Let’s start with a quick disclaimer. This article is not for people or organizations considering themselves to be anywhere near advanced on Scope 3 emissions reduction. Rather, it is aimed at those who are wondering how best to get started or to get moving. It draws on some of the lessons that we have seen in more advanced organizations, breaking down some of the simple steps that they took and lessons learned.
This is about sparking change
A first and fundamental principle to consider is that embarking on your Scope 3 quest is essentially trying to spark a change. At the outset, the scale of that change is unknown; in fact, it’s impossible to estimate in the early days, but it’s going to be sizeable and probably achieved with a combination of small steps and big, bold ones, into the unknown in some cases (which is why there is safety in numbers, but we will come to that later).
You may be in control of some of that change, things that you control and can do now. But an ambition to reduce Scope 3 emissions makes you beholden to a number of other parties, be that stakeholders, budget holders, suppliers, or business leaders. You are ultimately asking them to look at “value” through a different lens when making their decisions.
Some of those value calculations are far more straightforward than others. Carbon as a cost of a product or service, for example, can be calculated by determining the amount of carbon emissions released during the production, transportation, usage, and disposal of a product or service and then applying a cost of carbon to this (and perhaps any additional cross border taxes). Sounds simple, right? It is only in a small number of cases.
Change also means appealing to the personal motivations of the people who are making decisions or releasing funding. For example:
- A CFO may look at sustainability as a short-term cost increase, but could it unlock better financing conditions as part of an overall “beyond cost” investment calculation? (Read: Investing in a Sustainable Supply Chain)
- A budget holder may be sympathetic but primarily concerned about managing this year’s budget and wary of change. How do you appeal creatively?
- Suppliers may be managing their own financial and operational concerns and may seek simplification and commitment before investing.
- The executive may work on long-term incentive plans that pay out over a three-year cycle, weighted towards revenue and margin performance.
But beyond your ability to excite, engage, and support various actors to change, what are some pragmatic steps to get started on Scope 3 emissions reduction for procurement and sustainability teams?
Step 1 – Get started on data
A key first step is to get a feeling for your emissions data. You can find more about carbon accounting here. Still, essentially it refers to measuring the volume of carbon dioxide “equivalents” an organization emits across all aspects of its business – defined by the independent standard, the Greenhouse Gas Protocol, as Scopes 1, 2 & 3.
Now, the big secret is that in the early days, you don’t need to over-invest in or commit long-term to carbon accounting technology to get a good feeling for emissions. That time will come as you get deeper into emissions measurement and reduction. In the early days, it is more important to use the available data to identify ‘hot spots’ where emissions are the most intense.
Hot Spot analysis is useful to provide focus areas for discussion, which are usually at their most intense right at the heart of a business model. However, whilst this may show where emissions are high, it might not prompt action. Take it further and apply an assumptive “cost of carbon” to this initial data. This will demonstrate the additional likely cost implications for a business if it compensates for emissions.
Step 2 – Kick-off Supplier Engagement
A majority of your Scope 3 emissions will sit in your supply chain (Scope 3 refers to the somewhat broader value chain). This means that your ability to reduce emissions is mainly dependent upon suppliers to you reducing their emissions. Critically, it also means that the integrity of targets set and communicated at an organizational level should really take into account supply chain decarbonization readiness and ambition – if your suppliers don’t meet your targets, you won’t.
Generally speaking, work with suppliers will fall into three categories: 1) changing suppliers where a more appropriate alternative exists today, 2) changing or iterating specifications to be less emissions-intensive, or 3) “Design to X” innovation and collaboration projects involving suppliers and or peers seeking to address areas where solutions need to be developed.
Suppliers want to and need to understand your ambition and plan if they are to contribute to it. They are looking for the certainty that enables them to propose the right solutions and make the right investments. There are many ways to formalize engagement through supplier days and collaboration platforms, to name but two approaches. Still, the important thing is to start the dialogue that leads to a shared understanding. It’s time to communicate.
Step 3 – Peer Engagement
According to The Scope 3 Maturity Benchmark, one of the areas where pioneers are most advanced is peer collaboration. In fact, organizations in the Scope 3 Peer Group exist entirely for this purpose so that organizations can share and build understanding and capability together. Joining groups like this is a must to accelerate learning and de-risk early thinking.
In the absence of clear regulations and standards, peer collaboration also provides a platform for organizations to come together to set those standards and provide direction for suppliers looking to place their investments wisely. “Going it alone” may not only make an organization less attractive to suppliers but may also be more costly and risky than working in collaboration with peers.
Finally, a key collaboration opportunity not to be missed is to take The Scope 3 Maturity Benchmark. The Benchmark was initially built for the Scope 3 Peer Group but is now open to other submissions. It supports organizations in understanding their relative resources (e.g. funding and resources) and sets a framework for how procurement teams can mobilize and excel on Scope 3. The output will be data that you can take to your business and provide some ideas for how to plan what to do next.
Step 4 – Do the basics
Finally, as a result of the above, there will be some obvious and easy steps to take first. Some will relate to suppliers and sourcing, and some will relate to how your team and organization are set up to include Scope 3 and a “design principle” of how you do business. You’ll be creating a base plan for how to educate your teams, put in new policies and processes, and refresh category and sourcing strategies, for instance, before moving on to more advanced things.
So what’s stopping you
Calling the above steps makes it look like a sequence, but it doesn’t need to be. What’s important is that you think about what and how and then plot a course that makes sense to your organization. Do the things that you are empowered to do now and with no regrets – when sustainability becomes a top priority, be marked for what you have done, not what you haven’t.
Building that initial plan and roadmap and taking those first few actions can be daunting when the overall scale of change is so great. For support in creating yours and setting some achievable and measurable targets, get in touch.
