Why Should Businesses Care About Scope 3?

Why should businesses care about Scope 3?

As the global focus shifts to a sustainable way of living, companies must adapt as consumers look for carbon neutral and sustainable options for their purchases.

There is a growing urgency to reduce as many greenhouse gas emissions as possible which is reflected in Scopes 1, 2 and 3.

The urgency comes as the race is on to reduce greenhouse gas emissions in an effort to meet the goal of keeping the global temperature increase below 2⁰c.

Companies are responsible for the majority of global emissions which means they play an essential role in the long-term sustainability of our planet.

Looking at emissions in each of the 3 Scopes can have a positive impact for any organisation, ranging from saving money to better working relations with suppliers.

Scopes and emissions across the value chain diagram

What are Scope 3 emissions?

Scope 3 emissions are the greenhouse gases produced indirectly from a company’s activities upstream and downstream.

Upstream is the term given to any activities that happen before the company performs its in-house operations, another great way of looking at it is the pre-production activities.

Examples of the indirect upstream activities include the sourcing of raw materials and their transportation, employee commuting, business travel and the waste generated in operations.

Downstream is the term given to any activities that happen after the company performs its in-house operations, which can also be classified as post-production activities.

Some examples of the indirect downstream activities are the transportation and distribution of the manufactured goods, the use of the sold products and their end-of-life cycle.

One company’s Scope 3 emissions overlap with another company’s emissions and therefore by one company making a change which impacts its greenhouse gas emissions many other businesses would also benefit.

The UK’s 2050 Net-Zero Target

In 2019 the UK took the initiative on the fight against climate change and vowed to be net-zero by 2050.

They were the first major economy in the world to pass laws in a bid to end its contribution to global warming.

The target requires the UK to beat its previous goal of at least 80% reduction from 1990 and achieve no greenhouse gas emissions by 2050.

So far, the UK has already made a 42% reduction in its greenhouse gas emissions whilst also growing its economy by 72%.

Clean growth is now at the centre of the Industrial Strategy and with it there is expected to be a rise in the number of “green collar jobs” as experts estimate the total job count to hit around two million.

To accompany the expected rise in “green collar jobs” the value of exports from the UK’s low carbon economy are predicted to increase to £170 billion a year by 2030.

The Energy and Clean Growth Minister, Chris Skidmore, said “The UK kick-started the Industrial Revolution […] Today we’re leading the world yet again in becoming the first major economy to pass new laws to reduce emissions to net zero by 2050…”

The UK’s net-zero target seemed to be the most ambitious in the world as it was recommended by the Committee on Climate Change, however many more countries have joined in this initiative since.

The UK’s 2050 Net-Zero Target

How does reporting on Scope 3 benefit a company?

Reporting on a company’s Scope 3 emissions can provide benefits which range from better relationships with stakeholders and suppliers to cost savings and good publicity.

Reviewing Scope 3 can highlight areas with exceptionally high emissions and ensure the company tackles these areas; from encouraging employees to reduce commuting emissions by carpooling to sourcing much more environmentally sustainable equipment.

By performing an evaluation of a company’s total emissions across all Scopes it is possible to find areas of large money saving opportunities, especially in the UK where lower carbon emissions reduces the Carbon Emissions Tax charges.

Reporting on Scope 3 also provides the company a greater insight into the operations and effectiveness of its suppliers and stakeholders allowing for a better understanding into the upstream and downstream operations.

Through this understanding the reporting company can pinpoint weak relations and build upon them. They can also assess the value for money with the existing connections and make changes should they see fit.

Through the strengthened relations as a direct effect of reporting on Scope 3, the reporting company can account on its Corporate Social Responsibility much more accurately.

Having a clearer understanding of the product’s journey from raw material to its end-of-life cycle can be relayed to the ever-growing sustainability focused consumers.

With consumers now becoming more eco-aware they look at the entire story behind a product. The publicity attached to Scope 3 reporting not only directly affects them but is almost crucial for a business in the sustainability focused world.

Reporting on Scope 3 will not only save organisations money and encourage consumers to purchase sustainably produced goods, but it will actively help our fight against climate change.

Written by Nathan Haughton – Marketing Executive at Circular Computing™