Notes from the Summit: Tackling Decarbonization Part 1: Introduction to Scope 3 Impact
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December 8, 2022 - Organizations across different sectors and maturity levels need to address their climate- and carbon-related impacts, which touch both their direct operations and their indirect value chain, all of which can be difficult to navigate. However, up until recently, many organizations have forestalled the type of planning needed to evolve their businesses as the world around them has begun to change with increasing momentum (read Decarbonization Can’t Wait).
On the heels of the pandemic and global supply chain disruptions, organizational leadership now faces an onslaught of new challenges: a pending recession, a dismal climate outlook, and a renewed emphasis, both corporate and legislative, on Environmental, Social, and Governance (ESG) best practices.
In addition, many companies have taken notice of the pending reporting rules proposed by the US Securities and Exchange Commission (SEC) related to public companies’ disclosure of climate-related risks. Among these rulings include the potential requirement for companies to report the GHG emissions of their entire value chain, also known as Scope 3 emissions (read Tackling Decarbonization: SEC Throws a Flag at Current Climate-Related Reporting Practices).
As a result, businesses should anticipate increased investor and customer scrutiny. For some time, we've seen institutional shareholders applying pressure to private sector organizations to issue some sort of reporting on making changes and adopting policies around a host of issues, be it around climate and carbon, or other ESG-related impacts like human rights, water management, etc.
The harsh reality now is that carbon-reduction strategies and practices can no longer be an afterthought. The scale and complexity of Scope 3 emissions are daunting. Even more challenging is the prospect of reducing those emissions once a company is able to measure them.
As a background, emissions that are a direct result of company activity are called Scope 1. These are fuels we burn to produce energy or power our activity: natural gas to heat our sites, or gasoline to power transport. This also includes fugitive emissions from refrigerants, which are incredibly potent greenhouse gases. Emissions that are a result of purchased energy are called Scope 2. Although these are emitted at the utility where power is generated, companies can reduce emissions through the purchase of clean energy. (For a complete overview of Scope 1 and 2 emissions read Tackling Decarbonization: GHG Accounting Basics.)
Emissions that are an indirect result of company activity are called Scope 3. These represent everything upstream and downstream in a company’s value chain. Although companies have less control over these emissions, they often represent the majority of emissions resulting from company activity.
There are 15 categories within Scope 3 ranging from the raw materials and components a company purchases, transportation, waste, business travel, leased assets, the use of a company’s products by its customers, and emissions from disposal or incineration of a product.
As you can see below, there are many sources of these emissions associated with the wider value chain that are important to understand. In many cases, companies may not have direct control over these, but they can almost always influence reduction of these emissions.
To reliably calculate your GHG emissions, it’s important to establish a consistent practice of tracking energy usage. This also provides a great opportunity to identify cost saving opportunities by identifying the sites, equipment, and processes that consume the most energy within your supply chain. And since Scope 3 emissions are so varied, emissions reductions opportunities touch almost every department, from facilities management to procurement to logistics and others.
In Notes from the Summit: Tackling Decarbonization, Part 2: Reducing Scope 3 Impact through Supplier Improvement, we’ll cover methods to engage and enable internal stakeholders and suppliers to develop and execute their own GHG reduction strategies. Listen to Ryan Lynch’s full Connect Summit session Reducing Scope 3 Impacts Through Supplier Engagement and Improvement. Follow along with Ryan’s Tackling Decarbonization series for more insights on implementing your carbon reduction initiatives and other future-ready approaches to organizational sustainability. For more EHS and Digital Trust topics that should be at the top of your list, visit at BSI’s Experts Corner.
