UK companies should begin drawing up plans for how to report Scope 3 greenhouse gas emissions created from their supply and value chains, as the UK government is likely to require all organisations to report these emissions in the near future.
That’s according to Chris Williams, founder and CEO of ISB Global, a software and solutions provider for the waste management sector, who in a new blogpost calls for organisations in the UK of all sizes to take steps to understand their Scope 3 emissions and then put in place the necessary processes to identify and manage them properly as part of the ongoing collective effort to mitigate climate change.
“For most organisations, Scope 3 emissions make up the lion’s share of their emissions – anywhere from 80 to 90 percent or more,” said Williams. “At present here in the UK, only large private companies are required to report their Scope 3 emissions. However, we expect this to change. The UK government will likely legislate for all organisations of every size to report their Scope 3 emissions in the future – smart companies should be preparing for this right now.”
The widely-used international accounting tool, the Greenhouse Gas (GHG) Protocol, categorises Scope 3 emissions as those that are not directly produced by a company itself, and which are also not the result of activities from assets it owns or control. Instead, Scope 3 are emissions that a company is indirectly responsible for, which are generated from both up and down its value chain.
“The bigger and more complex your supply chain, the more emissions will be associated with your organisation,” explained Williams. “Companies that manage, reduce and ideally eliminate their Scope 3 emissions have a significant positive impact on the environment and mitigating the climate crisis. The priority is to properly understand Scope 3 emissions and then put in place the correct processes to identify and manage them.”
As well as reducing the impact on the environment, understanding and measuring its emissions has clear commercial benefits for a company, including:
- Identifying and managing potential risks in the upstream or downstream supply chain
- Determining the value received from current suppliers – and whether there are more efficient alternatives elsewhere
- Finding energy efficiencies that improve margins
- Building a sustainable employee brand and underlining CSR credentials
“Let’s bear in mind as well that stakeholders today increasingly expect and demand organisations to measure and mitigate their environmental impact. Industry regulators plus investors, customers and suppliers increasingly expect transparent reporting from companies regarding their Scope 1, 2 and 3 emissions,” added Williams.
“The key to effective reporting is data,” he explained. “Without accurate data and the appropriate tools to collect and examine it, companies lack visibility of their emissions and their sources. Integrated toolsets that capture, analyse and report on all scope emissions provide the clarity and transparency that’s necessary for precise reporting.”
“What’s also essential is collaboration with partners and suppliers. Accurate, integrated data capture and analysis in collaboration with supply chain partners means organisations can fulfil their environmental responsibilities. Furthermore, a thorough reporting process can uncover opportunities to boost performance, reduce costs, improve profitability – and inspire new ideas as well.
“Operational improvements means companies can be more competitive, offer better products and services to customers, and reduce their Greenhouse Gas Emissions as well,” Williams concluded.