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Tackling Scope 3 emissions

31 August 2023

Supply chain decarbonisation is complicated by the complex web of supply chains a company interacts with, says Alexis Normand.

SCOPE 3 emissions, unlike Scope 1 or Scope 2, are notoriously the most difficult to measure because they include all other emissions generated outside the company's own premises. These include activities carried out throughout the various supply chains the company has chosen to work with - such as upstream and downstream transport and distribution.

Underscoring the importance of understanding Scope 3 is the fact that they are typically up to five times greater than the emissions generated by Scope 1 and Scope 2 emissions combined. Tackling this is a complex undertaking which first requires obtaining accurate data from an often fragmented supplier landscape. 

Traditionally, this is difficult and time-consuming. Procurement managers have had to rely on manual data collection, fragmented spreadsheets, and complex calculations, which can result in errors, data inconsistencies, and a lack of real-time visibility. These hurdles make it difficult to effectively measure, monitor, and benchmark emissions across the supply chain. In addition, traditional methods have lacked the scalability required to handle the massive amounts of data generated by large supply chains, hindering accurate and timely decision-making.

However, with the advent of more advanced technologies built to scale carbon accounting and climate reporting, it’s easier than ever for procurement managers to drive their supply chains toward decarbonisation. 

Carrot and stick

New technology platforms provide insight into emissions data for individual suppliers, allowing procurement managers to identify high and low performers. Armed with this information, companies can work with suppliers to implement emission-reduction initiatives, set targets, and track progress over time. 

Eeducation is paramount to getting it right. Suppliers cannot be expected to do this on their own, it’s the responsibility of the buyer to provide education to help suppliers understand decarbonisation and their role in it.

Taking a carrot and stick approach may also be worthwhile for some companies to consider, using incentives to help encourage suppliers to get on board with decarbonisation goals. Incentives could be financial (for example, offering preferential rates or margins, in line with decarbonisation targets), reputational (for example, taking part in joint-marketing initiatives to shout about joint decarbonisation progress), or competitive (for example, only working with suppliers that have a clear, demonstrable strategy for decarbonisation).

As pressure on Scope 3 reporting mounts up with the arrival of new regulation like the Corporate Sustainability Reporting Directive (plus many other industry and geography-specific regulations), we’re seeing big multinationals make bigger and more accountable steps towards decarbonising their supply chains.

In its latest Sustainability Report, Amazon announced that, from 2024, it will require regular reporting and emissions goal setting. To help suppliers to meet these expectations, Amazon will provide suppliers with products and tools to help them reach these goals.

Walmart, another retail behemoth, has been pushing for a similar level of transparency for a number of years through its Project Gigaton programme.

Decarbonisation isn’t just for the big companies however. Any business, from a one-man band to a regional company, has a supply chain and therefore needs to be thinking about this. Only through decarbonising supply chains will a net zero future be a remote possibility. Without these efforts, sustainability initiatives are all but meaningless.

Alexis Normand, co-founder and CEO, Greenly

For more information, visit www.greenly.earth