Scope 1 is direct emissions. Scope 2 is emissions associated with a company’s purchased energy such as electricity. Many organizations stop there. But Scope 3 is everything else, such as building materials, food, travel, even waste. It’s the emissions associated with all the goods and services that companies buy. For most organizations, including government agencies and universities, the Scope 3 footprint is much larger than the operational footprint.
How can companies measure their Scope 3 indirect carbon emissions?
As these emissions are wide and varied, it’s a big measurement challenge. There are two main ways. One is to model it using estimates and calculations from economic input-output lifecycle assessments and average emissions by sector. The other method is to calculate it with real data from suppliers or providers — or you could combine the two approaches.
What are the main difficulties in reining in indirect emissions in the supply chain?
One is that the emissions are further down in the supply chain where you don’t have direct contact with the supplier. So, it’s hard to measure and attribute the emissions, but also, it’s hard to engage those suppliers as you don’t have any direct contact. Another challenge is to prioritize. Companies have a lot of small purchases for a really wide range of different goods and services spread over a lot of categories. It’s important not to get overwhelmed, but instead to figure out which emissions are having the biggest impact and focus on those. Given that supplier engagement takes time, you want to be thoughtful about which categories you want to go after, where you have influence, the timing of when contracts are being renewed, whether the supplier has shown any interest in making a change, and then what actions will change the emissions being generated.
How can companies tackle these obstacles?
They should collaborate with other large buyers and look for credible standards and labels for programs where sectors have come together to promote sustainability by requiring common climate criteria. This will cascade down the chain by sending a market signal. If a supplier is hearing the same message from hundreds of customers, they are going to take it more seriously. It’s also important to back up the request with purchasing decisions and clearly stated preferences so it goes beyond an information request. To do that you need to engage your whole purchasing team in the effort.
What progress has been made?
Companies are spending more time on their climate strategies, and the more advanced ones are starting to address Scope 3 more seriously, as well as invest in carbon credible offsets projects to speed things up. We also see more progress by leadership companies supporting carbon removal projects. Part of this has been driven by the growth of socially responsible investors — environmental social governance (“ESG”) investors — who are creating different financial products and pressuring companies to act on climate. The Securities and Exchange Commission is working on more standardized disclosures on climate risk, as is Biden’s climate team. Many companies are setting voluntary “net-zero” or science-based targets to reduce their emissions around the world, ahead of government regulation.
What else needs to be done to get to true zero emissions for companies?
More work needs to be done on providing high quality analytical models to at least characterize the footprints and inform the strategies. There are some great tools out there already, but we need to make them more accessible and easier to use for non-specialists.
As buyers, we also need to coalesce around certain categories of emissions and press for the same requirements and actions so that we amplify the message.
And finally, we need to expand our definition of net-zero and insist on Scope 3 emissions being included. Otherwise, we have a false sense of security that we are making progress, while we are just moving the emissions, and the impacts, offshore.