The landscape of Scope 3 emissions presents numerous challenges for organizations striving to address their environmental impact. One of the primary difficulties lies in the vast and complex nature of value chains, which encompass diverse economic activities and greenhouse gas emission sources.
Gathering accurate and consistent data across these intricate networks proves to be a daunting and perhaps unrealistic task. But, when approached with the correct methodology, Scope 3 emissions data can be translated into an actionable language that can be used for decision-making.
In a recent conversation with Meta, ENGIE Impact explored these Scope 3 insights and more. View Discussion →
Scope 3 emissions, the indirect greenhouse gas emissions associated with an organization's value chain, have gained significant attention in recent years. Companies have demonstrated progress in measuring and managing their Scope 1 (direct) and Scope 2 (indirect energy) emissions, but Scope 3 emissions present a unique set of challenges due to their distributed nature and complex value chain interactions. A recent survey conducted by ENGIE Impact highlights some of the main barriers that working with Scope 3 presents for organizations.
Another challenge associated with reducing Scope 3 emissions is the difference in accounting methodology compared to Scope 1 and Scope 2 accounting. Scope 1 emissions are identified and calculated based on specific GHG emission sources associated with the actual processes generating those emissions, such as fuel combustion in boilers or heavy-duty trucks. This clear linkage between calculated emissions and their sources allows for targeted interventions like electrification or switching to alternative fuels. In contrast, Scope 3 emissions are categorized by business activities, like the purchase of goods and services or the use of sold products.
While this categorization used in accounting helps identify hotspots to engage relevant business units, it lacks a direct link between emissions and specific intervention measures. This distinction highlights the need for a deeper understanding and new perspectives in addressing Scope 3 emissions.
Converting Scope 3 inventory categories into the commonly used language of Scope 1 and 2 provides companies with greater clarity regarding their reduction levers. Understanding emission sources enables them to identify the appropriate interventions that have the greatest impact and lead to meaningful and efficient reductions in emissions throughout their value chain. But what goes into converting Scope 3 accounting data into actionable insights?
The proposed solution aims to enable decision-making for Scope 3 reductions. This requires executives to have confidence in the prioritization of reduction actions, forecasted inventory, and implementation plans to meet or exceed their targets. To instill this confidence, three fundamental questions need to be addressed.
Getting started on Scope 3 reductions requires focus. By identifying the greenhouse gas sources in Scope 3, and considering their materiality and proximity to operations in the value chain, prioritized emissions sources focus on early reduction efforts.
Scope 3 emissions will evolve a lot leading up to the target year. It’s important to understand the evolution of these greenhouse gas sources, taking into account factors such as the company's own forecasts, supplier targets, and relevant laws and regulations.
With emission sources prioritized and forecasted, actionable plans are then needed to confidently and efficiently meet the set targets. These plans are built by identifying gaps between forecasts and targets, outlining specific engagement models and process changes, and estimating associated costs.
Learn how Meta used this approach to address its Scope 3 emissions.
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To answer these questions, two additional lenses are applied to the inventory. The first lens involves considering all the economic activities throughout the value chain that contribute to greenhouse gas emissions. The second lens focuses on identifying the specific greenhouse gas sources stemming from the processes within those economic activities.
Adopting an iterative approach that shifts the focus from exhaustive accuracy to practical insights enables organizations to get immediately actionable insights for their Scope 3 reductions. If emissions are not able to be fully allocated in the first few iterations, organizations still get valuable insights to prioritize effective interventions that target their emissions hotspots.
Once organizations recognize that addressing Scope 3 emissions is an evolving process, they can get started with their current inventory – even if spend-based - and continuously improve data quality. This iterative approach enables them to start now, collect information along the way, and update the analysis over time to refine their strategies.
By examining the Scope 3 inventory through these new lenses, organizations gain valuable insights that help them identify more traditional emission reduction actions associated with Scope 1 and Scope 2. These actions can then be implemented in collaboration with stakeholders along the value chain.
By embracing a fresh approach to Scope 3 emissions, organizations can overcome the challenges associated with supply chain decarbonization and unlock the potential for positive change. Through actionable insights, flexibility, and collaboration, organizations can prioritize interventions that yield maximum impact and collective benefit for business and planet.
Let’s work together to decarbonize your supply chain.
