Sustainability is taking over the world of logistics and supply chains. From eco-friendly packaging to decarbonisation, green strategies are more important than ever. Businesses around the world are making climate commitments and stepping up their green game. This is especially important as more transparency and reporting requirements come into play.
Especially relevant will be the Corporate Sustainability Reporting Directive (CSRD), which will impact over 49,000 European businesses. CSRD will require all businesses that fall under start reporting on their 2024 financial year, so meaningful change will need to happen quickly.
For supply chains, the biggest category of emissions to tackle is also the most complex. A business’ emissions are divided into three categories called ‘scopes.’ Each scope (Scope 1, Scope 2 and Scope 3) represents a category of emissions based on how much control a company has over them. And a lot of the value chain lands in Scope 3.
But what are Scope 3 emissions?
Scope 3 emissions can be confusing when you first start looking at your business’ overall emissions. That’s because it sometimes feels like a catch-all category that doesn’t have a guiding principle to tie it together. And, in some ways, that’s true! Scope 3 covers all indirect emissions that occur through a company’s value chain. Which is extensive! Examples of Scope 3 emissions sources include:
- Purchased goods and services
- Business travel
- Waste disposal
- Use of sold products
- Investments
- Leased assets and franchises.
- Transportation and distribution
That final point is both the biggest factor in how much your company emits and one of the easiest parts for a company to impact
Read more: The 5 factors that can cut your supply chain emissions RIGHT NOW
How to start reducing your Scope 3 emissions
Start demanding more from your suppliers
Use your buying power to require better reporting from suppliers. Some companies require their Tier 1 and Tier 2 suppliers to undergo climate and emissions reporting. This encourages them to consider their current output and provides your organisation with more data to help make green decisions.
More and more climate reporting has become mandatory, so this also has the added benefit of helping both you and your supplies get ahead of the curve. As new regulations come into play, both parties will already have processes in place. This could enable you to react more agilely to future challenges.
Incentivise green behaviours
This can happen in a couple of ways. First, because Scope 3 emissions cover things like business flights and employee commuting, you need to look at your culture. Making sure that you have built an internal culture of sustainability is crucial. Educating your teams and consistently prioritising green solutions are key ways to help those values stick.
Secondly, you can incentivise your buyers to order in ways that are better for the environment. A first step here could be simply charging extra for orders placed in a way that doesn’t align with your green ideal. This can also help convince your buyers to purchase goods in ways that better fill your ‘gap to perfection’ (the difference between current fulfilment needs compared to the ideal).
Alternatively, if your buyers aren’t inclined to change based on additional fees alone, consider collaborating with them to discover where the hurdles are on their side and how you can support them going forward.
Learn more: The Green Ratio - the optimal path to a sustainable future
Set science-based targets
Science Based Targets are goals that are truly aligned to existing climate science and which take into account the nuanced and dynamic nature of the science itself. They are a clear way to make achievable, measurable, benchmarked goals.
One method of calculating science-based Scope 3 goals is the GEVA method. The GEVA (or Greenhouse gas Emissions per unit of Value Added) method equates a carbon budget to total GDP and a company’s share of emissions is determined by its gross profit. This is because the sum of all companies’ gross profits worldwide equate to global GDP.
Because climate science is complex, the Science Based Target initiative (SBTi) can help you understand how to set these goals.
Challenges with Scope 3 reporting
Part of the difficulty with Scope 3 emissions is just how broad a range the term covers. From employee commuting to your full logistics and distribution network, Scope 3 is meant to encompass it all. Considering that, it isn’t surprising that this category usually produces the majority of a business’s carbon emissions. However, that breadth means strategies for tackling Scope 3 emissions in your supply chain have to be comprehensive.
The other major hurdle in reducing Scope 3 emissions is data. Because Scope 3 reporting is far from mandatory, finding emissions data about owned factors is difficult, not to mention data from any third party providers. Having total visibility of your Scope 3 data can feel impossible at times.
Determining your baseline
Acting quickly to reduce your company’s carbon footprint will help slow the warming of the planet. However, it will be hard to get leadership buy-in without being able to show your results. The first step to proving effectiveness is establishing a baseline. This is your starting point and should reflect your current emissions levels.
Once you have that baseline, you can use it to benchmark future emissions against and prove the impact of the above initiatives. Getting to that point can be difficult. It’s not always easy to find or collate the available data. The sheer volume of invoices you’d need to review alone can make the task overwhelming. This is where tools like AI can help. Artificial intelligence can gather those invoices, align it to available carbon data and pull together a clear picture of where you are currently.
Determining your carbon baseline can absolutely be done without the aid of AI. But the amount of time, resources and money that would go into a project like that could make it feel, well, unsustainable.
Even though reducing your supply chain’s carbon emissions is vital, don’t worry if you can’t achieve that overnight. Reaching your sustainable business goals is not a simple project and there will be challenges throughout. But defining your baseline and taking steps to incentivise your buyers and suppliers can help simplify the process.
Establish your baseline with AI and drive impact through your decarbonisation journey.
