By Lena Milton
When we think about lowering a company’s climate change impacts, we typically look at its direct emissions—the products they produce, the materials they use, the amount of energy a company building consumes. The reality, though, is that the majority of companies’ emissions stem from their indirect sources.
Scope 3 emissions are all of the emissions that occur indirectly from a company’s value chain. They include all of the impacts that happen both downstream and upstream of product creation, including resource harvesting, refinement, distribution, and product disposal. These impacts are rarely reported by companies, and in most cases, companies are not aware of the full impacts of their Scope 3 emissions.
This article examines the major sources of Scope 3 emissions and seeks to find areas of mitigation that will help companies improve their environmental impacts as well as benefit their overall business practices.
As we race towards a carbon-neutral 2050, businesses will need to examine every aspect of their value chains. Studies show that 20% of businesses lack data on their suppliers’ suppliers, and even fewer can track their entire network chain. In order to fully evaluate and reduce Scope 3 emissions, businesses must first be able to identify all areas of concern.
A company’s value chain encompasses all of the processes that occur upstream and downstream of a company’s immediate activities. The value chain is where the majority of emissions and environmental impact occur in most businesses, and is rarely targeted as an area of mitigation.
Upstream emissions include all emissions stemming from suppliers’ products and services. Downstream emissions include all those that occur after the product has left the hands of the company.
The upstream emissions come from a variety of sources, including:
- Product manufacturing
- Resource harvesting
- Resource refinement
- Material transportation and distribution
Downstream emissions typically include:
- Transportation and distribution
- Processing and packaging of sold products
- Use of sold products
- Products’ end of life treatment and disposal
These sources can have tremendous impacts on GHG emissions. Shipping alone produces an average of 1 billion tons of GHG emissions globally. Unfortunately, these sources are often overlooked when companies evaluate their carbon impacts.
Mitigating companies’ climate impacts is an important and powerful aspect of reducing the global threat of climate change. In order to fully reduce companies’ impacts, businesses must fully evaluate and address their Scope 3 emissions.
One of the first steps companies can take toward lower emissions is evaluating their value chains. Few companies enforce supply chain transparency in their businesses, resulting in major sources of emissions going unchecked. Companies can take advantage of manufacturing audits that examine their supply chains and identify areas for environmental and social improvements. Companies can reduce their upstream emissions through:
- Producing goods with sustainable and recycled material
- Minimizing plastic materials
- Minimizing shipping and transportation
- Minimizing manufacturing waste
Improving supply chain quality and other upstream services can drastically improve Scope 3 emissions. Addressing downstream emissions can be more difficult, however.
Companies that provide goods and services should assess the entire lifecycle of their product. Once a product leaves the hands of the company and enters the market, the product still has immense environmental impacts. Companies should seek to mitigate their downstream emissions through:
- Ensuring products are recyclable or biodegradable
- Making products energy-efficient during product usage
- Limiting plastic packaging
- Minimizing toxin usage in products
- Minimizing long-distance distribution
While mitigating Scope 3 emissions may seem like a daunting and expensive endeavor, doing so can have profound impacts not only on the environment, but on the company itself. Mitigating Scope 3 emissions has shown to improve business practices and generate higher long-term revenue and savings. For example, reducing transport distances or choosing a more energy-efficient method of transport often leads to financial savings as well as emissions savings.
Identifying and addressing Scope 3 emissions helps companies become more aware of their indirect business practices, and can in turn significantly reduce their energy consumption and environmental impacts.