Episode 38: Scope 3 Emissions: How to Help Your Suppliers Reduce Their Carbon Footprint
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Many companies have started to think about measuring and reducing their Scope 3 emissions. The truth is most companies often feel overwhelmed by the scale of this effort and don’t know where to start. In this episode, Tad and Julianna discuss what Scope 3 emissions are, the top Scope 3 category for most companies, how to help your suppliers reduce their carbon emissions, and how to start estimating your company’s Scope 3 emissions from your suppliers.
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Can you give a quick overview of scope 3 emissions?
“Every company generates Scope 1 emissions which are from the fuels they burn. That would be the natural gas, oil, and other fuels that are burned in the facility. Those are considered direct emissions. Then Scope 2 would be from the things you buy. That would be electricity in most cases because most companies don't generate their own electricity, they are buying it off the grid and utilizing it. Scope 1 and Scope 2 have been a huge focus for companies and many companies that are just starting their sustainability journey are going after those right now and trying to understand them to then figure out how they are going to reduce them. Most companies will evaluate that and they understand “All right, here's my carbon footprint that we are responsible for.”
If they are going to set sustainability goals, report to the CDP, or set science-based targets, they have to understand what their Scope 3 emissions are. For most companies, if they manufacture something, their Scope 3 emissions are going to be driven by their purchased goods and services. That would be all the raw materials, parts, ingredients, packaging, anything they are buying from a supplier. It could also be related to the transportation that they don't control. If they are shipping all their finished products off to their customers, that transportation could be Scope 3, especially if they don't own the fleet. It could be their waste also in some cases because there are multiple categories of Scope 3 emissions, so it could be a lot of different things.
Scope 3 emissions are pretty much the emissions that a company has responsibility for but they don't have direct ownership of it. It's beyond their control. A lot of companies’ Scope 3 emissions represent 80% or more of their emissions profiles. This is a huge chunk of their carbon footprint.”
What is the top Scope 3 category for most companies?
“For most companies, it is going to be their purchased goods and services. Especially if they are manufacturing something, because it is going to be every raw material, part, ingredient, and packaging that they are getting from a supplier. It could even be if they are buying ancillary chemicals or different things like that to make products or process them.
If you look at the overall life cycle of a product, in many cases, the raw materials stage is the biggest chunk of the life cycle impacts. The manufacturing stage is where your Scope 1 and 2 emissions are happening. The raw material stage, or ingredient stage, are going to be typically anywhere from 50% to 80% of a company's impact. It ranges, but in most cases, it is very large. If a company makes a product that uses energy, then the use stage is usually going to be the dominant one. In most cases we see that it is very big. The life cycle tells us that purchased goods and services are going to have the largest impact. If you look at the global warming potential of those raw materials, then you are going to see that is where you need to be focused. We have a couple companies that we work with and we have done some work in terms of looking at the most important categories. Most companies usually have on average, I think I just saw a statistic, about six categories apply to them in a big way and what I have seen is that many of these companies the purchased goods and services could be up to 90% of their total Scope 3 alone.”
How can you help your suppliers with reducing their carbon emissions?
“Many of the companies we work with might have anywhere from 1,000 to 20,000 suppliers. So you can see how big this is. If you do the 80/20 rule, they might have several hundred that are their top purchases. Our strategies are, first, getting the suppliers to understand. They might be a decent size company but they might also be a really small company. They don't even know what Scope 1 and Scope 2 is; they don't totally understand sustainability. They are hearing about it, they are starting to get all these questionnaires that these companies are sending them, but most of them don't even know what to do with them or fill them out except for the really advanced ones. What they are struggling with is how they are going to even deal with this. The biggest thing I would say is we have a whole platform on how we can educate these suppliers. We have done a lot of supplier education over the years where we bring them all together when a company's having a big supplier meeting or we can do a whole webinar series. We have developed a webinar series educating what this means, why it's important to them as well as their customer, then basically teaching them how to do the benchmarking and measurement of their Scope 1 and Scope 2. Once they understand their Scope 1 and Scope 2, they should start to look at doing things like Sustainable Operations Assessments (SOAs).”
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