Whether setting a science-based target or expanding greenhouse gas accounting for other reasons, sustainability teams are increasingly tackling Scope 3 emissions, setting goals and tracking improvements. If you and your company are going on the line and publicly committing to dramatic reductions (and kudos if so, as we need more of that), it behooves you to think through not only how you’re quantifying your Scope 3 baseline number, but also how readily you’ll be able to quantify benefits and track progress toward goals.
As sustainability teams that have grappled with addressing greenhouse gas emissions from their supply chain know, companies can take a wide range of approaches to quantify Scope 3 impacts. They include:
- Estimates based on purchasing dollars
- Estimates based on life-cycle analysis (LCA), which works with industry sector GHG averages and purchasing weights
- Collecting actual data on the company’s supply chain
- Some hybrid of the three approaches above (purists may note that use of purchasing dollars is just a streamlined form of LCA)
In many cases, it’s hard to get the actual data in approach No. 3. For example, if you’re a cereal company sourcing rice flour, it’s difficult to actually measure rice patty methane over the growing season. So companies often go with options No. 1 or No. 2.
The real challenge comes when companies want to go beyond simply reporting a number for Scope 3 emissions to wanting to demonstrate improvements.
Consider the following: When you use an approach tied to purchasing dollar information, that data is tied to a GHG/$ metric located in some database for a given type of purchase — office products, mechanical parts or food ingredients. You don’t need a Ph.D. in math (but if you do have one, super-cool!) to see that there are only three ways to demonstrate an improvement if you’re using that metric:
- The company buys less (so the purchasing dollars go down)
- Industry-wide shifts change the metric in the GHG database (so GHG/$ goes down)
- The company sources something different if that’s an option (substituting a purchase with lower GHG/$)
Unless you’re trying to downscale your business, No. 1 isn’t an option. And having an impact on No. 2 goes well beyond the actions of one company. Shifts in that metric are unlikely to happen within a three-year goal timeline, let alone show up in the database until some time after the shift happens. The only real strategy that’s measurable here is the substitution option: buying an ingredient or feedstock with a smaller footprint.
When substitution has played out, your company is left with the last resort: offsets. And offsets don’t count toward science-based targets. You need to demonstrate operational reductions
Your company will run into the same issue when using life-cycle analysis to quantify Scope 3 emissions. To achieve reductions, you need less purchasing weight or less GHG/amount of weight. In theory, your company always can be more efficient to reduce the amount it purchases, but unless the baseline is wholly inefficient, it’s unlikely that the company will find the 30 percent cuts and extremely unlikely to find the 80 percent reduction you’ll need under science-based targets.
The method by which Scope 3 emissions are measured has real implications for any company setting science-based targets. How do you demonstrate dramatic GHG reductions when the way you measure doesn’t allow for it? Do you just need a number to report? Or do you want/need to be able to measure reductions that come from improved actions?
I’m not such an analytics improvement hawk that I’m saying there isn’t value in using purchasing dollars or LCA results for Scope 3 estimates. Can they give you a sense of priority on where to focus? Absolutely.
Can you use that to target improvements in your supply chain (such as investing in renewables with key partners) and to quantify that improvement? Of course. In that scenario, though, how you quantified footprint and how you’re quantifying improvement are now out of sync.
Make sure your methods will allow you to track progress toward your goals. The cleanest way to do that is by collecting actual supply-chain data. Given the difficulties of obtaining that data, a valid hybrid approach is to use LCA data to see hotspots and selectively collect data on key GHG sources of concern. Otherwise, going the path of least resistance to come up with Scope 3 numbers just might generate a great deal of resistance later.