Scope 3 Emissions Reporting Will Become a Key Responsibility for Supply Managers

Scope 3 is a science-based target initiative that organizations are employing to establish greenhouse gas emissions goals.  By addressing GHG emissions, companies can identify opportunities to bolster their bottom line, reduce risk, and discover competitive advantages. Through the development of the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, the GHG Protocol has responded to the demand for an internationally accepted method to enable GHG management of companies’ value chains.[1]  The Scope 3 Standard provides requirements and guidance for companies and other organizations to prepare and publicly report a GHG emissions inventory that includes indirect emissions resulting from value chain activities (i.e., scope 3 emissions). The primary goal of this standard is to provide a standardized step-by-step approach to help companies understand their full value chain emissions impact in order to focus company efforts on the greatest GHG reduction opportunities, leading to more sustainable decisions about companies’ activities and the products they buy, sell, and produce. The standard was developed with the following objectives in mind:

• To help companies prepare a true and fair scope 3 GHG inventory in a cost-effective manner, through the use of standardized approaches and principles
• To help companies develop effective strategies for managing and reducing their scope 3 emissions through an understanding of value chain emissions and associated risks and opportunities
• To support consistent and transparent public reporting of corporate value chain emissions according to a standardized set of reporting requirements Ultimately, this is more than a technical accounting standard.

Current State

Many companies begin this process by reviewing their current third party spend across purchase categories, as a first step in calculating Scope 3 emissions calculation. This can serve to establish a baseline carbon-footprint figure based on spend, It can also serve to identify the top 3 categories for emissions reduction. The next step is to extend this estimation to a more refined science-based target, and to establish the roadmap for doing so.  A rigorous process is required to take this spend and to render it more granular by sub-sector and by supplier, in order to establish key actions required to move forward to reduce Scope 3 carbon emissions.  This would enable a cost-benefit analysis, and also establish alternative approaches for that would permit development of a reasonable target that the procurement organization could be confident in, and one that could be communicated to the organization and key stakeholders (including the public). 

Scope 3 emissions analysis is being driven by increasing consumer awareness of carbon emissions, as well as shareholder and investor awareness of “green” sustainability initiatives underway at companies.  Today most companies are at a loss as to how to proceed, and most do not have a strong case for establishing a firm target for emissions reduction.  It will be important to collaborate, especially with larger suppliers , to jointly establish targets, as well as to include both direct and non-direct suppliers in establishing goals for improvement. 

[1] https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf