ABI Research’s latest Sustainability Assessment has analysed the sustainability activities of 10 of the world’s largest industrial manufacturing conglomerates, highlighting the importance of Scope 3 activities – particularly the robustness of data collection and reporting tools – for achieving industrial firm sustainability objectives.
The Greenhouse Gas Protocol defines Scope 3 emissions as all value chain emissions resulting from activities and assets not owned or controlled by the reporting organization. There are 15 Scope 3 categories, although some may not apply to all companies.
According to the Carbon Disclosure Project (CDP), Scope 3 emissions typically account for over 75% of total emissions, with the share often being over 90% for companies in the industrial sector. For Schneider Electric, Siemens, ABB, and Bosch, who were classified as “sustainability leaders”, Scope 3 emissions are over 99% of total emissions.
Alex McQueen, Sustainable Technologies Research Analyst, explained: “Large industrials face many challenges in measuring and reducing Scope 3 emissions, as the process encompasses a wide range of activities from suppliers, consumers, and distributors. Measuring Scope 3 emissions requires dedicated resources, expertise, and specific data collection and management processes.” Large industrial companies may also find it challenging to obtain data from lower-tier suppliers that may not track their CO2 emissions. Additionally, there is no standardized methodology for Scope 3 emissions calculations and disclosures, creating difficulty in assessing the activities of a broad set of suppliers, each using different data collection and reporting methods.
As regulation regarding the disclosure of environmental data becomes more prevalent, companies should prepare by establishing a robust framework for measuring and managing emissions data. As a starting point, industrials with a high proportion of Scope 3 emissions should look to identify all relevant Scope 3 emission categories. After that, supplier engagement is vital, and industrial firms should seek support from third-party organizations, such as CDP Supply Chain and EcoVadis, in requesting and managing supplier emissions data. Companies may also tie requirements to provide environmental data into supplier contracts and set targets for reducing supply chain emissions.
“Investing in digital tools helps automate the collection, monitoring, and reporting of Environmental, Social, and Governance (ESG) data, and they can also improve value chain collaboration. Since Scope 3 emissions calculations require the tracking of vast amounts of data, leveraging digital solutions is crucial for effective emissions management and reporting,” concluded McQueen.