Supply Chain

Most Businesses Don’t Understand Scope 3 Emissions — Here’s Why

Tackling Scope 3 emissions is a daunting task; companies must collaborate with their suppliers to understand their carbon literacy, and then work together to take steps towards reducing emissions.

Brand Provided | By James Butcher | Published 1 year ago | About a 4 minute read

Image: Vlada Karpovich

As the clock rapidly counts down towards ambitious national and international climate targets, there is a growing understanding that action is needed imminently — before it’s too late to make a positive change. Every five weeks brings us one percent closer to the Paris Agreement’s 2030 target of reducing global emissions by 45 percent, so the time for decisive action really is upon us.

The biggest challenge we see in our work with brands and retailers is not necessarily a lack of desire to make changes that will make their business more sustainable, but a gap in understanding how to start the process.

Carbon emissions are categorised in three scopes; and identifying the categorised emissions can be incredibly complex and time-consuming, especially when dealing with hundreds of suppliers central to the process. Outside of those that specialise in sustainability reporting, teams within these companies struggle to understand the importance and where they can start to reduce emissions.

This means that they naturally focus primarily on Scope 1 and 2 emissions — namely, the ones that are in their direct control.

However, Scope 3 — indirect emissions throughout the supply chain — is by far the most prevalent and troublesome category; and while there are several areas where these emissions are significant (ex: manufacturing, packaging, transportation and consumer use), this also presents a massive opportunity for companies to innovate and drive changes.

The biggest issue with tackling Scope 3 emissions is the sheer scale of the task; the only effective way of dealing with it is by collaborating with your suppliers to understand their carbon literacy, and then working together to take steps towards reducing emissions.

Gaining a broader view

The starting point for this process is finding the right tools for each of your suppliers to measure their emissions. The climate emergency has the potential to dramatically restrict our ability to source raw materials; so, measuring current emissions is crucial to calculating not just the environmental, but also the economic, cost of our processes.

Many parts of the supply chain don’t measure data or impact, so have little to no idea where their product’s emissions are coming from, what the impact source is and what its true carbon footprint looks like.

However, by virtue of their position at the top of the supply chain, companies hold the cards in this situation and can therefore leverage their impact and influence downward to make a difference. If — as is the case with many suppliers — they don’t have the data to work from or the carbon literacy to understand what it means for their business, you have to understand the supplier’s readiness and tailor your approach around that.

Through understanding a supplier’s level of maturity around certain initiatives and their capabilities when it comes to capturing the data required, the company is in a much better position to start the appropriate conversations. By taking this approach, organisations can then choose their suppliers carefully and mandate what materials and ingredients are involved.

In asking for help in understanding carbon footprints, brands and retailers also hold significant influence over how the supply chain approaches sustainable practices.

Bringing everyone on your journey

Once you have that starting point of understanding your platform and having an inventory of your Scope 3 emissions, the next steps are about making changes that can bring about reductions.

What is important here is identifying the incremental steps on the wider journey to net zero. The changes made to reduce Scope 1 and 2 emissions are typically large-scale, company-wide policies and adaptations, but the sheer scale of Scope 3 lends itself to a marginal gains-type approach — meaning, even seemingly small changes introduced throughout the whole supply chain will naturally compound over time and make a big impact on overall emissions.

For example, retailers and brands should start collaborating with suppliers on things such as making full use of shipping containers to prevent empty running, or considering warehouse location and the possible role of electric vehicles in relation to the final mile.

Improvements can also be made by increasing the use of trains to minimise road and air travel, charging points at haulage rest stops, and packaging design that can go from pallet to shelf without wasted air — all can make a difference; but the conversations must be had.

Communicating the challenge

As well as communicating with the supply chain, it is also critical to convey the importance of having visibility into Scope 3 emissions from board level downward. As they are — by definition — not something that can be directly controlled by teams on a day-to-day basis, a natural state of indifference around Scope 3 can develop if its role isn’t communicated clearly, especially in larger teams.

By creating a wider understanding internally of the different priorities in reducing carbon emissions, you are bringing your team along with you on the journey in the same way you do your suppliers.

Playing our part in solving the climate emergency is no small task, and a lack of resources and diverse numbers of suppliers doesn’t make it any simpler. However, by setting clear expectations, having measurable targets and working collaboratively and openly, we as an industry can face the challenge and make improvements together.