Over 150 companies have signed the American Business Act on Climate Pledge for aggressive climate action. Furthermore, through the RE100 initiative, 81 other companies have committed to achieving 100% renewable energy.
While such efforts are a significant step in the right direction, much more needs to be done, beginning by rethinking the view on emissions. And while operations may seem like the most important contributor to emissions, it’s actually your supply chain.
According to the CDP 2022 Global Supply Chain Report, supply chain emissions exceed operational emissions by 11.4 times. This translates to 92% of your company’s total GHG emissions. However, despite using millions of dollars on the supply chain each year, most organizations view it only as a cost to manage.
At this stage, the world is at a critical point in managing and reversing the climate crisis. Over the next ten years, there is a need to reduce emissions by 45%. Otherwise, the goal to limit average global temperature increases to 1.5 degrees will not be achieved. With this, there is a need for organizations to look beyond Scope 1 and 2 GHG emissions.
What Are Scope 3 GHG Emissions?
When thinking about your emissions, it’s understandable if your focus is on direct contributions. However, you also contribute to carbon emissions through processes conducted for you by suppliers.
This is where Scope 3 emissions come into play. These emissions come from activities and assets that you do not own or control, but your organization indirectly impacts. As such, your Scope 3 emissions account for Scope 1 and 2 emissions for another company in your value chain. This is why Scope 3 emissions are also known as value chain emissions.
Scope 3 emissions occur both upstream and downstream, so they account for the largest proportion of your total GHG emissions. Moreover, there are 15 categories of Scope 3 emissions, but not all will be relevant to you.
Some of the examples of Scope 3 emissions include:
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- Business travel
- Employee commuting
- Use of sold products
- Purchased goods and services
- Transportation and distribution (up-and downstream)
- Leased assets and franchises
- Investments
Measuring Scope 3 Emissions
As companies reduce Scope 3 emissions, the first step involves pinpointing the sources and their magnitude. As such, measuring Scope 3 emissions should be the first step. In so doing, an organization can:
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- Determine its emission hotspots in the value chain
- Know the suppliers that lead or lag behind in terms of sustainability efforts
- Identify resources and risks in the supply chain
- Identify opportunities in the supply chain for cost reduction and energy efficiency
- Coordinate with suppliers to develop and implement sustainability initiatives
- Engage with employees to reduce business travel and commute-related emissions
Achieving Scope 3 Emission Targets
While achieving Scope 3 emission targets may seem like an impossible task, it’s far from it. All that’s needed is a conviction to do so supported by organizational policies. Some of the steps your company should take include:
1. Set Clear C-Level Policies and Framework
To achieve such ambitious goals, they must echo throughout the organization. Senior leadership must lead the way by championing and setting a supportive governance structure for this to happen.
The first step should be a C-level mandate by the CEO, demonstrating the company’s commitment and urgency. Then, the organization should follow up with the appointment of a senior executive to guide the company towards zero emissions.
2. Embed Energy into Company Culture
Once the executive team that will champion energy and emissions efforts is in place, the next step should involve echoing the message to the rest of the organization. To ensure buy-in, communicate the impact of Scope 3 emissions and the benefits of reducing them.
As you do this, ensure that you embed the key values in the company’s mission, vision, and culture. Otherwise, sustainable efforts may not have the desired impact, especially in the long run.
3. Track Energy at All Levels
Although energy is one of the most significant cost factors for most organizations, most executives cannot account for it. However, to reduce or achieve zero emissions, that must change. Organizations should track energy use and emissions from all levels. This starts from equipment, facilities, individual activities, and at the plant level.
As you monitor and analyze energy use, you’ll also be able to identify performance, quality, operating, and cost issues. This will be easy as you can compare data from different plants or time periods. By identifying such issues, you can address them early on, improve quality and reduce cost. Not to mention, it will be easier to keep emissions at bay.
4. Transition to Renewable Energies
In fairness, most organizations believe transitioning to renewable energy is a great idea. However, the biggest challenge has been the costs associated with such a move. Fortunately, that’s not the case anymore.
Renewable energy technology has improved significantly in recent decades, making it more available and affordable. As such, renewable energy sources are now more affordable than other options. Some of the renewable energy technologies you should consider including are:
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- Biofuels
- Turbines
- Photovoltaics
- LED lighting
- Advanced meters
- Advanced batteries
Unlock the Value of Renewable Energy Sources
The primary goal of reducing carbon emissions is to ensure the world remains sustainable and habitable for future generations. Unlike nuclear power and fossil fuels such as natural gas, oil, and coal, renewables provide clean, safe, and reliable energy.
Moreover, they also offer key business benefits. To begin with, they offer protection from the price fluctuations and regulatory changes that come with fossil fuels. Also, with most organizations looking to lower their Scope 3 emissions, your organization will appeal to them as a partner. So, aside from the environmental benefits, reducing Scope 3 emissions is a competitive advantage.
ABOUT LIBERTY ADVISOR GROUP
Liberty Advisor Group is a goal-oriented, client-focused, and results-driven consulting firm. We are a lean, handpicked team of strategists, technologists, and entrepreneurs – battle-tested experts with a steadfast, start-up attitude. We collaborate, integrate, and ideate in real-time with our clients to deliver situation-specific solutions that work. Liberty Advisor Group has the experience to realize our clients’ highest ambitions. Liberty has been named as Great Place to Work, to the Best Places to Work in Chicago, and to FORTUNE’s list of Best Workplaces in Consulting and Professional Services.
Liberty’s hands-on supply chain experience is why we are able to understand and appreciate the challenges that our clients face. The advisors in our Supply Chain Practice do not have generalist backgrounds – practicing supply chain experts who are passionate about the industry and how it continually evolves. Further, they have worked across the entire supply chain lifecycle.
