It is now a firmly established practice in Greenhouse Gas (GHG) accounting that your greenhouse gas emissions will fall into 3 different “scopes”:
Scope 1 Emissions
Scope 1 emissions are those emissions that fall directly within your organizational boundary. Therefore, your company owns or controls those sources.
Scope 2 Emissions
Scope 2 emissions are those from purchased electricity that fall outside your organizational boundary. These are indirect emissions.
Scope 3 Emissions
Scope 3 emissions are also related to your organization, but owned or controlled by another entity. Examples of Scope 3 emissions could be the transportation of goods and services, such as office equipment, to your office, by another company.
Reducing GHG Emissions in your Supply Chain
According to CDP, on average, about 80% of a reporting organization’s Greenhouse Gas emissions come from their Scope 3 emissions. Scope 3 emissions are mostly attributed to two categories:
Purchased goods and services
Use of sold products
The providers of the goods and services you purchase are, collectively, in your supply chain and you are part of your customer’s supply chain.
Many companies, recognizing the risk climate change poses to their business and the opportunity it creates for leadership and innovation, have already set GHG emission reduction targets. To date, most sustainability teams have focused their efforts on reducing Scopes 1 and 2, primarily investing in projects within a company’s operational control opting to deal with direct costs and regulatory burdens.
Reducing Scope 3 GHG Emissions
Without addressing the reduction of their Scope 3 GHG emissions, many companies won’t achieve the goals of the IPCC Climate Change Report or the Paris Agreement.
Reaching out to your supply chain to reduce GHG emissions is key.
The Intergovernmental Panel on Climate Change (IPCC) recently issued its climate change report, commissioned by the United Nations, detailing the damages to our planet if greenhouse gas emissions continue at the current rate, warming the atmosphere by as much as 1.5 degrees Celsius (°C) above pre-industrial levels by 2040. In the Paris Agreement, national governments committed to limit temperature rise to below 2°C above the pre-industrial average to avoid sea-level rise, droughts, flooding, and other extremes. The IPCC report suggests a lower threshold (1.5°C) is needed for preventing severe global effects of climate change and that an accelerated timeline for mitigation efforts must be established. Yet, most companies’ GHG reduction targets have been incremental and do not match the ambition and urgency consistent with a 2°C future, much less a 1.5°C future.
CDP began collecting Supply Chain information back in 2015 and their modeling, informed by GHG reduction commitments by the existing cohort of reporting organizations, suggests that they could only keep global warming to below 3.4°C. Reaching out to your supply chain to reduce GHG emissions is essential for avoiding warming up that additional 1.4 degrees (compared to the Paris Agreement’s 2°C limit) or 1.9°C (as the recent IPCC report suggests is needed).
Setting Science Based Targets for GHG Reduction
Science Based Targets (SBTs) represent a more robust approach for companies to manage their emissions. Targets are considered “science-based” if they are in line with the level of decarbonization required to keep global temperature increase below 2°C compared to pre-industrial temperatures. SBTs are grounded on an objective, scientific evaluation of what is needed, rather than what is achievable by any one company, and offer a firm foundation for companies’ long-term climate change strategies, boosting companies’ competitive advantage in the transition to the low-carbon economy.
Companies are increasingly adopting SBTs, although best practices continue to emerge. Various methods, including the Science-Based Targets Initiative’s Sectoral Decarbonization Approach, can determine how much a company should cut emissions to help reach the international goal to limit global warming to 2°C to avoid the most dangerous consequences of climate change. Over 140 companies have already set an SBT and over 300 more have committed to set an SBT in the near future through the Science Based Targets initiative.
Companies, and their supply chains, have a pivotal role in ensuring that the global temperature goals are met, but most existing company targets are not ambitious enough because they underestimate the significance of the GHG emissions from their supply chain and they lack data-driven information for setting targets. Evaluating Scope 3 emissions enables companies to identify the greatest GHG reduction opportunities across their entire corporate value chain, and in turn make more sustainable decisions regarding their company’s activities and the products they buy, sell, and produce.