FAQ: Supply Chain Scope 3 Decarbonization: Why it's Important and How it's Done
Tackling upstream Scope 3 Emissions is no small feat, especially if you’re working with hundreds, if not thousands, of suppliers.
Though challenging, the complexities of decarbonizing your supply chain present a significant opportunity to meet your environmental targets and become a market leader in sustainability. Read on to learn about the advantages of decarbonizing your supply chain, the importance of supplier engagement, and how to reduce your complex Scope 3 emissions efficiently.
Q: Why Decarbonize Upstream Scope 3 Emissions?
A recent report from CDP and BCG found that, on average, it takes between one and three years to disclose your entire supply chain emissions, and between three and five years before any emissions reductions are realized. By working with your suppliers now, you can expect to see the following advantages:
Meet your ESG targets: Effective supplier engagement ensures transparent and accurate emissions data, which is essential for meeting your ESG (environmental, social, and governance) goals and demonstrating your commitment to sustainability.
Become a market leader in sustainability: Enhance your brand's reputation, differentiate your organization from competitors, open new investment and market opportunities, and gain a competitive edge in your industry.
Achieve sustainability rating targets: Effectively managing supply chain emissions can position your business to achieve top sustainability ratings, such as a CDP A rating.
Create long-term impact: A commitment to reducing your environmental impact will encourage others in your industry to follow suit. Set a precedent for responsible sustainability practices and amplify the impact globally.
Q: What are the Risks of not Decarbonizing Supply Chain Emissions?
Depending on where your organization is based and operates, failing to meet compliance standards can do more than harm your reputation. For example, not disclosing your Scope 3 emissions to regulatory frameworks like CSRD can lead to major penalties. Both voluntary and regulatory frameworks are always evolving, so you’ll have a better chance of staying compliant and competitive if you’re actively decarbonizing your supply chain. Other risks include:
Limited supplier data: Transitioning to reduced-emission alternatives requires access to reliable data. Limited data availability hampers the ability to make informed decisions, leading to unsuccessful investments in new technologies.
Struggles with sourcing: Resource scarcity and high demand can increase the costs of renewable energy procurement. Delaying sourcing opportunities now can eventually lead to higher operational costs and supply chain disruptions due to future market vulnerabilities.
Q: How Does Reducing Upstream Scope 3 Emissions Work?
Reducing Scope 3 Category 1-4 emissions starts with engaging your suppliers and encouraging them to switch to renewable energy alternatives. This process involves setting clear and realistic targets, mapping out your supply chain to identify key emitters, and providing continuous support and incentives. Plus, by actively guiding and supporting your suppliers, you can drive higher renewable energy adoption rates.
Q: Why is Supplier Engagement Important?
Your suppliers play a vital role in decarbonizing your upstream Scope 3 emissions. Effective supplier engagement enhances your ability to manage and reduce emissions through accurate data collection, enabling you to adapt to regulatory demands, drive innovation, and make data-driven decisions while minimizing risk.
Engaging suppliers not only ensures better compliance but also allows them to improve their own ESG status and meet their sustainability targets, creating a win-win situation for all parties. Build stronger partnerships, gain visibility into the scope and quantity of your suppliers’ emissions, and reduce environmental impact across your entire supply chain.
In Summary
Over 90% of a business’s emissions can stem from its supply chain, and while the number of corporations tackling them has grown, too few are acting on their Scope 3 emissions or are unaware of the action they can take. As of 2022, just four in 10 corporations engage their suppliers on climate-related issues.
The time to start reducing your upstream Scope 3 emissions is now. With ACT’s Supply Chain Program, your organization can lower its emissions, hit SBTi targets, report in line with CDP, and other evolving compliance regulations, and become a market leader in sustainability.