The Scope 3 GHG Protocol has become a critical tool for assessing and addressing indirect greenhouse gas emissions in the corporate world. While its primary purpose is to help organizations understand their supply chain’s environmental impact, it also presents a significant opportunity for innovation.
Accounting for Scope 3 emissions involves collecting data from suppliers, which can be daunting. However, this exercise can also reveal valuable insights and innovation opportunities that could significantly reduce a company’s carbon footprint.
Moving from spend-based to supplier-based data collection.
Moving from spend-based to supplier-based data collection is the first step in this process. It allows companies to understand the emissions associated with each supplier, identify areas for improvement, and act. Even if data is limited, immediate action can still be taken, starting with a screening of suppliers and an inventory of the most significant sources of emissions.
Innovation opportunities can arise when companies embark on new projects or collaborate with suppliers to develop new products or processes. This presents a chance to collect better data and improve Scope 3 emissions. Furthermore, understanding the impact of each supplier is essential, as a Tier 4 supplier may have a more significant impact than a Tier 1 supplier.
It is essential to note that Scope 3 is not a perfect system, and data can be aggregated differently on a company level, leading to different conclusions. For instance, Apple’s most considerable Scope 3 emission impact lies with 70% in purchased goods, while Ford’s lies in the use phase (fuel), even though a truck weighs more than an iPhone.
My five key takeaways:
- Prioritize addressing Scope 3 emissions to become more sustainable and gain a competitive advantage.
- Collaborate with suppliers to collect better data and identify areas for improvement in the upstream and downstream supply chain.
- Embrace the circular economy by developing product take-back, refurbish, and repair initiatives.
- Develop innovative low carbon & circular products and processes by collaborating with suppliers and investing in sustainable technology.
- Incorporate circular principles into product design and supply chain management to reduce environmental impact and create new growth opportunities.
Competitive advantage with new business models
The potential for innovation in addressing Scope 3 emissions is vast. Companies that take the lead in addressing their indirect emissions can gain a competitive advantage and develop new, more sustainable business models. For example, they can use innovative technology to track emissions and collaborate with suppliers to develop low-carbon products and processes.
Let’s look at two great examples of companies that have successfully addressed their Scope 3 emissions and reaped the rewards of innovation—as seen on GreenBiz 23.
First is Patagonia’s clothing brand, which has implemented a comprehensive approach to reducing its carbon footprint. Patagonia has focused on reducing the environmental impact of its supply chain, from sourcing raw materials to manufacturing, how the products are designed, and shipping products.
How to reduce its Scope 3 emissions significantly
Through collaboration with suppliers and the development of innovative products, and energy-efficient production techniques, Patagonia has reduced its Scope 3 emissions significantly. The company has also implemented a circular economy approach by encouraging customers to repair, reuse, and recommence their products, reducing their environmental impact.
Another example is IKEA, which has set ambitious sustainability goals, including becoming carbon neutral by 2030. The company has taken a holistic approach to addressing its Scope 3 emissions, focusing on renewable energy, sustainable materials, and reducing waste. IKEA has also collaborated with suppliers to develop low-carbon products, such as energy-efficient LED lighting.
Furthermore, IKEA has embraced the circular economy by developing product take-back programs and recycling initiatives. The company has also invested in renewable energy, such as wind and solar power, to reduce its environmental impact further.
Patagonia and IKEA demonstrate that addressing Scope 3 emissions presents significant innovation opportunities and can lead to a competitive advantage. By embracing the circular economy and collaborating with suppliers, companies can develop new, sustainable products and processes while reducing their carbon footprint.
Becoming more sustainable
Let’s conclude: addressing Scope 3 emissions is essential for any company to become more sustainable and gain a competitive advantage. By following the examples of Patagonia, IKEA, and the like, companies can take a holistic approach to reducing their environmental impact, embracing the circular economy and collaborating with suppliers to develop innovative solutions. Ultimately, these efforts will benefit the planet and lead to cost savings, increased efficiency, new business, and customer loyalty.
As an innovation services firm, INDEED believes innovation is critical to reducing Scope 3 emissions. By incorporating circular principles into product design and supply chain management, companies can reduce their environmental impact and create new opportunities for growth. It’s time to act and shift our focus to the entire value chain, not just our immediate suppliers or downstream recycling.
Let’s work together to create a more sustainable and circular future.
Karel J. Golta
CEO + Founder