3 insights to help organizations measure, report and reduce scope 3 emissions

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Monica Batchelder, Chief Sustainability Officer, Hewlett Packard Enterprise

• Scope 3 emissions are indirect emissions that occur in the value chain of a company.
• Accounting for scope 3 emissions is a measure of mutual responsibility for our environmental impact.
• Measuring, reporting and reducing scope 3 emissions is a process of continuous improvement.

It’s human nature to wish not to be held accountable for things we cannot fully control. But as climate change persists, we must accept that measuring and reducing emissions for which we are directly responsible is not enough to meet the moment.

Enterprises must view their carbon footprints end-to-end across their value chains, including accounting for emissions generated from activities and assets they don’t control – like those generated by suppliers from sourcing raw materials, or those generated by customers when they power-on your products.

Managing emissions that are not directly created by an organization’s operations – scope 3 emissions – is a difficult concept for many businesses to wrap their arms around. But we’re all interconnected; one business’s indirect emissions are another’s direct emissions. Accounting for scope 3 in one’s carbon reduction efforts is, in a way, a measure of mutual accountability for our collective impact on the environment.

HPE has been reporting and working to reduce scope 3 emissions for over a decade, as they represent 97% of our carbon footprint and are the lynchpin of our plan to achieve net-zero. As Chief Sustainability Officer, I can attest that it isn’t always easy, especially starting out. For those beginning this journey, here are three pieces of advice I can offer.

1. See value creation, not compliance

Helping stakeholders across an organization understand the importance of indirect emissions in your sustainability programme can be a challenge. Often, measurement and reporting of Environmental, Social and Governance (ESG) data is positioned within an enterprise as a check-the-box compliance issue. And, with government requirements for public companies to disclose this data forthcoming around the world, that’s understandable.

Viewing it this way is a missed opportunity. Measuring, reporting, and reducing scope 3 emissions is an opportunity to create value for your business. Customers are increasingly demanding their suppliers have a defined and credible path to net-zero. We’re seeing requests for proposals (RFPs) from customers weighting sustainability criteria as much as 25%. The same is true of institutional investors, who now not only include climate considerations in their investment decisions, but will also use their holdings to force action. Understanding the business case for focusing on scope 3 emissions is critical to getting your leaders to change their mindset.

Beyond making the dollars and cents case, you need to prepare leaders to engage on this topic. Two things can help. First, invest in educating your organization. We’ve done this by requiring a climate training module be completed by all executives at the vice president level and higher, and adding goals related to our net-zero roadmap to executive bonus criteria. Also, buddy-up your salesforce with your sustainability team to engage customers. Creating bespoke customer engagements to demonstrate how your products and services can reduce customers’ carbon consumption will deepen your relationships while making progress on your scope 3 goals.

2. Partnership makes it possible

Large public companies have the resources to devote to measuring and managing indirect emissions. However, many of the entities that are creating those emissions, particularly in the supply chain, often do not. They’re not set up to track and process the information and don’t have the ability to dedicate staff to this practice. And, even if your products have energy efficiency attributes, customers need help optimizing their use.

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What’s the World Economic Forum doing about climate change?

Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.

To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.

The World Economic Forum’s Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.

This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.

Contact us to get involved.

Successful sustainability programmes meet their partners where they are in terms of readiness and give them tools and guidance. The supplier side of the equation is often opaque and extends to all of the entities that provide inputs to your organization’s direct provider of goods and services. To tackle this challenge, we developed a supply chain management programme requiring our suppliers to set science-based emissions reduction targets for their own operations and publicly disclose their emissions and progress annually. Supplier-facing emissions dashboards help users track progress toward their goals and even compare their performance to their peers.

Customers are slightly more straightforward, as the relationship isn’t as layered. A good starting point is developing a workbook specific to your products and services that lays out practical steps that they can take to turn their sustainability partnership with you into ROI. And, make sure that how-to guide provides multiple pathways to engage with you no matter how mature their sustainability programme is. Everyone is in a different place in their journey.

3. Embrace estimates and imperfection

One of the things organizations struggle with in this space is data quality, especially when real time metrics aren’t available from your partners. The idea of using estimates in the context of public reporting, especially when required by government regulators, is unsettling.

It’s OK to have imperfect data as long as you are transparent about that. Leveraging estimates, if that’s what is available to you, is perfectly fine as long as you are honest about your limitations with your stakeholders and, even better, have a roadmap to capture better data in the future. Our carbon accounting guide explains our calculation methodology for our reported emissions. Transparency around the data estimates companies use when calculating scope 3 emissions allows the entire industry to move forward through knowledge sharing that ultimately builds better data.

Measuring, managing, and reporting scope 3 emissions is a process of continuous improvement. But by treating this body of work as an opportunity to create value, forming strong partnerships across your value chain that meet suppliers and customers where they are, and not being intimidated by inherent imperfection, we can accelerate momentum in reducing greenhouse gas emissions for the sake of our planet.