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Scope 3: The top five mistakes

Scope 1 and 2 represent all emissions that are company-owned, while emissions that occur upstream and downstream are referred to as Scope 3. For manufacturing companies, these can account for as much as 90% of their total environmental impact.

The Corporate Climate Responsibility Monitor recently published that the Net Zero climate pledges of 25 of the world’s largest companies in reality only commit to reducing their emissions by 40%. The underestimation of scope 3 emissions plays a big role in this issue. Scope 1 and 2 represent all emissions that are company-owned, while emissions that occur upstream and downstream are referred to as scope 3. For manufacturing companies, these can account for as much as 90% of their total environmental impact.

Today, a lot of capital is deployed to emission reduction and therefore, companies are eager to set highly ambitious goals. By underestimating scope 3 emissions, companies risk that many of these goals will never be achieved. This will not only worsen the global climate crisis, but waste capital, slow down innovation and eventually make companies lose market competitiveness. Regulators, investors, and customers demand more.

Makersite’s experts put together five of the most common mistakes companies make dealing with scope 3 emissions, as well as how to avoid them.

 

1. Thinking it’s just business travel

Rather than measuring what matters, we’re often measuring what’s easy to do. Since scope 1 and 2 data is easily accessible, these emission factors have come to be relatively well understood. For scope 3 emissions, however, companies often take only employee commuting, business travel and sometimes, logistics, into account. In reality scope 3 consists of 15 emission categories. For manufacturing companies, nearly all emissions come from the categories ‚purchased goods‘ or‚ use of sold products‘. But because for these categories it is hard to collect data and to find quick solutions, companies often skip some of their most important emission drivers.

2. Sacrificing depth for coverage

Some companies are going to great lengths to estimate all scope 3 categories, while the results are only of use in sustainability reports – not for any meaningful mitigation plan. If you don’t know the impact of raw material X from supplier Y, you won’t be able to benchmark and make changes. If you don’t quantify, in detail, the impact of product use, how do you plan to enable engineers to make trade-offs during design? Given limited time and capacity it is important to focus on what matters and what can be changed. This will help you free up resources to get beyond reporting and increase granularity, identify opportunities, exploit them, and measure progress.

3. Believing you’re set up for change

Quantifying scope 3 emissions is actually the easy bit. Many companies don’t realize that large parts of their organization need to work differently to make the necessary changes. In manufacturing companies, for example, the research and development and the procurement teams are at the heart of change. These teams decide the kind of products to make, materials and processes to use and where to buy. Providing them with the tools and data they need to make granular decisions at speed will determine if a company progresses towards its targets or not. Modern technologies are of aid when it comes to enabling them.

4. Thinking your teams want change

You might consider this mildly cynical, but most successful companies don’t want to change. Today buying green electricity and investing in carbon sequestration projects are the two main levers used to reduce a company’s impact. It enables companies to demonstrate reductions, without improving. Change is a threat to the status quo and therefore needs robust incentivization for it to happen. Internal carbon prices and targets are an effective way of repurposing current incentive models to drive decarbonization at all levels of the company.

5. Expecting suppliers to cooperate

The time and effort spent on collecting data about the emissions of suppliers are often underestimated. Carbon footprints are increasingly becoming a differentiating factor in procurement, which is good news. However, suppliers fear that transparency on carbon will inevitably expose intellectual property or disadvantage them against other suppliers. Many suppliers are therefore hesitant to be transparent and even those who want to cooperate are lacking expertise in generating this kind of data.

 

While dealing with Scope 3 emissions is certainly a challenge, it is key for companies and especially manufacturers to solve these complexities and understand scope 3 as a business opportunity and not as another reporting requirement. Only then will they be the winners of the next decades’ competitive innovation race and lead their industry.

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