A guide to Scope 3 emissions and carbon footprinting
Last year, about one month after COP26, someone asked me whether I had seen an acceleration of corporate emissions reduction efforts because of the event. I answered that it was too early to tell.
Now, almost one year later, it does seem that something is shifting. The multitude of corporate commitments to net-zero, science-based targets meant that some of the largest companies started to take responsibility for their value-chain emissions (Scope 3), including those associated with procured products and services and the use of their own products and services. There are signs that the effects of this are starting to ripple through the business community.
So, what are Scope 3 emissions?
In many ways, Scope 3 is a difficult concept. Companies struggle with a lack of visibility and limited influence that they can exert on emissions that occur upstream and downstream in their value chain. At a macro-level, the risk of double counting makes it difficult to assess the absolute scale of emissions reductions achieved.
However, Scope 3 is a great mechanism for incentivising emissions reductions. When multiple companies take responsibility for the same emissions, they are more likely to stimulate each other to take measures to reduce them, and to seek partnerships for more impactful approaches to doing so.
Increasingly, I see signals that companies along the value chain are starting to ask each other questions about their emissions footprint. I have come across examples where companies need to demonstrate a certain level of progress on emissions reduction, for instance reaching step 3 on the CO2-performance ladder, to be eligible for delivering products or services to another company. I have seen tenders that prescribe a maximum carbon-intensity for a specific process or asset, or the use of a specific low-carbon fuel for the transport involved. Some companies offer incentives for sustainable practices. Recently, the dairy co-operative Arla Foods announced that it will pay farmers more money for the milk they produce if they meet new environmental sustainability targets.1
How should companies prepare to manage and reduce Scope 3 emissions?
Scope 3 emissions account for 75% of companies’ greenhouse gas emissions on average, but the importance of Scope 3 emissions varies considerably by sector.2 Many companies have only recently started to look at Scope 3 emissions seriously, and we have only seen the first ripple effects through the value chain. More and more companies can expect questions about their footprint and measures to reduce it as other step up their efforts. How should they prepare?
Multiple clients have asked us to help them prepare for and respond to new demands from their clients or other stakeholders. We have a structured approach for doing this. First, we make an inventory of the company’s ESG plans and performance to identify which claims can be made. Second, we assess existing claims against standards for sustainable communication and advertising, like the Green Claims Code in the UK, and the Milieureclamecode in the Netherlands. This ensures that claims made in B2B sales stand up and are credible. Third, where existing sustainability initiatives fall short of the prescribed standard, we advise how the company can step up, and help establish new strategies, programmes and policies and the associated narratives.
Author: Sytze Dijkstra, Netherlands Country Manager at Simply Sustainable.
1 Dairy co-op Arla to pay farmers more for milk if climate targets met. The Guardian.
2 Scope 3 trends US climate disclosure rule. World Resources Institute.
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