Businesses are increasingly turning their focus to reducing Scope 3 emissions – which make up 88% of total business emissions. An industry-wide problem is that scope 3 emissions are particularly challenging to manage as they occur outside a company's direct operations, spanning the entire value chain from upstream to downstream activities.

Organizations face significant hurdles in tackling Scope 3 emissions, stemming from issues such as poor data quality and availability, varied disclosure standards, and the limited integration of emissions data into core business processes. The lack of high-quality primary data from supply chain partners, especially smaller businesses, hampers accurate measurement and reporting.

On top of that, a diverse range of rapidly evolving disclosure standards complicates the landscape, requiring expert knowledge and constant updating to stay aligned with the latest climate science and regulatory requirements.

The integration of Scope 3 emissions into business strategy is essential for decarbonization, yet businesses often move slowly due to a lack of organization-wide awareness and strategic vision. Procurement decisions rarely incorporate emissions criteria, despite their potential to drive meaningful change.

To overcome these challenges, we've created this guide, containing six actionable recommendations to help you reduce your company’s scope 3 emissions today.

What suppliers should you engage?

Companies are advised to focus on at least tier 1 suppliers – the direct suppliers. Furthermore, a rule of thumb should be that the top 80% of these suppliers are mapped, either by monetary value or by the volume of emissions.

By prioritizing these suppliers, companies can concentrate their efforts where they are likely to have the most significant influence. Companies can conduct a detailed analysis to identify these key suppliers, either by evaluating the financial transactions with them or by estimating the emissions associated with their products and services.

This focused approach allows companies to allocate resources efficiently, engaging with these critical suppliers to implement emission reduction strategies, such as optimizing energy use, shifting towards renewable energy sources, or redesigning products and processes for greater efficiency.

By starting with tier 1 suppliers and targeting those that represent the majority of spending or emissions, companies can achieve meaningful reductions in their overall carbon footprint, setting a foundation for deeper decarbonization efforts throughout their supply chain.

The six solutions

1. Upskilling

Upskilling employees is crucial for the effective management of Scope 3 emissions – business leaders and their teams must grasp the complexities of their environmental impact in order to steer towards more sustainable practices.

To this end, companies should offer targeted training programs that could range from online modules on carbon footprint calculations to advanced strategies for emissions reduction.

For instance, a company could set up an online portal where suppliers can learn about energy efficiency and sustainable material sourcing through interactive courses and real-world case studies.

2. Sustainable procurement policy

A Sustainable procurement policy is essential in guiding a company's approach to managing Scope 3 emissions. Such a policy should clearly articulate the company's commitment to sustainability, setting specific selection criteria for suppliers that prioritize environmental responsibility.

This includes choosing suppliers with lower carbon footprints and those who actively use energy-efficient technologies.

A key metric to include here is the emission intensity of suppliers, which is calculated by dividing total scope 1,2 and 3 emissions by revenue. Based on this outcome, companies can select suppliers that have committed to low emission intensities, or have already achieved this.

3. Product Life Cycle Assessments

LCAs are an indispensable tool for mapping the full environmental footprints of products from raw material extraction to end-of-life. By analyzing every stage – beginning with raw material extraction, progressing through manufacturing and usage, and ending with disposal or recycling – LCAs provide a holistic view of a product's environmental footprint.

This in-depth insight is key for sustainability teams. For example, a company could utilize LCA software to compare the environmental impacts of sourcing raw materials like aluminum versus recycled aluminum, taking into account factors such as greenhouse gas emissions, water use, and energy consumption.

It can also be used as a requirement for tier 1 suppliers, to inform what options are most sustainable. Even better: LCAs can be integrated into carbon accounting software to give highly accurate insights into the total carbon footprint associated with LCA-assessed products.

By integrating LCA findings, companies can prioritize suppliers who design products for longevity, repairability, and recyclability, and who actively minimize their use of hazardous substances.

4. Supply chain transparency

Enhancing supply chain transparency is a strategic necessity that enables a company to gain a comprehensive understanding of its products' background and the environmental practices of its suppliers. Achieving this level of transparency involves a systematic approach to gather and analyze data on how and where products are manufactured, the materials used, the labor conditions under which they are produced, and the environmental policies of each supplier.

To illustrate, companies might deploy blockchain technology to trace raw materials from their source, ensuring that each component of a product adheres to sustainability standards. They could also implement supplier self-assessment questionnaires for tier 1 suppliers focused on environmental practices, which would provide detailed insights into the carbon footprint of the manufacturing processes.

Getting a clear overview of which suppliers your company buys also allows you to set up improved competitor analyses. What alternatives are there, are they more sustainable, and how feasible is such a switch?

5. Monitoring reduction targets

Regular monitoring and reporting of Scope 3 emissions are critical components of an effective supply chain decarbonization strategy. Utilizing carbon accounting software, companies can track and analyze emissions data, ensuring accurate and timely insights into their environmental impact. This systematic tracking allows businesses to pinpoint areas where emissions can be curtailed and to assess the effectiveness of their sustainability initiatives.

To support this, companies should establish clear and measurable reduction targets that align with scientific recommendations, such as those set by the Science Based Targets initiative. These targets should not only be ambitious but also realistic, taking into account the company's current emissions profile and the potential for reductions within the industry context.

6. Mandatory carbon reporting

Mandatory carbon reporting from suppliers represents a shift towards greater accountability and transparency in a company’s effort to map – and reduce – emissions. By making carbon disclosure a prerequisite for all suppliers, companies can ensure a uniform standard of climate reporting, fostering an environment where decarbonization becomes a central pillar of business operations across industries. This requirement signals to suppliers the critical importance of environmental responsibility, irrespective of the contractual basis of their relationship with the company.

Conclusion

It's clear that tackling Scope 3 emissions is not just beneficial but necessary for forward-thinking businesses. By prioritizing transparency, sustainability, and efficiency from the top of the supply chain down, companies can significantly reduce their environmental footprint.

Emphasizing the engagement with tier 1 suppliers and focusing on the most impactful 80% in terms of emissions or financial value underscores the practical approach to sustainability. When a company optimizes logistics to reduce emissions or implements a sustainable procurement policy that favors suppliers using renewable energy, it’s good for both profitability and scope 3.

Mandating carbon reporting reinforces this commitment across the board, setting a new standard in environmental responsibility. Ready to accelerate your procurement insights? See Coolset in action below or contact one of our product experts for a personalized walkthrough today.

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