HOW TO EFFECTIVELY MONITOR SCOPE 3 EMISSIONS REPORTING FROM YOUR SUPPLY CHAIN

Regulators around the world are adopting an increasingly stringent approach, especially in regard to carbon emissions from supply chains.

However, despite the regulatory pressure and growing awareness among consumers, many businesses do not currently have a clear plan in place to regulate emissions.

This can prove costly and harm their reputation.

Time to Watch Out for Scope 3 Emission Reporting

Scope 3 emissions originate in the supply chain and account for more than 80% of emissions associated with a business, according to CDP.

Monitoring these emissions may at first seem a daunting task, especially for businesses that are starting from scratch.

To begin with, a business may find it difficult to work with suppliers spread across different regions. And then asking these suppliers to accurately measure and report their emissions would require some amount of convincing.

However, this isn’t something that can be delayed.

In fact, authorities in the U.S. as well as Europe are getting stricter on scope 3 emissions reporting.

This is clear from the most recent United Nations Climate Change Conference held in 2021 in Glasgow, Scotland. During this conference, the goal of aggressively reducing greenhouse gas (GHG) emissions was back at the top of participants’ priority lists.

While regulatory requirements could well be the convincer in the future, the reality is that many organizations are already asking suppliers to report these emissions. To retain their customers, suppliers need to get on board and fully extend their support.

Scope to Gain Competitive Edge

Besides complying with regulation, regulating scope 3 emissions also makes business sense. It can, in fact, help a business gain competitive advantage. And this is due to increasing awareness and a change in consumer mindset.

Today, consumers care a lot more than they did 15 years ago about their own impact on the planet. They stick with brands that are taking steps to reduce their environmental impact. Alternatively, they aren’t afraid to switch to another brand that shows more commitment toward the environment.

Reducing scope 3 emissions is therefore crucial to the future of the brand. Additionally, it can also be a key consideration for raising investment.

There is a word of caution here for businesses that look to merely use scope 3 for their business benefit. Consumers can see through a lack of sincerity very quickly. Environmental watchdogs are quick to expose companies that are paying lip service to these important issues.

Where to Begin with Scope 3 Reduction

The first step in monitoring scope 3 emissions is to segment your supplier base. This exercise will help identify the highest drivers and critical suppliers.

Next, educate suppliers about the importance of reporting emissions data and ask them to seek cooperation of their suppliers in this process.

To accurately monitor and report emissions, a business must leverage advanced technology. It needs to:

• Define the technology and tools needed
• Select and implement the tools
• Create associated policies, processes and procedures
• Decide how to regularly interact with the supply base
• Educate internal and external stakeholders
• Set targets
• Do the usual testing, perhaps in a pilot phase

The Bottom Line

It is vital for a business to start now and not wait for regulatory authorities to introduce legislation on scope 3 emissions. This is particularly important for businesses starting from scratch, as it may take them 18 months to two years to have a clearly defined system.

It is equally important to actively work with suppliers and check the progress periodically.