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Measuring & managing Scope 3 environmental impact

For most organizations, the (indirect) environmental impact in the value chain is a dominant contribution to the overall environmental impact. Therefore, for most companies, reducing the scope 3 provides the ‘biggest bang for the buck’ in terms of impact reduction.

Footprinting & LCA

Based on several case studies from our portfolio and external resources, we see that in various sectors, the scope 3 emissions account usually for more than 80% of the total value chain environmental impact.

And although the impact may be indirect, the impact can be strongly influenced by a company’s actions. This includes e.g. product innovations to reduce waste processing impacts and the end of the chain or the use of renewable materials to reduce upstream production impacts.

The following ‘golden rules’ apply to make up for a successful scope 3 reduction program.

First measure, then manage!

Reality is that most organizations are not aware of their environmental hotspots. They simply do not have an idea about the most pressing environmental issues in their value chain.

Hence one of the first steps is measurement. Getting a grasp of the key environmental issues is key for prioritizing your environmental programs and initiatives. Quantification is the cornerstone for a company’s sustainability strategy and the underlying program.

Find a suitable measurement approach

Today, good measurement approaches are available for quantification of scope 3 environmental impact. However, organizations should carefully consider which type of approach to use: it should fit their business characteristics.

For instance, a ‘life cycle assessment approach’ to measuring scope 3 impacts may be a considerable investment to companies with diversified product portfolio’s whereas it is perfectly doable for companies with a specialized portfolio.

For financial institutions that cover a wide variation of industries such an approach is simply not doable and hence banks commonly use an ‘input-output modeling type of approach’. Other organizations, stuck in the middle in terms of business characteristics could typically opt for a hybrid approach.

Consider ‘what-if’ scenario’s & define targets

A baseline measurement provides an excellent foundation. But a measurement should be done to create a Call To Action. So a critical next step is that companies should use their scope 3 measurements to get the company to the next level.

One of the critical things to do is to work on future ‘what-if scenario’s’. So, for instance for a textile company, what would be my environmental impact if I replace this fabric with another fabric with that contains more recycled content and is made with energy from renewable sources? What would typically be the potential impact reduction. Such an analysis provides a basis for decision making and helps to set proper targets for the future. This could also e.g. be scientific targets to assess ‘compliance’ with one of the scenario’s of the Paris agreement.

Performance monitoring

The key to success is to keep on monitoring to see if the chosen scenario delivers the anticipated results. There are several good examples available for companies that have excellent programs in place for monitoring such as Kering and Philips.

More details are provided in the scope 3 GHG protocol, see technical the guidance document. For non-services organizations, most of the upstream impact is commonly coming from category 1 (purchased goods & services), whereas the downstream impact usually comes from category 11 (use of sold products) and category 12 (end of life treatment of sold products).

Author
roeldrost
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