Tackling Scope 3 Emissions with Collaboration and Technology

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Caitlin Keam, ESG Product Director at IFS
Caitlin Keam, ESG Product Director at IFS, on why tracking emissions is crucial for understanding and mitigating the environmental impact of supply chains

It’s no secret that Scope 3 is a key battleground in the war on carbon emissions. A term that has been thrust into the forefront of most business’ minds in recent years, it was not that long ago that people were not aware of what they are, and that’s without even getting started on their magnitude and importance.

For those not already in the know, greenhouse gas emissions are categorised into three groups, also known as Scopes. Scopes 1 and 2 are emissions that are owned or controlled by a company, with Scope 3 emissions those that companies are indirectly responsible for and come from its value chain. 

“All emissions have environmental impact and are encompassed by the internationally agreed Greenhouse Gas Protocol Scopes 1, 2 and 3,” says Caitlin Keam, ESG Product Director at cloud enterprise software company IFS.

IFS develops and delivers software for companies around the world who manufacture and distribute goods, build and maintain assets and manage service-focused operations. Its 6,000-strong workforce of experts focus on providing agility, trustworthiness and collaboration to help best support thousands of customers globally.

Scope 3 emissions: Key to winning carbon emissions battle 

With Scope 3 emissions encompassing output of any part of the supply chain — from the likes of manufacturing, packaging and transporting a product to business travel and waste disposal — Caitlin emphasises that the ability to collect data from each process and those of partners is essential to track these emissions. 

“You need digital technology to do this, such as the IFS Cloud Sustainability Hub,” she details. “Once you have the data you must analyse it in a platform to gain a consolidated view of your emissions and where you are in relation to your targets and the regulations that apply to you.”

Studies suggest that Scope 3 emissions can comprise up to 80% of a company’s emissions, with Caitlin stating that around 70% which are from the value chain.

Speaking at Sustainability LIVE: Net Zero — hosted by our sister brand Sustainability Magazine — earlier this year, Patrick Linighan, Chief Sustainability Officer at law firm Clyde & Co, shared that up to 96% of the company’s own total emissions could be categorised as Scope 3.

“If we can measure and manage our Scope 3 emissions, we can gain insights into our emissions hotspots, we can prioritise reduction strategies, we can evaluate supplier sustainability performance, we can inform decision-making in procurement,” he said. “But, perhaps most importantly, we can encourage innovation for more sustainable products.”

Off the back of this in 2023, Clyde & Co implemented a set of sustainable procurement principles which encourage suppliers to adopt its sustainability targets as a minimum before they become obligatory in three years’ time.

He continues: “We have to be a bit more authoritarian with our own supply chain. We have to strike that balance of bringing people on the journey, but also we also have to be a little bit more imposing in how fast they start that journey.”

Patrick’s address — which saw him speak alongside Javier López Gómez, Global Head of Corporate Sustainability at SGS and Mark Jones, Chief Sustainability Officer at THG — circles perfectly back into how Caitlin views Scope 3 emissions, as something all members of supply chains should work on collaboratively to ensure are as low as possible.

Partnerships central to lowering Scope 3 emissions

“Most emissions come from outsourced distribution which is usually in the petrol and diesel for vehicles,” Caitlin shares. “Clearly, businesses can improve this through more efficient use of logistics – having fuller trucks – and through the use of reverse logistics – managing returns and repairs more effectively.”

US retail technology provider Spencer Technologies, for example, uses IFS automation of reverse logistics to ensure its retail customers’ assets and components are serviced as required and reach the right destination. Automation avoids wasted journeys and optimises movement of parts when machinery needs to be picked up, repaired and returned.

She continues: “The difficulty in Scope 3 monitoring is working out how much of a third-party’s emissions an organisation should ascribe to its partners and customers. Achieving this makes cooperation essential. Everyone is reliant on data from their partners to fill in the picture – which places a high premium on collaboration.

“What we need is standardisation to ensure everyone reports data in the same format to make it more relevant, usable and understandable. All parties in complex value chains should be tapping into databases that already exist and can support hundreds of end-users’ queries. This way you get a single consistent source of data available to those who need it – a data chain.”

But one thing that cannot be overlooked is the complexity of tracking and reporting Scope 3 emissions. With Scope 3 covering emissions from supply chains and outsourcing — a complicated area involving multiple organisations that are likely to collect data in different ways and formats — Caitlin calls for cohesion, with guidance around the specific data needed to be brought forward rather than going off estimates.

“Data is less hard to track once organisations have the solutions in place to give them a full value-chain view of everything they do, including any goods they buy in,” Caitlin says. “The full value-chain view helps disclose areas of high emissions where they can act first. Collecting data is futile unless companies put mitigation and reduction steps in place. Businesses with a heavy transport emissions factor can, for example, use logistics providers who have replaced diesel vehicles with electric equivalents, using more advanced solutions to optimise their deployment, charging, and maintenance.”

How technology enhances Scope 3 reporting and reduction

The intricacies of Scope 3 emissions would remain elusive if it wasn't for technology — typically now driven by AI — as would the means to report it and, as a result, reduce its impact.

AI’s qualities are known to be beneficial when it comes to combating emissions and fostering greater efficiency, but it can also be applied to solutions which can accurately quantify an organisation's carbon footprint.

The impact of these, Caitlin affirms, is huge.

“The implementation of AI will allow for analysis of large amounts of data that organisations can use to improve data quality and standardisation, bringing the information that the various different systems provide together,” she feels. “The technology will also give insights from different data into where firms can achieve efficiency gains and emissions reductions. By linking to financial data, for example, an AI solution will make clear where the most cost-effective path to emissions reductions lies.”

Caitlin states that an AI-driven optimisation engine will continually improve assignment duration accuracy, route planning and scheduling, being able to teach itself based on data it is fed and become increasingly smarter. But this does not mitigate overcoming the challenge of gathering comprehensive Scope 3 data.

Although standards to calculate Scope 3 have changed and become more consistent, the case has emerged that they have also become more stringent. 

As Caitlin explains: “Scope 3 emissions from purchased goods, for example, could formerly be derived from spending as an indicator. This was not, however, very accurate and did not account for fluctuations in cost or inflation.

“Now we need the consumption data to meet the changing requirements. In other words, measurement is now based on activity, rather than just spending. The customer will need to show the carbon that went into making and transporting it. This is an area that is evolving and companies should be ready to obtain and supply greater detail.”

But this does not dampen Caitlin’s spirits when it comes to the future of tackling Scope 3 emissions, with technology leading the charge toward raising awareness and bringing those all-important emissions down.

Caitlin foresees the focus on data and closer collaboration with suppliers continuing to be strong features of emissions monitoring for Scope 3, with organisations needing to continually invest in technology to gather and analyse data.

“This is the only way they can efficiently and effectively meet the requirements,” she concludes. “Technology is required for data management and for understanding what all the data means. Digital technology ensures accuracy in all the emissions factors monitoring and is how organisations achieve supply chain transparency.

“The move towards mandatory reporting to meet regulatory requirements is certain to be a major stimulus because the holding companies at the top of the corporate ownership tree will need to have transparency all the way down their value chains. Even if a company is not in an area subject directly to emissions regulations, it will have to meet the requirements of its owners and shareholders. These will have substantial effects right along the value chain.”

To see the full interview in the magazine, please click HERE.

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