As the effects of climate change become increasingly clear, businesses today are facing unprecedented pressure to rein in their carbon footprints and to properly account for and disclose their environmental impact.
The era of vague, voluntary corporate mission statements on climate-related goals to satisfy internal and external stakeholders’ demands is over. In their place have come a slew of increasingly stringent regulatory moves – from California’s greenhouse gas disclosure rules to the EU’s Corporate Sustainability Reporting Directive (CSRD) – that businesses must either abide by, or run the risk of facing not just reputational black eyes, but tangible business consequences.
Building a cohesive data strategy to track, report and disclose emissions is no easy feat, particularly when it comes to Scope 3 emissions – emissions that a company does not produce directly but is responsible for as part of its broader value chain. Moreover, Scope 3 emissions make up the vast majority of most companies’ carbon footprints, often 70-90%. Tackling Scope 3 emissions expectations properly depends on businesses having a comprehensive and sophisticated approach for how they collect, synthesize, and act on their data. Unfortunately, whether it is striking collaborative partnerships with suppliers or identifying the data they need, many businesses are struggling to build the foundations to achieve Scope 3 data demands.
With that in mind, here are a few fundamentals that organizations across the business world should consider as they look to build effective Scope 3 emissions management strategies.
Life Cycle Assessment
Specificity is the foremost priority and a key stepping stone to achieving modern sustainability and decarbonization success today. Simply put, the better businesses understand the true climate impacts of each product or service in their inventory – and the faster they can do so – the better chance they have of avoiding regulatory hot water in the short-, medium- and long-term. This is why life cycle assessments (LCAs) are indispensable.
LCAs are designed as a scientific way for businesses to understand the environmental impacts across the lifecycle of their market offerings – from raw material extraction to recycling or reuse. This process includes a rigorous analysis of each product, breaking down all of the materials and energy flows to get a clear understanding of its sustainability impacts. The findings are then modeled against a variety of established databases and datasets to gain a comprehensive view of each offering’s true environmental impacts and where they stem from. Business decision-makers can then use this data to gain a full view of their emissions risks, how to address them, and exactly how they are tracking to meet external and internal sustainability goals.
LCAs can be a means to increase the accuracy of emissions and shed light on where the emission hotspots are in the lifecycle. The key to success with LCAs is focusing on core services or products. Performing quality LCAs requires significant time and resources to accurately understand emission stemming from all stages in the lifecycle. Therefore, focusing on high-selling or carbon-intensive products or services can provide significant insight into the emissions profile of the product portfolio.
Supplier Engagement
Business supply chains and supplier networks are becoming more complex and interconnected by the day, making data collection and analysis incredibly challenging. To overcome these hurdles, it is imperative that businesses first take a step back and carefully consider their supplier options to lay a path toward the most effective partnerships and frictionless reporting experiences. This begins with identifying the suppliers that will have the biggest impacts on your sustainability goals and then tapping your procurement team to vet each supplier to ensure that there is alignment and synergies between both parties in terms of sustainability best practices, emissions trajectories, and emissions controls.
Additionally, they must be willing to be open and transparent about their carbon footprints. Collaboration between companies and supplier networks – such as companies providing training to their supplier networks on GHG emission assessments and targets – can be pivotal in establishing this open dynamic. From there, businesses can then begin to work collaboratively with suppliers, collecting primary data to build not just a holistic view of current emissions performance, but chart an actionable course towards a more sustainable future.
Making Data Actionable
Equally as important as the data itself is a company’s ability to access that data and turn it into actionable insights. Today, even as the world is in the midst of rapid digital transformation, it is still commonplace for businesses to operate in silos, preventing the necessary stakeholders from getting quick and easy access to the data that they need. Further, organizations must have quality, reliable data, which can be challenging when assembling from disparate datasets and legacy systems.
Reporting on Scope 3 emissions is an all-encompassing task that requires a 360-degree view of a business’s emissions and collaboration across multiple departments and teams. If one team is shut out from data access or there are any blind spots that go unnoticed, not only will businesses fail to meet their own internal emissions goals, but they will likely find themselves quickly having to deal with regulatory consequences. By adopting modern technology solutions such as the cloud and automation, businesses will not just make their data more easily accessible but allow their key stakeholders to make much quicker decisions with far greater confidence.
Furthermore, Scope 3 data does not need to be all primary data in order to be actionable. For example, breaking down upstream emissions into key categories such as transportation mode, weights of raw materials, and distance transported can help shed light on where emissions reductions are possible – such as changing mode of transportation from air to sea for heavier weighted products or materials.
Closing Thoughts
As the world continues to be more aggressive in tackling climate change, regulatory demands are only going to become more acute. By enhancing their data workflows, businesses will be able to drive greater regulatory compliance success and establish themselves as sustainability leaders for the future. Assessing Scope 3 emissions is an iterative process; as data becomes more available it can be estimated more precisely. However, in the meantime, we should not let the quest for accuracy hinder action. By embarking on the journey to assess Scope 3 emissions, valuable insights to ensure a more resilient and lower emission value chain can be uncovered along the way.