Why understanding your Scope 1, 2 and 3 emissions is good for business

Why understanding your Scope 1, 2 and 3 emissions is good for business

As the UK prepares to host COP26 next month, there will be increased scrutiny on our climate targets and how the UK will achieve its net zero ambition - and businesses in particular have an important role to play. 

However, setting ambitious, yet realistic, carbon reduction targets can be challenging.  We know from our previous work in our ‘Plot Your Path to Net Zero’ series, that businesses are taking the decarbonisation of their operations seriously, with many considering long-term investments such as sustainable on-site generation to reduce emissions and increase resilience.

One area that often causes confusion among businesses is how to calculate their emissions in line with the three ‘Scopes’ as outlined in the Greenhouse Gas (GHG) Protocol.

Scope 3 - the indirect emissions from a business’ value chain - is more complex than Scope 1 & 2 and could require significant additional commitment, time and resources..  

Under the Streamlined Energy and Carbon Reporting (SECR) scheme, reporting on most Scope 3 emissions remains voluntary, with the exception of business travel, even for large unquoted and listed (LLP) businesses. However, if your business manages a complex supply chain and reports under SECR, Scope 3 looks set to have a significant commercial impact on your organisation in the very near future. Here’s why.

 

It’s important for hitting net zero

Organisations are increasingly setting ambitious net zero goals, often through the Science Based Target Initiative (SBTi), and there are a raft of commercial, financial and reputational benefits to be gained from doing so.

Most businesses have focused on reducing emissions from their own operations and those occurring through power consumption, under the GHG Protocol Scope 1 (direct) and Scope 2 (power-related) framework.  However, demand for carbon reporting across the value chain is growing, particularly as ignoring these wider emissions can lead to accusations of ‘greenwashing’.

Scope 3 emissions - which occur across the value chain - can account for up to 90% of an organisation’s carbon footprint, which often makes them essential to achieving science-based targets.

The reason so many businesses are already prioritising Scope 3 is two fold. Firstly, they know that they have an important role to play on the road to net zero, and secondly, they know that their investors, stakeholders and customers are becoming increasingly aware of the need for climate action and will demand they take their corporate responsibility seriously.

 

Understanding Scope 3

The GHG Protocol’s Scope 3 standard is the internationally accepted method for measuring, reporting and reducing non-owned, indirect carbon emissions. But while the importance of Scope 3 is clear, the calculations can be complex. 

There are 15 different categories to consider for Scope 3, covering everything from business travel and distribution to how products are used and disposed of, and deciding which of these to focus on is a great place to begin. Identifying the areas that will not only deliver the largest carbon reductions but will also bring the most benefit to your business is a key first step on your Scope 3 journey.

 

The business benefits of Scope 3 reporting

A more robust approach to sustainability planning has the potential to deliver significant shared benefits and to unlock new commercial opportunities, while also helping you to boost efficiency and productivity across your business value chain. And with environmental awareness on the rise and corporate responsibility high on the agenda, it may even help you to boost staff morale or secure and retain fresh talent for your business.

For businesses that form the supply chain, it could also mean the difference between winning or losing contracts.

So, whether your business is  an ‘influencer’ or ‘influencee’ in the supply chain, understanding Scope 3 will become increasingly important. That is why we have created a new guide - Scope 3 and Your Road to Net Zero - to provide advice and ideas on where to start. It can be downloaded here

 

1. https://www.carbontrust.com/resources/briefing-what-are-scope-3-emissions

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