Curbing carbon emissions in company value chains

Most of the world’s largest companies account and report on emissions from their direct operations, but there is still a significant gap in accounting for emissions along their value chain. These are called Scope 3 emissions and often represent the biggest share of a company’s greenhouse gas impacts, in some cases up to 70 per cent. Methods to curb them was a central topic of debate at this year’s Climate Innovation Summit in Dublin.

Interventions on company greenhouse gas emissions have widely become embedded into corporate practices by addressing emissions related directly to their operations and energy use. This is called Scope 1 and Scope 2 emissions. However, consulting firms aside, most major companies have the largest share of emissions embedded in their value chains. This encompasses emissions not directly associated with its operational activities, for instance, purchased goods and services, waste generation, investments and choice of technologies. These areas are collectively defined as Scope 3 emissions and finding methods of intervention poses a significant challenge for companies.

Many businesses lose oversight when they move beyond their first tier of suppliers and they find it difficult to compare one supply chain with the other – and hence very difficult to calculate the associated environmental impact. Being unable to measure and quantify their emissions hinders their ability to set targets as they do not have a baseline to compare them against.

As described by Owen Hewlett, Chief Technical Officer, Gold Standard: “Scope 3 has been the forgotten man of climate accounting.” This is despite the fact that value chain emissions account for up to 70 per cent of a company’s greenhouse gas emissions.

Finding means of intervention was precisely the focus of the breakout session at this year’s Climate Innovation Summit in Dublin. “It’s a vast amount of emissions that we are talking about, which provides a vast amount of opportunity,” Hewlett continued.

A lot can be done to incentivise companies to work more broadly with their supply chain. By investigating best practice interventions from successful case studies on Scope 3 reporting, five main themes were identified as viable pathways to curb emissions in company value chains:

• Supplier engagement/procurement: Using the power of procurement to change the actions of company suppliers. For example, CDP works with key suppliers to help them set targets and monitor emissions over time. This has saved approximately 150 million tonnes of CO2 in the upstream supply chain of their suppliers.
• Product service design: Design choices ultimately determine the product’s lifecycle emissions, which is based on the choice of materials used for their products. Designing products with longer lifespans and more sustainable materials can help offset emissions in value chains.
• Operational practices: This is an internal perspective for the company, which includes biking to work in terms of employee commuting and using teleconferences to offset emissions from business travel.
• Business model innovation: Enforcing business models that move away from evermore production and realigning incentives between producers and consumers that move away from more and more consumption.
• Customer engagement: Affecting the way that customers actually use their products. This includes nudging and gamification as a means to influence customers in order to make them use their products more efficiently.

Areas of significant impact include accounting for land use change in corporate supply chains and deforestation related commodities which have high risk and impact. In an EIT Climate-KIC context, current projects for Scope 3 reporting with our partners include:

• Gold Standard: The ‘Value Chains Interventions Guidance’, which is focused on Soil Organic Carbon Reporting.
• Quantis: A commodity monitoring tool that determines the spatially-sensitive geo-footprint of mayor commodities by converging Life Cycle Assessment datasets with spatial data from Geographic Information Systems.
• Quantis: A Redchain project that aims to reduce inconsistencies and improve transparency for REDD+ projects using a blockchain solution. 

With the carbon costs of travel in mind, Climate Innovation Summit session summaries are available online for those who cannot attend—and for review for those present. These summaries aim to extract the key debates, dialogues, and learnings from each #MissionFinance session.