rising resource prices and an ever-changing regulatory landscape, such as the tightening of efficiency standards and carbon taxes.
Concerning climate change risks broadly, Scope 3 is a critical consideration. Upstream Scope 3 emissions are exposed to policy risk, whereas downstream Scope 3 emissions are exposed to legal, technology, social licence, and market risk.
Additionally, the ability to access equity funding or debt in future depends highly on value chain emissions performance. It is also highly dependent on a clear path to net-zero emissions across the value chain. As the world transitions to a low-carbon economy, focusing on Scope 3 can help companies unlock potential opportunities.
When it comes to reducing Scope 3 emissions, supply chain managers in companies face a daunting task. This is because these emissions are both indirect in that they are the consequence of a company’s activities outside its direct control and large.
How to reduce Scope 3 emissions?
In terms of how to calculate scope 3, there are several ways companies can do this. Collecting data is crucial; you can’t manage what you can’t measure. Therefore, having quality, accurate data allows you to set and follow through on your emission reduction goals.
The GHG Protocol has developed the Scope 3 Standard to help corporations measure their Scope 3 emissions account for emissions from 15 different categories. This framework also supports plans to partner with customers and suppliers to address environmental impacts within the value chain. You can also take it upon yourself to engage with your suppliers and explore ways to curb emissions together.
Encouraging your team members to utilise greener transportation options and making your products and packaging recyclable can always help too. With sustainability training, you can also uncover other ways to tackle Scope 3 emissions. Scope 3 emissions can no longer be ignored as they are critical in driving the decarbonisation transition.
