Daniel Usifoh explores the challenges facing businesses looking to achieve net zero, particularly around Scope 3 emissions
Net zero has become the overarching goal of the business sustainability movement, and organisations in every industry are making commitments to slash emissions and go carbon neutral. As sustainability becomes non-negotiable in the business world, the pressure is on for organisations of all sizes.
Making a commitment to be net zero is one thing, but what do these commitments mean in practice? Do businesses understand the true meaning of the phrase, and are they underestimating the scale of the challenge?
Scope emissions and the supply chain
An organisation’s carbon emissions fall into three different categories – commonly known as ‘scopes’, as used by the Greenhouse Gas Protocol.
Scope 1 covers emissions from owned or controlled sources, such as gas boilers and fleet vehicles. Scope 2 covers indirect emissions from the generation of purchased steam, electricity, heating and cooling. Scope 3 emissions are all indirect emissions that occur within the supply chain.
As Scope 1 emissions are under an organisation’s direct control, they are some of the easiest to measure and manage; solutions include directly removing the source of the emission and investing in energy-efficient machinery. Scope 2 emissions cover indirect emissions, and companies typically tackle these through energy conservation – for example switching to low-carbon electricity, or changing their energy contract or supplier.
Scope 3 emissions are harder to tackle. These are all of the emissions generated by suppliers in creating and delivering the products and services supplied to the business, as well as leased assets; they include everything from waste disposal processes that are beyond an organisation’s control, to the emissions arising from business travel, employee commutes and the use of sold products.
Scope 3 emissions are extremely significant in the journey to net zero as they make up 80%–90% of an organisation’s emissions, depending on the industry. If a business wants to make a significant impact on its carbon footprint, it can’t do so without addressing Scope 3 emissions. The issue is that when businesses are making commitments to reach net zero, what many of them really mean is net zero in terms of Scope 1 and Scope 2 emissions.
Sustainability and the supply chain
Even if an organisation’s own operations and values are sustainable, it still needs to ensure that there are no unsustainable supply chain practices or business relationships undermining its green credentials, causing reputational damage or making it harder to achieve net zero. While measuring Scope 1 and Scope 2 emissions can be straightforward, Scope 3 emissions pose a range different challenges – from the logistical to the administrative.
Factors that can hinder the successful measurement of Scope 3 emissions include reliance on external organisations, unreliable data, and a lack of supplier coverage and visibility. These factors make measuring emissions difficult and create unreliable data; over time, this leads to poorly informed decisions or unsuccessful attempts to reduce emissions.
To solve the problem, businesses first need to understand its true scale. Value chains are inherently complex, especially in larger organisations. Communicating with suppliers to collect specific emissions data can be a major undertaking, exacerbated by the relationships a company has with them, as well as by the contact details and time zones available to the company. Measuring the data can quickly become complicated, as companies are often dealing with people, places and organisational practices that are beyond their immediate control or knowledge.
One useful approach is to have a calculated and organised roadmap. Plan data collection methods well in advance and use any resources or technology at your disposal, such as dedicated carbon emissions reporting and measuring software. The right software provides an easier and more centralised way to estimate emissions data, providing businesses with insights on the major areas of Scope 3 emissions so they can make the right decisions on reduction strategies.
Sustainable procurement strategies
Although gathering Scope 3 data and improving its visibility is a good starting point, it’s what businesses do with this data that matters. It can be used to identify which areas of the supply chain emit the most emissions and which areas can be addressed to make the biggest impact.
Implementing a sustainable procurement policy is one way that businesses can target Scope 3 emissions. Such a policy makes sustainable operation a prerequisite for a supplier wanting to do business with an organisation, ensuring suppliers meet the required standards in terms of business ethics and environmental, social and governance issues. In this way, an organisation’s buying power is used to drive change among its suppliers. As well as the direct benefits of reducing a company’s emissions, waste and energy consumption, these policies can also deliver benefits further down the supply chain.
Carbon insetting
Another way to address Scope 3 emissions is carbon insetting, which directly addresses a lack of sustainability in the supply chain. It involves businesses encouraging organisations to improve their operations and become greener via financial initiatives or other means of assistance.
From investing in new, less harmful machinery to facilitating greener decision-making, carbon insetting finances decarbonisation measures and drives the value of all businesses involved to improve supplier relationships, all while helping the planet.
A greener future
Reducing Scope 3 emissions is a fundamental part of the journey towards net zero and a greener, fairer future. Businesses looking to advance their sustainability credentials and fulfil environmental goals should make them a priority, not an afterthought.
Organisations need to look beyond their own operations, take accountability for their professional relationships and seek new, innovative ways to elevate their sustainability to demonstrate their commitment while adapting to ever-changing legislation and regulation.
Daniel Usifoh is a co-founder of Gateway Procurement and AXIOM Sustainability Software.
