Master Scope 3 – Without Losing Your Supply Chain
- Amy Andrews
- Apr 6
- 3 min read
The global economy has increasingly shifted towards sustainability. It’s becoming increasingly crucial for companies to report comprehensive carbon emissions for brand reputation and compliance.
Scope 3 emissions can contribute to 70-90% of a business's total carbon footprint. The lack of data and transparency often leads to underreporting or misreporting of emissions, complicating efforts to set meaningful reduction targets and limiting actual results in reducing the carbon footprint.
However, the ability to disclose Scope 3 emissions is essential for businesses operating in the rapidly changing legal environment. The EU has launched the Corporate Sustainability Reporting Directive (CSRD), which came into effect in April 2021. Under this directive, addressing Scope 3 emissions is required based on the size of the company and its sector for companies operating within the EU, including global companies that have subsidiaries in the EU or wish to do business with EU businesses.
Companies that manage to report Scope 3 emissions face both challenges and opportunities regarding legal requirements and the enhancement of their brand reputation.
Challenges in Measuring Scope 3 Emissions
Data Collection and Accuracy:
A primary challenge that companies face in addressing Scope 3 emissions is the lack of reliable data. Many companies struggle to obtain accurate emissions data from suppliers and other stakeholders in their supply chains, especially those with complex supply chains that include raw material sourcing, manufacturing, warehouse storage, and distribution.
Estimation Methods:
Emission factors provide a standardized way to estimate the amount of GHG emissions produced per unit of activity, such as fuel consumed, electricity used, or products manufactured.
Manufacturing and transformation are often located in developing countries. In these countries, governments might not have developed a set of emission factors for estimating the carbon footprint of equipment or transportation. Organizations might rely on estimation methods to determine the emission factors or utilize emission factors of the U.S. or the UK, where the actual emissions remain uncertain.
Engagement and Collaboration:
The evolving landscape of regulations and reporting standards can create confusion for businesses. Companies may have to manage various frameworks, such as ISO 14064, the Carbon Disclosure Project (CDP), the Science Based Targets Initiative (SBTi), and the Task Force on Climate-related Financial Disclosures (TCFD), which can complicate communication with vendors in the data collection process.
In addition, many vendors may lack the resources or incentives to invest in sustainability initiatives, as well as the knowledge needed to manage and report carbon emissions data for themselves and the supply chain. This can lead to a disconnect between a company’s sustainability goals and its supply chain practices.
Opportunity for Businesses
While managing Scope 3 emissions presents significant challenges for businesses, it also offers a wealth of opportunities for adaptation to the regulatory environment, particularly in the EU.
Secondly, optimizing transportation routes and reducing waste can lower operational costs while simultaneously decreasing emissions, leading to cost savings and increased efficiency.
Last but not least, companies that proactively manage their Scope 3 emissions can enhance their brand reputation and appeal to growing customer expectations for environmentally friendly practices. By demonstrating corporate commitment to sustainability, business can differentiate their brand in a crowded marketplace and strengthen customer loyalty.
Strategies for Managing Scope 3 Emissions
Utilize Platform Technology:
Utilizing advanced technology and tools designed for carbon accounting, emissions tracking, and analysis can simplify the process of Scope 3 data collection. A platform can enhance data collection and analysis efficiency, allowing businesses to monitor their carbon emissions from vendors, ensure compliance, and select vendors based on their carbon footprints.
Collaboration and Partnerships:
Collaborating with suppliers to gather data and implement emissions reduction strategies is crucial. This can be achieved by sharing best practices, providing resources, and setting joint sustainability goals. Findings’ platform offers streamlined communication with suppliers for setting sustainability goals and utilizing available built-in resources for their carbon tracking progress.
Utilizing a Streamline Approach:
Collecting carbon data from vendors and tracking the entire supply chain can be a challenge for a business. Findings’ solution provides effortless progress tracking by inviting vendors to fill out a simple questionnaire, allowing even those without prior knowledge to answer the questions. In the process, inappropriate answers can be detected using artificial intelligence, along with recommendations for correct practices.
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Addressing Scope 3 emissions can be a challenge for global companies, but it also creates opportunities, such as improved efficiency and cost savings, compliance with the regulatory environment, and enhanced brand reputation. The good news is that today’s technological advancements can help businesses streamline communication processes, data collection, and analysis, allowing them to adapt to the regulatory environment and enhance their brand reputation.
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