Deep dive

Tackling your value chain emissions

Why reducing your Scope 3 emissions is vital to reaching net zero

Transitioning to a zero carbon economy and meeting the goals of the Paris Agreement require us all to decarbonise urgently. While some companies are making good progress in understanding the emissions they generate directly, mapping their emissions footprint right across the value chain is a far bigger challenge.

Calculating, then eliminating, value chain emissions (known as Scope 3) can be an intimidating prospect. For most companies, they represent a much greater proportion of their carbon footprint than operational emissions (known as Scope 1 and 2). They’re also something they have much less control over.

In many cases, a company won’t even know the extent or make-up of their value chain emissions, making it tempting to ignore them completely. But addressing them is a critical element of the path for reaching net zero.

What are value chain emissions?

Put simply, these are emissions associated not with a company itself, but with the other entities it interacts with up and down the value chain. Examples of upstream emissions include those generated by a supplier’s distribution activities, and the production of raw materials or components bought by the company. Downstream, the term covers emissions generated by the use or disposal of the end product that the company sells, as well as all their business travel.

Despite being split into three buckets, or ‘Scopes’, by the Greenhouse Gas Protocol, emissions are rarely distributed evenly between these categories. For many businesses, Scope 3 emissions account for more than 70 percent of their carbon footprint. Until every company has successfully decarbonised, that will continue to be true.

Here's why it matters

They’re harder to track: Unlike Scope 1 and 2 emissions, Scope 3 emissions are not easily ring fenced and much more difficult to track accurately. With Scope 1 and 2, a company will normally have the source data needed to convert direct purchases of gas and electricity into a value in tonnes of GHGs. They’re unlikely to have the same oversight when it comes to their suppliers of other goods and services.

And businesses have less control on how they’re addressed: The willingness of suppliers to support with addressing Scope 3 emissions is often a balance between their own net zero ambitions, your influence on them as a client or buyer and the opportunity to reach win-win solutions.

To sidestep this challenge and reach net zero, companies may attempt to ‘de-scope’ emissions by outsourcing emissions-heavy activities like manufacturing – but this approach carries with it some reputational risks.

So how do I shift to a greener environmental footprint?

First, estimate your value chain emissions: It’s not an exact science. So starting out you will need to make some educated guesses; by leaning on industry averages for instance, and combining them with your own data to reach an approximate figure. Remember, it’s better to make a reasonable estimate and move onto eradicating them, than focus too much on total accuracy and never take any steps at all.

Prioritise where your efforts go first: Map your emissions footprint by scale, and how much control you have over the source. Make the emissions hotspots within easy reach your first ports of call. This may relate to reconsidering the suppliers you choose to work with, or partnering with them to decarbonise.

Decide who is going to be responsible for Scope emissions: Almost all company spending results in an impact on their GHG footprint. Therefore, your company’s leadership team will have a vital role in getting a decarbonisation agenda rolling internally, and they should be at the forefront of decisions concerning your value chain.

Collaborate with others: suppliers and competitors alike. Working with like-minded companies will help create broader change and ease the process. Let your supply chain know what you're trying to achieve, and keep an eye out for ways you could improve it yourself (is there a new supplier on the block offering a better way of working?).

Given a large proportion of emissions come from your value chain, this last step about collaboration is essential. Reducing supply chain emissions may result in your suppliers using renewable energy, providing distribution in electric vehicles, or supplying different materials to support redesigned products. Similarly, you may need to support your customer base in using a lower-carbon product, or disposing of your product in a different way.

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