Businesses aiming for net-zero goals recognize the critical importance of tackling Scope 3 emissions, which frequently constitute the largest segment of their carbon footprints. Procurement entities are instrumental in driving emissions reductions and fulfilling the company’s ESG objectives.
Sustainability across the value chain: A 5-stage plan to address Scope 3
Scope 1 and 2 emissions are currently a significant concern in many boardrooms, often referred to as the “elephant in the room.” However, there is a growing awareness of Scope 3 emissions, which are indirect emissions stemming from the company’s value chain, and this concern is gaining prominence.
The increasing focus on supply chain emissions is evident in the changing priorities of chief procurement officers (CPOs). Deloitte’s 2023 CPO Survey reveals that environmental, social, and governance (ESG) has become the second-highest priority for CPOs, climbing from sixth place in 2021, with improving operational efficiency retaining the top position.
Why are Scope 3 emissions important to my organization’s sustainability goals?
Scope 3 emissions, often the biggest part of a company’s carbon footprint, are crucial to address for those committed to achieving net-zero goals. Among the various categories of Scope 3 emissions, Category 1, Purchased Goods and Services, stands out as the largest and most complex.
This category involves engaging with suppliers, making procurement a key player in reducing emissions. Despite efforts by companies and regulators to tackle emissions in different categories, Category 1 still needs attention. According to the Carbon Disclosure Project (CDP), it typically contributes the most to Scope 3 emissions, ranging from 35% to 40% depending on the industry. Focusing on this category could significantly advance sustainability goals, but it requires a strategic and comprehensive approach.
5 Step framework to reduce Scope 3 emissions for purchased goods and services
Many companies have committed to achieving net-zero targets through initiatives like the Science Based Targets initiative (SBTi), which includes addressing Scope 3 emissions. However, creating and implementing a roadmap for this can be challenging. The following approach integrates all the essential components needed to develop it.
First, assess your current emissions to establish a baseline. Then, prioritize which emissions and supply categories to focus on. This lays the groundwork for setting goals at the company level, which will then be broken down into specific targets for emissions categories and suppliers.
Setting goals is important, but achieving them requires more than just a simple action. It’s a journey that demands a strategy, a detailed plan, and the ability to put it into action. This involves considering factors like available resources, internal expertise, and alignment within the company. When devising your strategy, it’s crucial to determine how you’ll engage with suppliers and choose the most effective carbon reduction programs given limited resources and supplier contexts. Additionally, assess your organization’s capabilities to ensure you have the necessary expertise to develop and execute the strategy effectively.
Lastly, ongoing management and monitoring are essential. This includes tracking suppliers’ performance against commitments and monitoring internal progress towards strategy targets.
How does an organization go about reducing Scope 3 emissions, specifically in Category 1?
After carefully examining the approaches of multiple companies to Scope 3, Category 1, collecting information from CPOs, and looking at studies from prominent academic institutions, Deloitte have designed a five-stage journey that aims to drive efficiency while speeding value impact:
- Assess baseline opportunity
- Set goals, strategy, and investments
- Evaluate initiatives and develop road map
- Execute strategy
- Monitor and manage
Source: Deloitte
