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For most companies, especially those pursuing ambitious decarbonization targets, progress toward reducing emissions produced indirectly by their supply chain has been comparatively slow. Tackling Scope 3 emissions is one of the largest barriers to decarbonization, but there are clear pathways to reduce them.
At ENGIE Impact’s most recent breakfast briefing, “How to Reduce Scope 3 Emissions in a Global Supply Chain”, our experts Joelle Thomas and Marc-Antione Franc invited Piotr Konopka, Senior Manager, Global Energy & Decarbonization Programs at global supply chain solutions provider DP World, and Dominic Newbury, Sustainable Sourcing Manager at agricultural science and technology multinational Syngenta, to share their experience and insights on achieving Scope 3 emissions reductions at scale.
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Like many multinationals, DP World and Syngenta realized they would not make sufficient decarbonization progress solely through Scope 1 and Scope 2 efforts, but tackling Scope 3 emissions can seem like a daunting proposal. Syngenta in particular is heavily outsourced for raw materials, with Scope 3 comprising 90% of their carbon footprint.
This is not uncommon. Scope 3 emissions comprise 70-90% of companies’ carbon output, and are notoriously hard to measure, estimate, track and report. The urgency to address them now is driven, at least in part, by the realization that decarbonization is not just a PR exercise anymore. “The number of inquiries from customers about our decarbonization strategy has grown exponentially over the last three years,” Piotr Konopka told us. “Furthermore, it is difficult if not impossible to raise finance on international markets without having a solid decarbonization strategy and being able to show progress on that plan.” Stakeholder expectations are maturing. The decarbonization impetus from the customer base, regulators and investors is palpable — and Scope 3 can no longer be ignored.
While acquiring perfect Scope 3 emissions data might be impossible, gathering imperfect data is still useful. With the right digital solutions, supplier engagement, and organizational innovation, companies can transform how they work with stakeholders, set clear expectations about decarbonization goals, and provide a springboard for exploring Scope 3 opportunities.
The foundation of any Scope 3 decarbonization program is alignment on both data gathering and operations, which go hand-in-hand. Having established the need for collaboration, both Syngenta and DP World took the same approach for their Scope 1 and 2 decarbonization programs – measuring data to identify emissions hotspots – though their methodologies differed.
Syngenta defined their Scope 3 emissions narrowly, limiting it to the first of fifteen categories — purchased goods and services — by sending questionnaires to their suppliers, aiming to understand where they were on their carbon journey. Syngenta used software developed by the supply chain sustainability platform SupplyShift to see which suppliers would potentially be the most impactful. By understanding where to focus to have the most impact, they could guide their procurement team and earmark opportunities for collaboration.
DP World relied instead on calculating the entirety of their Scope 3 emissions, using the spend-based carbon accounting method to calculate emissions related to their suppliers. This method takes the financial value of a purchased good or service and multiplies it by an emission factor to obtain an estimate of the emissions produced. It took about six to eight months for them to do the calculations and understand the legal and operating structure of the businesses assessed. The estimate enabled them to locate Scope 3 emissions hotspots in the value chain, work on a strategy to address them, and train their procurement department to carry it out.
The initial outlines of a data strategy are clear:
For any organization, there may be complications around establishing standards for reporting and ensuring the data gathered is consistent, which requires an audit of where each supplier stands and eventually incentivizing their participation in a carbon reduction effort.
Imperfect data should not hinder companies from getting started on decarbonizing their Scope 3 emissions, but eventually, a more granular and consistent approach is needed.
As Dominic Newbury explains, Syngenta has been trying to get accurate, real-time data from its suppliers about the product production footprint of the products they buy, but it has been a cumbersome and challenging process, in part due to the maturity of their supply base. “Large corporate suppliers can provide accurate data, but smaller suppliers, often in China and India, cannot. We have to navigate very different levels of understanding concerning decarbonization issues.” Companies must approach suppliers in different ways depending on where they stand on their journey.
Syngenta enlisted ENGIE Impact to acquire quality data, which was accomplished by leveraging supply chain transparency and responsibility software to significantly increase supplier participation in the process. These tools enabled Syngenta’s suppliers to easily communicate to ENGIE Impact their current energy usage and carbon emissions footprint. This data also enabled ENGIE Impact to identify what percentage of each supplier’s production was allocated to Syngenta and to draw up a decarbonization roadmap.
Internal resistance to Scope 3 mitigation measures can be another hurdle. The business case for Scope 3 is not as tangible as it is for Scope 1 and Scope 2. As a result, the biggest barrier is oftentimes organizational rather than technical – it can be difficult to convince stakeholders that emissions generated by a diverse group of suppliers outside the company’s core operations are important and of value to the business. An additional issue is not having the right decision-makers in place so they can consider sustainability implications every time investment decisions are made.
ENGIE Impact is equipped to address the issues of data inaccuracy, standardization, stakeholder engagement and incentivization – of corporate leaders as well as suppliers — following these steps:
Scope 3 decarbonization may be viewed as two parallel tracks, rolled out simultaneously:
Track 1
You’re continuously working on in-depth data collection and applying digital tools to process that information within a long-term framework in a way that will standardize and industrialize your data management processes. This methodology enables you to accurately measure and report on the impact and progress of your mitigation measures.
Track 2
Your company should launch decarbonization programs with their suppliers, engaging ENGIE Impact as a catalyst for stakeholder engagement and the creation of an interactive platform. You should set your supply chain in motion, building momentum with your partners and engaging them for the long term. Measurement should not prevent action.
With these steps and parallel paths in place, any organization will be equipped to begin tackling its Scope 3 emissions challenges.
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