On the journey to net zero, it’s not just governments, but corporations that have a meaningful role to play. To date 623 companies have committed to net-zero emissions targets through the Business Ambition for 1.5°C campaign, to limit carbon emissions in line with science-based targets. By implementing a strong net zero strategy, corporates can significantly move the needle on global carbon emissions.
High-quality carbon offsets are an important part of any net zero strategy, as it’s not possible for most companies to completely reduce their emissions to zero. But for these strategies to be most effective, they need to account for not just companies’ direct emissions, but indirect emissions as well – what’s known as scope 3 emissions.
What are direct and indirect carbon emissions?
All emissions that make up a company’s carbon footprint are defined under three categories: scope 1, scope 2 and scope 3. Scope 1 emissions are direct emissions. This covers all emissions that a company produces under its direct control. Examples of these scope 1 emissions are on-site fuel combustion for energy, emissions from company feel vehicles, and any fugitive emissions.
Scope 2 and 3 emissions are both classed as indirect emissions.
Scope 2 covers electricity that is bought and used by a company, as well as heating and cooling. Scope 3 accounts for all other emissions generated by companies’ operations and supply chain. For many corporates – specifically larger, multinational businesses – this can be where the bulk of their emissions can be found. It covers: transport and distribution; business travel; goods purchased in their supply chain – including raw materials; waste disposal; employee commuting and crucially, any emissions that arise from the use of the products that companies sell to customers.
This means that for manufacturing companies, for example, scope 3 emissions would cover all the carbon emissions that are generated within their supply chain. This would include emissions from the purchasing and acquiring raw materials for their products, such as timber, and in the shipping and transport of this material.
Understandably, calculating and accounting for scope 3 emissions can be a challenging task. But there are significant benefits both for the planet and for the corporates themselves who take steps to reduce and offset their scope 3 emissions.
Why do companies need to offset their scope 3 emissions?
There are obvious environmental advantages for businesses who reduce their overall carbon footprint by accounting for scope 3 emissions. The more greenhouse gas (GHG) emissions that are accounted for and offset, the faster net zero goals can be achieved. Yet many of the corporate climate commitments that grab headlines and give businesses sustainability credentials don’t account for scope 3 emissions.
However, measuring scope 3 emissions can have significant positive effects for companies, beyond reducing the amount of carbon they pump into the atmosphere. For starters, saving carbon can also lead to cost savings.
In many cases, the majority of their GHG emissions (up to 90%) are outside their direct operations. By proactively calculating, accounting for and reporting emissions across their entire supply chain corporates can reveal where there are particularly high emissions – what’s known as emissions hotspots and implement more energy efficient, cost effective solutions.
It can also help to identify resource and energy risks within their supply chain, boost their overall sustainability performance and start conversations with employees to positively engage with the ways in which they can reduce their emissions from business travel and commuting.
Improving the energy efficiency of products and services that a corporation manufactures can also future-proof their products against efficiency laws and regulations, whilst giving them a serious competitive advantage as consumers increasingly want to see sustainability as standard in the market place.
The road to net zero
Of course, simply measuring and reducing emissions across scope 1, 2 and 3 are only the first steps in a successful and efficient net zero strategy.
There are many reasons why, even with the most vigorous net zero strategy, corporations may not be able to run their operations at zero emissions. Sourcing the raw materials required for products, transport emissions for their services, or the GHG emissions at the point of use for these products may not be able to be fully eliminated at this stage. The next step is to find and purchase carbon credits equivalent to any unavoidable emissions.
Investing in high-quality carbon offsets to compensate these emissions is key. With the voluntary carbon market growing and diversifying year-on-year, companies have the opportunity to take ownership of their emissions and curate a robust and impactful offset scheme within their business strategy that truly reflects their values. Whether that’s through reforestation and ecosystem protection, low-carbon intensity agricultural practices or clean energy initiatives.
As net zero commitments gather pace, it’s likely that commitments that cover scope 3 emissions will become the standard corporations are held to.
Already there is strong support in favour of ensuring corporations commit to reducing and offsetting the totality of their GHG emissions. Multinational consumer brands, like brewer Carlsberg are taking the lead by account for their scope 3 emissions and take steps to reduce them 15% by 2022, by focusing on their packaging and supply chain. Though this may seem like a small reduction right now, it is an indicator of the importance that scope 3 emissions will play in the future of net zero reporting.
You can contact us if you have any questions about Scope 3 emissions and how to offset same. We will be happy to assist.