Scope 3 emissions: The key to tackling your organization’s sustainability targets

Across the globe, companies are increasingly recognizing the imperative to turn their sustainability agendas into action. 

Notably, a rising number of organizations have embarked on initiatives to curb their greenhouse gas (GHG) emissions. In a tangible demonstration of progress, the Financial Times’ Europe’s Climate Leaders 2024: interactive listing (ft.com) highlights the strides businesses have made in reducing the intensity of their Scope 1 and 2 GHG emissions, respectively produced by an organization’s own operations and the energy it consumes.

However, a critical aspect remains that demands attention: Scope 3 emissions, indirect emissions that occur in the value chain of the reporting company. Scope 3 emissions are the largest driver of many companies' total GHG emissions, often exceeding 70%, driven in particular by Category 1 (Purchased Goods and Services). 

Yet, compared to Scope 1 and 2 emissions, they have historically been more challenging to measure and address. The lack of standardized metrics and the complexity of assessing emissions across the value chain can pose significant obstacles for organizations aiming to tackle Scope 3 emissions effectively.

Addressing Scope 3 emissions is imperative for progress

It's clear that to truly advance sustainability agendas, addressing Scope 3 emissions is paramount. As regulators worldwide intensify their focus on comprehensive GHG reporting, organizations are under increasing pressure to take ownership of their entire emissions footprint. In Europe, the Corporate Sustainability Reporting Directive (CSRD) is progressively rolling out Scope 3 emissions disclosures. 

Beyond regulatory compliance, tackling Scope 3 emissions unlocks a myriad of benefits: 

• Appealing to eco-conscious customers: In today's increasingly eco-aware marketplace, prioritizing Scope 3 emission reduction attracts environmentally conscious clients, enhancing brand loyalty and market share Reputation enhancement: Addressing Scope 3 emissions showcases a commitment to environmental stewardship, bolstering the organization's reputation and credibility among stakeholders
• Employee motivation and engagement: Tackling Scope 3 emissions can foster employee engagement and talent retention, with an IBM survey indicating that 34% of respondents were more interested in working for environmentally sustainable companies; organizations that fail to position themselves as such risk missing out on talent
• Maintaining a competitive edge: Proactively addressing Scope 3 emissions keeps organizations ahead in evolving markets, mitigating sustainability risks and putting them at an advantage to capitalize on emerging opportunities for innovation and long-term profitability
• Strategic adaptation and resilience: Reducing Scope 3 emissions enhances an organization’s resilience by minimizing reliance on carbon-intensive practices and positions them as sustainability leaders

Despite this, many organizations face challenges in translating their sustainability goals into actionable plans. When looking at businesses that have set targets to reduce greenhouse gas emissions, our research shows that only a third of their leaders express confidence in their organization’s ability to meet those targets. 

As a result, efforts often remain confined to high-level statements, with targets pushed as far into the future as allowed by applicable ESG regulations; indeed, 74% of business leaders agree that setting sustainability targets is much easier than achieving them. But the future is quickly approaching. 

The critical next step for organizations aspiring to achieve meaningful progress towards their corporate sustainability goals is to move beyond rhetoric and embrace a proactive approach to sustainability by converting their objectives into executable strategies.

Empowering procurement for sustainable transformation

In this journey, procurement teams emerge as key catalysts for change. Positioned at the intersection of supply chains and sustainability initiatives, Chief Procurement Officers must equip their teams with the vision, skills, and practices to proactively manage the supply base, enabling the delivery of tangible results aligned to the business-level sustainability strategy.

Based on our sustainability improvement work with our clients, we have identified three key elements that set the stage for procurement teams to successfully deliver Scope 3 impact:

1. A digitally enabled tool to measure suppliers’ GHG emissions and identify carbon reduction opportunities

Leverage advanced digital tools that can map and baseline suppliers’ Scope 3 emissions, give visibility over high-impact spend categories, and help you monitor suppliers’ sustainability performance over time and their commitment to near- and long-term science-based targets. These tools empower organisations to scientifically quantify their supplier-related carbon footprint, laying a solid foundation for the development and implementation of targeted sustainable procurement strategies.

2. Well-defined processes and competencies to be agents of change

Develop robust processes and competencies for the procurement function to serve as a catalyst for transformative change. This will require a thorough examination and strengthening of various dimensions of sustainability maturity. 

• Vision and Strategy: Evaluate how well sustainability is integrated within the broader supply chain strategy. Foster buy-in for sustainability initiatives and sustainable procurement practices across all levels of the organization.
• Organization and People: Assess the extent to which sustainability considerations are ingrained within the supply chain structure. Invest in enhancing procurement teams’ knowledge, capabilities, and incentivization mechanisms to drive sustainable outcomes effectively.
• Governance and Processes: Integrate sustainability seamlessly into policies, procedures, and planning cycles. Ensure that sustainability risks and opportunities are systematically evaluated and factored into sourcing decisions. Implement robust mechanisms for measuring and monitoring supplier sustainability performance.
•  Enablers and Reporting: Streamline the measurement and reporting of sustainability performance, ensuring alignment with corporate sustainability objectives. Leverage data integrity and insight-creating tools to facilitate informed decision-making.

3. A best-in-class methodology to build and implement prioritized initiatives

Adopt a structured, fact-based approach for translating sustainability aspirations into actionable plans. This means moving beyond strategy formulation to execution, with a focus on delivering measurable outcomes:

1. Define a roadmap of sustainable procurement initiatives grounded in data insights, addressing areas of risk and opportunity uncovered through digitally enabled supplier data analysis
2. Prioritize initiatives based on their potential for impact and make sure they are aligned to the wider organization’s sustainability goals
3. Implement targeted interventions, including educating suppliers and supporting them in setting metrics to track progress against targets
4. Execute your sustainable procurement strategy plan, employing optimized sourcing practices and proactively managing supplier relationships to drive measurable reductions in Scope 3 emissions

There’s no way around it: to stay ahead of the curve, organizations will have to take on the challenge of Scope 3 emissions. It will be the companies that can effectively leverage procurement as a strategic business partner that will progress organizational sustainability goals from mere talk to concrete results.