Scope 3 reporting is a looming challenge for industry

Scope 3

Robust Scope 3 reporting tools are essential for achieving industrial sustainability objectives but firms face a range of practical challenges.

Large industrial companies may find it challenging to obtain data from lower-tier suppliers that may not track their CO2 emissions. Additionally, there is no standardised methodology for Scope 3 emissions calculations and disclosures, creating difficulty in assessing the activities of a broad set of suppliers, each using different data collection and reporting methods.

While some areas of industry are racing ahead with AI and machine learning, others are still using spreadsheets, pencils and informal reporting to account for their supply chain activities and impacts.

The Greenhouse Gas Protocol defines Scope 3 emissions as all value chain emissions resulting from activities and assets not owned or controlled by the reporting organisation. There are 15 Scope 3 categories and some may not apply to all companies. According to the Carbon Disclosure Project, Scope 3 emissions typically account for over 75 per cent of total emissions with a greater total among companies in the industrial sector.

The latest Sustainability Assessment by ABI Research analysed the sustainability activities of ten of the world’s largest industrial manufacturing conglomerates.  For Schneider Electric, Siemens, ABB, and Bosch, who were classified as ‘sustainability leaders’, Scope 3 emissions are over 99 per cent of total emissions.

“Large industrials face many challenges in measuring and reducing Scope 3 emissions, as the process encompasses a wide range of activities from suppliers, consumers, and distributors,” Alex McQueen, sustainable technologies research analyst, said. “Measuring Scope 3 emissions requires dedicated resources, expertise, and specific data collection and management processes.”

Technology to aid Scope 3 reporting

Obtaining a complete and accurate product carbon footprint can be challenging due to complexity of global supply chains and the lack of transparency in data so powerful technology is needed to provide scope and clarity.

“Investing in digital tools helps automate the collection, monitoring, and reporting of environmental, social, and governance data, and they can also improve value chain collaboration,” McQueen added. “Since Scope 3 emissions calculations require the tracking of vast amounts of data, leveraging digital solutions is crucial for effective emissions management and reporting.”

Retail giant River Island relies on latest technology to track the whole-life impact of its business across a supply chain that supports 300 stores worldwide selling over £600 million worth of clothes each year.

“It is essential that we understand and have a clear picture of the impact we’re having through our different scopes,” explains Jose Arguedas Schwank, head of corporate responsibility and sustainability at River Island. “We use Segura, a system that allows us to acquire greater transparency and visibility into our supply chain, to measure the real impact of our operations and products. It enables us to use the right emission factors and the right data to calculate our footprint. This really helps us to understand what measures we can put in place to help reduce our carbon footprint. We also use the solution to measure our transport footprint and that visibility helps us to look for lower-emissions alternatives, or to maximise the use of our suppliers. The system allows us to consolidate our data to gain a wider overview of the business.”

Regulation calls for robust reporting

As regulation regarding the disclosure of environmental data becomes more prevalent, companies should prepare by establishing a robust framework for measuring and managing emissions data. To start, industrials with high emissions should look to identify all relevant Scope 3 emission categories. After that, supplier engagement is vital and industrial firms should seek support from third-party organisations in requesting and managing supplier emissions data. Companies may also tie requirements to provide environmental data into supplier contracts and set targets for reducing supply chain emissions.

Scope 3 regulation aims to drive sustainability throughout the entire value chain and in doing so provide transparency and verifiable environmental reporting. More than a tick-box excerise, regulatory compliance will support an organisation’s annual environmental claims and boost its eco-credentials.

“Most companies are only just starting to understand the world of scope three supply chain issues and how that’s reported,” says Mauro Cozzi, CEO of EmitWise. “Upcoming regulation like the European taxonomy aims to ensure that eco-claims are well-founded. Eventually, every company making an environmental claim will need to ensure their claim can be audited by a professional and that the trail of numbers behind that claim is 100 per cent transparent and evidence based.”

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