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Measuring and managing Scope 3 emissions presents greater challenges than Scope one and Scope 2 emissions for many companies. Scope 3 emissions usually represent the greatest contribution to a company’s emissions profile. In this episode, Tad explains what Scope 3 emissions are, how a company can start to understand them, and how companies can reduce their Scope 3 emissions.
WHAT ARE SCOPE 3 EMISSIONS?
Scope 3 emissions are greenhouse gas emissions that are affiliated with the activities of a company, but they are not under the control of a company. For example, when a company buys raw materials, those come from their suppliers. Although the company is using the raw materials, they don’t actually produce them. Another example is waste disposal. Even though the company is responsible for generating the waste, they don't generally manage the waste at the end of life. They will send the waste to a recycler, a landfill, waste to energy, or composting. The waste disposal activity related to the company's operations, but they don't control it. Another example of Scope 3 emission is business travel. If a company flies employees all over the world, the emissions that are generated from flying in planes would also be related to their operations, but not under their direct control.
how does a company start to understand their scope 3 emissions?
Most companies start to evaluate their Scope one and Scope 2 emissions first by understanding how they're using fuels and electricity in their operations. When it comes to Scope 3, some companies have thousands of suppliers for the raw materials and packaging that go into the final products. Understanding the carbon footprint of those suppliers is really complicated. One company we work with is a pharmaceutical company and they did an analysis and determined that 80% of their carbon footprint is affiliated with Scope 3. It's a huge number and they probably have 10,000 suppliers. Then you start adding in business, travel, waste management and it really adds up.
When you look at some of the commitments by cities like Philadelphia, committing to being carbon neutral or net zero carbon by a certain timeframe, the big drivers are going to be their building operations. Followed by their transportation systems, and then finally their waste because there's so much waste coming out of city that has to be managed. There are companies out there that have claimed to be carbon neutral, and if they're doing it right, they are looking at their Scope 1, Scope 2, and Scope 3 emissions. Our company, GreenCircle Certified, certifies Greenfield Natural Meat under Maple Leaf Foods, and they set a carbon neutral goal. They actually did look down the supply chain to understand all the emissions that go into raising the animals, the packaging, and other things and we verified that they are carbon neutral.
This is why it gets complicated. Number one, you're talking about a lot of data and a lot of suppliers. A lot of suppliers don't even have a clue on what they're doing or how they contribute. The first thing you want to do is identify your critical supply chain. What we typically do is the 80 20 rule, we analyze the suppliers that generate 80% of your total spend or purchases first. We will zoom in on the supplier you spend the most with. So if the company's spending X million or billion dollars and you pick maybe the top 20% of the top spend that might make up a huge amount of things they buy.
Right now we're working with a coffee company and they source their coffee from over 4,000 different, small farmers all throughout south America. Tracking that carbon footprint of their Scope 3 is going to be interesting. What we're planning to do there is understanding the typical Scope 3 emissions or carbon footprint of the farming operations. Some of the farmers are highly mechanized where they use equipment, and others use all manual labor where they pick the beans and they do everything by hand. We're going to be doing some sampling across the 4,000 suppliers and zoom in on a typical, bigger farmer that uses machinery, and a typical, smaller farmer that uses manual labor. Once we get an understanding of these two supplier types, we can make some assumptions based on that.
The waste side is easier to measure because most companies should have a really good measurement of the waste they generated. Once you know what waste you have generated, you can do the calculations. In the International Greenhouse Gas Protocol, there are methodologies for calculating your Scope 3 emissions. For waste, if you know how much you send to recycling, landfill, waste to energy, compost, wastewater treatment, etc. you can actually determine your carbon footprint from that. A very accepted practice for determining Scope 3 emissions is running a life cycle assessment for certain products to assess the impacts of manufacturing the ingredients.
CAN COMPANIES EVALUATE THEIR SCOPE THREE EMISSIONS INTERNALLY OR IS IT BEST TO HIRE A CONSULTANT?
A lot of companies do start diving in internally, but it depends on how much time and resources they have. If they have a whole team of people that could just spend time doing this, then yes you could do this internally. But a lot of times companies will look for outside help to assist with it.
HOW CAN COMPANIES REDUCE THEIR SCOPE 3 EMISSIONS?
The first thing to do is really understanding your carbon footprint. Pick one of those Scope 3 target areas that we talked about, let's say waste. One thing you can do there is once you know what waste you're generating, you can start to plan how to minimize waste.
Another strategy would be doing supplier surveys. If you've got a lot of suppliers, you might want to just start out with maybe your top spend in the top 20%, which might pick up a large amount of your impact and you can create surveys to send out to them. Suppliers can respond to those surveys and tell you if they even know what their carbon footprint is, or if they've ever done a life cycle assessment.
Another big strategy would be to reduce your Scope 3 emissions from business travel by doing virtual meetings. We just proved with the pandemic that we probably don't need to travel as much as we do and everybody was still able to accomplish a lot of good things virtually.
Finally, doing some training and education for your suppliers would be huge. So if you've got companies selling you materials, and they're not up to speed on sustainability, do a training session for them. Explain what sustainability is, and how they're contributing to the impact of your products.
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