How to select your suppliers to reduce your scope 3 emissions?
Companies that wish to declare their emissions must conduct a carbon footprint assessment to determine the amount of greenhouse gases emitted during the production of a product or their activities over a specified period. To conduct this assessment, it is necessary to categorize emissions according to a specific classification. These are scopes 1, 2, and 3.
In this context, scopes refer to the boundaries within which an organization's or product's greenhouse gas emissions are examined. Today, we will focus specifically on scope 3, the broadest and most challenging to define.
Focus on Scope 3
What is scope 3?
Unlike scope 1 and 2, which are emissions directly linked to and controlled by the organization, scope 3 is more complex to understand because it encompasses a wide range of indirect sources such as the production of construction materials, supplier transportation, product use by customers, and many others. In other words, scope 3 includes all emissions related to the supply chain and product use, from design to end of life.
Scope 3 emissions are detailed in about ten categories (Table 1), which are further divided into two types: "Upstream" and "Downstream" emissions.
"Upstream" emissions refer to the initial or upstream stages of a process or value chain. These stages are often related to production, raw material sourcing, and initial logistics. This category includes emissions generated by employees' travel for business-related activities. For example, an employee's commute to the office would be classified under these emissions because it is necessary for producing the company's goods or services.
On the other hand, "Downstream" emissions refer to the final or downstream stages of a process, often related to distribution, marketing, and customer delivery. This includes emissions created by the use of services and goods sold. For example, if your company manufactures machines, the emissions resulting from the use of these machines would be considered downstream emissions.
Here are the categories considered in Scope 3 :
Why is it important?
Scope 3 is important in a carbon footprint assessment for several reasons:
1. Represents a significant portion of emissions
Scope 3 emissions make up a substantial portion of a company's total greenhouse gas emissions. Scope 3 accounts for nearly 75%* of a company's greenhouse gas emissions. According to a study by the Climate Action Network in 2016, "Scope 3 emissions can quickly represent 3 to 4 times the emissions of scopes 1 and 2."
It is essential to consider them to claim carbon neutrality because neglecting Scope 3 emissions can lead to underestimating a company's true carbon footprint.
*According to CDP (formerly Carbon Disclosure Project)
2. Vulnerability analysis
It allows companies to better understand emissions' sensitive points, such as products with high carbon intensity. Additionally, Scope 3 highlights parts of the value chain that are more vulnerable to risks associated with rising resource prices and changing regulations, such as carbon taxes and stricter efficiency standards. It also assesses the company's dependence on fossil fuels, taking into account factors such as employee, customer, or visitor travel.
3. Mandatory transparency
The disclosure of Scope 3 emissions has become mandatory in many jurisdictions. For example, the Task Force on Climate-related Financial Disclosures (TCFD) is now part of the regulatory framework in several jurisdictions, including the European Union (EU). Singapore, Canada, Japan, South Africa, New Zealand, and the United Kingdom, among others, now require the disclosure of climate risk in accordance with TCFD by 2023 and 2025. It has been stated that all organizations should consider disclosing Scope 3 greenhouse gas emissions, in addition to the mandatory emissions reporting for scopes 1 and 2.
In France, this obligation has been in place since January 1, 2023, and applies to companies with more than 500 employees in mainland France (250 in overseas territories), public establishments with more than 250 employees, and the state and local authorities with more than 50,000 inhabitants. These companies, which were previously subject to mandatory carbon footprint assessments for scopes 1 and 2, must now include the consideration of Scope 3 emissions from January 2023. This is a significant challenge in terms of accounting for greenhouse gas emissions and low-carbon transition actions in France. Financial penalties have been significantly increased, from 1,500 to 10,000 euros, and up to 20,000 euros in case of repeated violations.
How to choose low-carbon footprint suppliers to reduce Scope 3?
Since these emissions result from the company's value chain and are on average more than 11 times higher than the company's operational emissions, special attention must be given to suppliers. These suppliers should have a low carbon footprint, and equivalent products should be chosen.
The selection of low-carbon footprint suppliers is based on three points:
Supply chain assessment: The first step is to carefully assess the company's supply chain to identify key suppliers and critical stages in your production process.
Supplier emissions analysis: Ask suppliers to disclose their carbon emissions. Prioritize suppliers committed to reducing their carbon emissions, taking into account various aspects, from waste management to natural resource use. Look for companies with environmental labels, certifications, or other sustainability standards.
Collaboration and innovation: Work closely with suppliers using a collaborative and transparent approach. This involves establishing clear communication channels to facilitate information sharing.
How to choose low-carbon footprint products
On top of choosing the supplier, the choice of the product itself is equally important for reducing Scope 3 emissions.
The selection of low-carbon footprint products is based on several criteria:
Life cycle assessment (LCA): Evaluate the carbon footprint throughout the product's life cycle, from manufacturing to disposal, including the use of labels and standards. For this purpose, the International Organization for Standardization (ISO) has developed two complementary standards: the principles and framework of life cycle assessments are described in ISO 14040, while the specific requirements are outlined in ISO 14044.
Research and environmental labels: Look for products with environmental labels or certifications, such as the eco-label, verified carbon footprint, or other sustainability standards.
Efficient resource use: Choose products designed to be durable and resource-efficient, such as reusable, recyclable, or products made from recycled materials.
Local consumption: Prefer local products when possible. Imported products often have a higher carbon footprint due to transportation distances. If not possible and the product requires delivery, prioritize responsible transportation.
Company commitment: Prioritize companies engaged in sustainable and transparent practices, as previously described.
Challenges in implementation
Scope 3 emissions are challenging to manage because they are beyond the organization's direct control but still fall under its responsibility. Despite the advantages and importance described earlier (Part I), challenges persist in its implementation:
1. Lack of reliable, accurate, and specific data
Conducting a Scope 3 greenhouse gas emissions assessment requires gathering information beyond the company's borders. These data come from suppliers, customers, and other stakeholders involved in the product life cycle. This can be challenging for some products with a long and complex value chain.
As Scope 3 involves handling a significant amount of data beyond their control, companies often struggle to collect precise figures. This leads to the adoption of secondary data, which can come from industry averages, for example. Relying on averages instead of specific emission factors for the supplier and location means that estimates of actual emissions could be inaccurate.
2. Lack of resources and methodology
Calculating emissions from the value chain requires technical skills in carbon measurement, as well as human and financial resources. For many small and medium-sized enterprises, this presents a challenge in terms of costs and the availability of qualified personnel.
Furthermore, there is no clearly defined standardized methodology for calculating emissions from the value chain.
Get your organization support with a dedicated carbon footprint assessment to embed carbon footprint reduction in your project
Despite the challenges associated with its accounting, managing Scope 3 carbon emissions is essential for companies looking to reduce their environmental impact. By collaborating with low-carbon footprint suppliers and choosing environmentally friendly products, companies can not only reduce their emissions but also enhance their competitiveness in the market and their reputation.