One man’s trash is another man’s treasure, goes the well-known saying. Since your company’s emissions add up in your customer’s Scope 3 inventory, the lower your emissions, the more treasure you are to your customers. It really is an important area to focus on--especially if you want your business to truly become carbon neutral.
That's why in this blog, we take the time to focus just on Scope 3 – Value Chain Emissions and what you can do to be treasured by your customers.
Value Chain Emissions – Defined
Building upon the previous explanations on what constitutes emissions and the different scopes, here we are focused on Scope 3--emissions from activities not owned or controlled by the reporting organization. Your company’s Scope 1 and Scope 2 emissions add up for your customer’s Scope 3. Scope 3 emissions are broken into two streams:
- Upstream – emissions caused from the production of your product and service
- Downstream – emissions resulting from the sales and distribution of your product and service
While not exhaustive, the image below highlights frequent Scope 3 emissions categories.
Why Care About Scope 3
In its 2021 edition, CDP’s Global Supply Chain report reveals that on average, a company’s supply chain creates 11 times more emissions than the reporting company in its Scope 1 and 2. For companies committed to global emissions reductions, leaders know change will only occur when their supply chains engage in reporting and adopting reduction goals. That is why we are encouraged to see an increasing number of suppliers reporting impact on Climate Change through their emissions reporting.
While the CDP report positions the 20% who are reporting as not enough, we want to celebrate it. The fact that 20% of companies reported toward the Scope 3 category “Purchased Goods and Services”, and another 18% reported active engagement with suppliers to start reporting, is great news. That’s a long way of saying 38% of companies are doing something to report supply-chain emissions. Where are you and your customers on this continuum? Your Scope 1 and 2 emissions are their Scope 3. Are you ready to report?
Why Scope 3 Reporting Matters to Small & Medium Size Businesses
In short, you might make more money. As HSBC notes in the CDP report, Walmart gives favorable pricing, financing and payment terms to companies that report. Walmart is not alone. Just a few other notable brands include Microsoft, Goldman Sachs, Bayer, Dow, Deloitte, Lego, Nike, PayPal, Target and Wells Fargo. If you are in supply chains that lead to these or other reporting companies, you are on notice.
“…delivering on Scope 3 emissions won’t happen until a lot is done to help the SMEs supplying their products.”
– Mr. Surath Sengupta, Global HeaD, Trade Portfolio Management, HSBC
Building upon the concept that data shows 11 times more emissions come from the supply chain, we know fundamentally that what is not measured cannot be managed. That is why these increasing numbers of companies reporting and engaging supply chains are so important. The report data shows that 50% of the world’s employment and 90% of all businesses fall into the small-to-medium enterprise (SME) category.
Without SME engagement and reporting, global emission reductions will not reduce. Responding to pressure from customers and stakeholders, 41% more SMEs reported emissions than in 2020. Not only are you being asked to report, but you are also being asked to achieve target reductions. Are you ready to report and reduce?
It Takes Supplier Engagement
Don't panic--your customers will help you get there, and so can we. The report also shows us that getting to a solid Scope 3 emissions reporting process takes time and effort. Of the companies reporting in 2021, only 49% felt comfortable sharing Scope 3 data publicly. The details show that once a company starts to engage its suppliers towards Scope 3 reporting, some need two to three years before they achieve 70% or more engagement. Whether you are just starting to report your Scope 1 and 2, or ready to move on to your Scope 3, the important idea is simply to start. If you are ready to look at your Scope 3, knowing how to engage your suppliers and supporting them in complying with your reporting requirements takes work. Are you prepared to engage your suppliers?
Emerald is Here to Help
Your Scope 1 and 2 emissions report is within reach. Building upon our experience with new construction and renovation projects, Emerald often consults with companies to improve performance on their existing facilities and processes. We have the tools and systems in place to guide you to a Scope 1 and 2 report, while satisfying your customer’s Scope 3 requirements for you. Want to achieve targeted reductions in emissions? We can help with that too.
You can also learn more by watching our video on this subject, Your Customer's Scope 3 is Your Scope 1 and 2 - Greenhouse Gas Emissions Part 3. Tracking and reporting greenhouse gas emissions is a new concern for many businesses. With it comes a whole new set of vocabulary people need to learn. In this video, Laura breaks down greenhouse gas emissions scope 3 so you have a better idea of where to begin with your scope 1 and 2.
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