Christian Arno

A business case for reporting on scope 3 emissions

6 min Read
A rocky mountaintop and the edge of a forest reflected in a lake

Scope 3 emissions are the Samwise Gamgee of carbon footprinting; pivotal to the story but often totally overlooked. With the ability to bolster the bottom line, uncover competitive advantages, reduce risk and improve employee engagement, I thought it high time I write about why businesses should start developing a scope 3 inventory.

First up, a quick overview/recap of what scope 3 emissions actually are. In 2001, Greenhouse Gas Protocol released a standardised framework for businesses to measure and manage their greenhouse gas (GHG) emissions. They broke these emissions down into 3 sections or scopes;

  • Scope 1 is direct emissions from company vehicles and facilities
  • Scope 2 is indirect emissions from purchased heat, steam and electricity
  • Scope 3 is indirect emissions produced by everything else in a company’s value chain

Rather than reinvent the wheel, I’ve plonked Greenhouse Gas Protocol’s diagram below. It gives you a good sense of what’s involved in the framework at a glance.

Graphic showing value chain emissions split into direct Scope 1 emissions and indirect Scope 2 and 3 emissions
“For most businesses Scope 3 emissions also make up the lion’s share of their total emissions.” (Edie, 2020)

At present, there’s no legislation in the UK that forces businesses to measure their entire environmental impact; the SECR requires large companies to report on particular aspects of their footprint but much of scope 3 is left off the list. This seems to have set a precedent in the business world, although admittedly the fact that scope 3 is more complicated to measure hasn’t helped. As Julie Baddeley, Director of the Hughes Hall Centre for Climate Change Engagement at the University of Cambridge, put it, “Scope 3 is a very important area and one that many businesses haven’t quite yet got to grips with.”

Why should businesses measure their Scope 3 emissions?

The thing is, ignoring scope 3 because it’s complicated or not expected of you is akin to leaving your house in Edinburgh without a rain jacket because it’s sunny… naive at best, reckless at worst (I say this having very recently been caught in a snowstorm in a t-shirt).

For now, much of the business world can get away with not reporting on any of its emissions. But this is changing, and I imagine the change will come fast. Mandates for large organisations to report their entire environmental impact have already been recommended by the Taskforce on Climate-related Financial Disclosures (TCFD), which will have a knock-on effect on SMEs in their supply chain and likely be expanded to all businesses in the not too distant future.

Moreover, if we take a step back and look at the bigger picture, achieving Net Zero by 2050 is critical. We face “increasingly unpredictable and dangerous impacts for people and ecosystems” if we don’t (Greenhouse Gas Protocol). The Climate Change Committee (the UK’s independent advisor on tackling climate change) says we must move very decisively over the next decade if we are to achieve this… My point? The bigger picture needs businesses to do more than what they’re currently mandated to do. And, to be frank, your business needs the bigger picture, full stop.

As Sir Partha Dasgupta makes very clear in his recently released ‘The Economics of Biodiversity Report’, we depend on nature. To do nothing now is to accept that your business will face tough, maybe even impossible, times ahead. It’s chucking it out in a dark-skied Edinburgh, sans-jacket.

What benefits will businesses see from measuring scope 3 emissions?

“By addressing GHG emissions, companies can identify opportunities to bolster their bottom line, reduce risk, and discover competitive advantages.” Corporate Value Chain (Scope 3) Accounting and Reporting Standard, GHG Protocol

I’ve summarised the potential business benefits of developing a scope 3 inventory identified by the GHG Protocol below:

  • Get ahead of future regulations
  • Future-proof corporate procurement and product design
  • Spot and plug efficiency leakages to save on costs
  • Identify and prioritise emissions-reduction opportunities
  • Mitigate against reputational risk
  • Prove to share and stakeholders that you’re serious about achieving Net Zero
  • Identify new market opportunities for producing and selling goods and services with lower GHG emissions
  • Improve employee engagement on sustainability initiatives

On that last point (plugging Pawprint is what I’m ultimately here to do, after all), the CCC has called for businesses to report on scope 1 - 3, but also to go further by finding ways that they can have wider influence and impact systematic change. For example, by engaging employees to think green at work and at home.

Our tool:

  • Enables employees to measure, understand and reduce their carbon footprint at work and at home
  • Empowers businesses with data and insights around employee-related emissions
  • Allows employees and businesses to work together to fight climate change

At the risk of taking this analogy too far, everyone knows Samwise Gamgee is the real hero of The Lord of The Rings saga. Scope 3 emissions hold the same potential. Be a front runner in the fight against climate change and win the hearts of everyone watching.

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