How to decide which Scope 3 emissions to include in your net zero commitments
In this second blog in our ‘achieving a decade of action’ series, Ricardo’s associate director for sustainability services tackles some of the big questions about carbon emissions.
- Who should take responsibility for carbon emissions?
- What emissions should you include in your net zero commitments?
- What data should you collect and how do you gather it?
- How do you use the data to drive improvement?
Many climate change campaigners have cited the USA rejoining the Paris Agreement as hugely significant in global efforts to decarbonise. I don’t deny it is important, but for me, the focus on ‘them’ is symptomatic of the challenge of achieving a future that is free from carbon dioxide (CO2) or other greenhouse gas (GHG) emissions (often referred to as ‘carbon’ emissions).
To unpick my point, let’s take a step back and look at the aims of the Paris Agreement. Adopted at COP21 in 2015 by nearly 200 countries, it seeks to limit global warming to well below 2 degrees Celsius (and ideally less than 1.5 degrees) compared to pre-industrial levels. In practical terms, this means reducing global emission to net zero by 2050, with a 50% reduction achieved by 2030.
In this regard, it is clear to see that without the participation of the USA, whose emissions account for about 13% of the global total, these reduction targets would be significantly harder to achieve. In fact, without leadership from the top 10 emitters (China, the USA, the EU27, India, Russia, Japan, Brazil, Indonesia, Iran and South Korea) that account for nearly 70% of global emissions, achieving the Paris Agreement is impossible. So, why do I say that focusing on the USA or any other country – or even all of these countries – is symptomatic of the problem? Because it implies it is their responsibility.
It’s not about the USA or any of ‘them’, it’s about ‘us’ taking responsibility
To achieve net zero emissions at the global economic level relies on more than just a few countries or a few industries. It is dependent on all of us taking action. If every organisation reduced its own Scope 1 and Scope 2 emissions (as defined by the Greenhouse Gas Protocol) towards zero at an equal pace, then we would be on the right path. But. in reality, this is unlikely to happen. And, even if it does, it is unlikely to happen on a timescale that is consistent with what is needed.
To deliver a greater environmental benefit, forward-thinking organisations are seeking to decarbonise their own emissions plus those in their supply and value chains. The so called ‘Scope 3’ emissions are becoming an increasingly important part of net zero strategies and their inclusion will accelerate decarbonisation across a much wider set of activities, including products and services.
This holistic approach to emissions reduction – that is, taking responsibility for managing your own emissions and encouraging others to do likewise – moves away from leaving decarbonisation to ‘them’ and makes it about ‘us’.
However, this creates a challenge of knowing where to draw the line (or, rather, the boundary). For example, how far back is it reasonable to go along the supply chain? How far up the value chain does your responsibility persist? We have found these to be questions that need to be addressed on a case-by-case basis, taking into account the specifics for our clients and their stakeholders.
And, in greenhouse gas terms specifically, your Scope 1 and Scope 2 emissions are someone else’s Scope 3 emissions, and vice versa. So, whose carbon is it anyway?
Which Scope 3 emissions should you include in your planning and reporting?
Through our emissions footprinting and reduction projects – and, in particular, our work with clients to help them achieve net zero emissions in line with the Paris Agreement commitments – we work on the principle that:
- You must include anything you can control.
- You should include anything you can directly influence.
- You could include areas of indirect influence.
Therefore, we include all Scope 1 and Scope 2 emission sources plus the Scope 3 emissions that are significant in the context of a client’s total footprint. This can vary substantially and is heavily influenced by the needs of stakeholders such as customers, investors, regulators and, of course, employees. We work on the principle that if is the Scope 3 emissions are important to your stakeholders, they should be important for you to include in your net zero commitments.
But, by definition, you can’t control Scope 3 emissions, so including them relies on the following two points.
- Focusing on the areas where you can reduce your use of resources such that emissions reduce in the supply chain. For example, reducing the size of a product’s packaging may help to reduce your supplier’s emissions by reducing the energy needed to produce the packaging material. Business travel is likely to be of most significance here. Perhaps one good thing that has come out of the coronavirus (COVID-19) disruption is that we are all now more able to deliver our business without needing to jump on a plane, train or in a car for every meeting. Therefore, emissions from our travel partners will reduce as a result.
- Addressing the areas of biggest impact in your supply and value chain. This will vary by organisation, sector, location and many other factors. However, showing an awareness of, and plans to address, the areas of highest impact will improve your credibility in the eyes of all stakeholders. This may mean looking at the lifecycle impacts of your products. It may mean using your procurement policy to demand action of others or support circular economy concepts. It can also mean investing in innovation that changes the way you do things or enables others to change what they do.
How do you start to manage Scope 3 emissions and what data do you need?
Managing Scope 3 emissions is an iterative process that starts at the highest level and broadest boundary, but refines down to specific, discrete data that, importantly, can be collected without excessive cost. We use 15 categories for Scope 3 emissions, as defined by the Greenhouse Gas Protocol, and work through their materiality in successive layers to establish the key dataset. This data will typically then form part of the baseline emissions for net zero, and start the targeted efforts to manage and reduce emissions where they matter the most.
As a minimum, we recommend that all organisations include the Scope 3 emissions relating to business travel and the transmission/distribution of energy to their facilities. However, for real credibility in the eyes of your stakeholders, you should consider the emissions that others might attribute as reasonable for you to take responsibility for. For example, if you use a lot of water in the production of your products (either as part of the product or in the production process), then it would be reasonable to include the emissions of getting that water to your site ready for use within your Scope 3 emissions. Another example might be to consider the brand value of your packaging and, where the packaging is part of the customer experience or premium you are able to charge, then it would again be reasonable to include the Scope 3 emissions associated with that packaging.
As government and stakeholders’ expectations of action on emissions continues to increase, it is vital that this important, but complex, topic is addressed.
We’re here to help. So, whether you want to establish your Scope 3 emissions baseline, set effective reductions targets or develop a meaningful net zero strategy, please get in touch.