How to get on top of Scope 3 emissions with technology solutions

In a previous article, we investigated the difficulty of reporting Scope 3 emissions due to problems with data availability across complex, dynamic supply networks. In this article we investigate how technology can help to overcome this difficulty and provide a technology solution framework, based on customer and business requirements. The next article will outline some exemplary technological solutions in the market and address their functionalities. In combination, the articles will explain how to choose the right technology.

Solutions assessment and framework

A successful framework will reflect the requirements of both the customer and the business and will focus on building products to scale and accomplishing the organisation’s vision. Based on their functionalities, the technology enablers can be classified in one or more categories: Sustainability Footprint Tech, Sustainability Model Tech and Sustainability Governance Tech.

Footprint Tech – Handles input data and produces a traceable ledger/customer interface. An example of a solution achieving this using proprietary blockchain technology is Minespider. It uses key data from responsibility audits and carbon emissions to produce a product passport stored on the blockchain.

Model Tech – Manages both the infrastructure for ESG-related model-building and the facts required to validate the output of these models. The ability to adapt a wide range of sustainability sample models to the goals of an organisation, considering emissions reduction, carbon capture and recycling is offered, for instance, by AspenTech. Sample models can provide structure and operate as an accelerator, helping an organisation achieve a range of sustainability goals.

Governance Tech – Ensures that the output of ESG-related models can be integrated with downstream systems, such as finance and reporting for compliance and regulation. Comprehensive packages such as SAP Ariba and Coupa offer extensive integration which can be used to ensure that data flows from the model to both downstream systems and reporting.

Data-driven availability – a prerequisite for technology success

When using technology to drive insight into Scope 3 emissions, the key challenge is data availability. As data sources vary across different solutions, it is important to consider the underlying data used to provide the insights required and maintain an awareness of both the advantages and limitations associated with different methods.

A single integrated platform such as SAP Ariba offers a network of millions of suppliers. The data lake generated by the large volume of transactions through the platform can then be used to drive insight. Using such data to measure emissions is therefore based on real-world information to a degree, though it is limited in that suppliers and organisations outside the platform are not included in the resulting benchmarks and summaries.

On the other hand, a specialised provider of sustainability ratings uses public data to create evidence-based metrics; a market-leading example is Ecovadis. To create its business sustainability risk and performance index it uses approximately 72,000 ratings of over 46,000 companies. Ratings are broken down into the four key areas: environment; labour and human rights; ethics; and sustainable procurement. These ratings can provide organisations with insight into their Scope 3 emissions through benchmarking, allowing comparison by country, region and industry. The data used by a tool of this kind includes a wide range of inputs and the benchmarks created can drive real change within an organisation. But it is still based upon estimates and the degree of precision provided is therefore limited.

Emerging solutions such as Digital Twins for hyperscale being offered by Google Data and Amazon attempt to leverage the extensive data pool they have available to evaluate a wide range of potential scenarios. This technology is very much in its infancy, but it has the potential to remove the limitation of estimates from Scope 3 reporting and provide a much more accurate view of total emissions.

How to choose the right tool

When it comes to Scope 3 measuring, planning and reporting, choosing the right solution is often a challenge for companies. The technology landscape is wide and evolving rapidly and can overwhelm companies seeking to choose a solution that meets customer and business requirements as well as having the potential to scale and accomplish the organisation’s vision. To structure the decision-making process, decision-makers should follow a roadmap of key activities before they commit to one solution.

First it is important to understand the reporting requirements for the organisation; these are linked to emerging regulatory needs. Then, a company needs to investigate its current technology set-up and its strengths and limitations, including already deployed in-house solutions, and their ability to support sustainability reporting needs. Conducting an as-is analysis through frameworks, priority grids, maturity assessments and sustainability audits is an integral part of evaluating the performance of both the organisation’s current tools and its sustainability policy in relation to its development goals.

When searching for the benchmarks required to provide the guidance and principles necessary to assess where your organisation stands in the market, direction can be provided by looking to market-leading global initiatives such as the United Nations Global Compact (UNGC). As potential shortcomings and areas for growth become evident through this analytical process, new digital solutions can be identified as part of a fit-gap analysis. Only after a reflective assessment of this kind can a technology roadmap be developed, defining areas of focus and identifying potential solutions for current weaknesses. Prior to full implementation, these solutions can finally be tested with the help of pilot launches, allowing the organisation to manage the risk associated with introducing an innovative technology while identifying any potential shortcomings – before considerable resources are devoted to the project.

Conclusion

The Scope 3 emissions technology landscape is huge and evolving quickly. Scope 3 technologies offer a wide range of functionalities serving different needs, such as measuring, planning for and reporting Scope 3 emissions. This often means that corporate decision-makers don’t know how to make the best decision for their enterprise. Companies therefore need to engage in a structured process to understand their requirements and the possibilities and limitations of the different technology solutions available in today’s market.

The next articles will focus on the different technological solutions based on the three identified pillars – footprint, model and governance tech – and will also provide use cases and insights into the functionalities and limitations of different solutions.

We would be pleased to help you pave the way towards managing Scope 3 in your organisation. Please do not hesitate to reach out to us.

This article has been authored by Peter Vickers, Carlos Sanchez, Dennis Schulz and Samuel Hawkins.