Tackling Scope 3 emissions in the supply chain

Explaining how an organisation can take steps to reduce carbon emissions while at the same time producing financial savings.

It is quite straightforward for organisations to measure Scope 1 and 2 greenhouse gas emissions and to identify opportunities to reduce them (even if, in practice, it may not be as simple to realise the reductions). However, for organisations involved in the production, sourcing and selling of physical goods, most emissions will come from Scope 3 sources. This article explains what Scope 3 emissions are, how they can be measured and how they can be reduced.

What are ‘Scope 3’ emissions?

Scope 3 emissions can be caused either ‘upstream’ or ‘downstream’. Upstream emissions relate to the production of goods and services that a company purchases. Downstream emissions are related to the use and disposal of a company’s products and services.

The ‘Greenhouse Gas Protocol’ breaks down Scope 3 emissions into fifteen distinct categories (see table 1). It can be clearly seen from the wide range of categories that Scope 3 emissions can originate from everything that an organisation does.

‘Purchased goods and services’ (category 1) will be a major source of emissions for manufacturing and retailing companies. Examples of purchased goods are finished goods for resale, raw materials and office supplies. Purchased services would include accounting, consulting, landscaping and testing.

How do you measure Scope 3 emissions?

To measure its Scope 3 emissions, an organisation will need to collect primary data for all relevant categories. Online carbon accounting platforms which provide templates that can be filled in for each emissions category can be used to support this process. These templates can be completed online, uploaded via a spreadsheet, or can even be integrated with a company’s existing IT systems.

The information collected is then used as an input to calculate a total emissions value for each category. For instance, the impact of business air travel can be calculated by multiplying the total number of kilometres that have been flown by a recognised emissions factor for one kilometre of passenger air travel.

A good starting point for the collection of primary data is to use information that the organisation will already have, such as total spend by supplier. Each supplier is then assigned to one of the emissions categories and the total spend per category can be used to calculate the total emissions per category.

This allows any obvious ‘hot spots’ to be identified, and the process can then be refined year-on-year. As an example, at SATRA we initially calculated inbound and outbound freight emissions from total spend on air freight, sea freight and courier shipments.

However, we are now able to source reports from our freight providers that provide us with freight mode, weight of shipment and distance travelled, which allows us to calculate emissions much more accurately. It is similar for purchased goods, although spend may be used initially, it will be more accurate to highlight the total weight of what has been purchased for each ‘type’ of item.

What can be done to reduce impacts?

In order to reduce its Scope 3 emissions, it is important for an organisation to consider its entire end-to-end supply chain, as well as the full product lifecycle of its products. Some examples of areas on which to focus are provided below.

A first step could be to select raw materials that have been verified as having a lower environmental impact. If it is practical to do so, reducing the amount and weight of materials which are used in the finished products will reduce emissions, as the more material that is used, the higher the carbon impact will be.

Where materials such as textiles and leather must be cut into sections to make the finished product, engineering the pattern design to be more efficient can help to reduce the amount of waste material. The distance over which raw materials are transported and the manner in which they are transported will also affect the overall emissions of a finished product.

It is important to consider emissions from supplier production sites. If suppliers can reduce their energy consumption and switch to on-site renewable energy generation such as solar panels, such actions will help to reduce the level of Scope 3 emissions.

Additional challenges

The impact of producing and shipping samples should not be overlooked. In many industries, it is common to regularly introduce new products. This will typically involve the production of multiple samples that are shipped by air around the world to distribution partners and customers, adding up to a huge environmental impact.

Modern design software and Artificial Intelligence (AI) can be used to create high-quality images, and three-dimensional (3D) visualisations of new products to support approval and sales processes will in turn reduce the number of samples that need to be produced.

Another challenge faced by many companies is high volumes of leftover stock that is no longer required or is obsolete, and must then be sold at a reduced price or even destroyed. Although it is easier said than done, if forecasting processes can be improved to avoid over-production and to minimise left over stock, this will reduce carbon emissions. The European Union is also introducing legislation to outlaw the destruction of some types of unsold products, such as clothing and footwear.

Organisations should also aim to minimise the amount of finished goods shipped by air. Business travel can be another considerable source of Scope 3 emissions. Where possible, alternatives to air travel should be considered, with trips using this form of transport only being made if absolutely necessary. What is likely to happen to the product at the end of its life must also be considered. For example, is there any possibility for the item to be recycled or repurposed – either through existing recycling infrastructure or through a dedicated take-back scheme?

Such suggestions are not a complete and exhaustive list of everything that can be done to reduce an organisation’s Scope 3 emissions, but they do hopefully provide a useful starting point. In addition, it should be noted that in most cases, actions taken to reduce carbon emissions can also provide financial savings.

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