The climate crisis is real. Countries, cities, and businesses have begun efforts to reduce greenhouse gases (GHGs), but the past eight years (2015-2022) have been marked by rising greenhouse gas concentrations and accumulating Heat (Preliminary State of the Global Climate, WMO 2022 report). This has resulted in extreme heatwaves, droughts and devastating floods that have affected millions of people and cost billions of dollars this year.
Companies have adhered to protocols to effectively measure their GHG emissions, which are mostly restricted to Scope 1 (direct emissions) and Scope 2 (emissions from direct energy purchases). Indirect emissions from activities outside the organization’s boundaries, such as vendors and suppliers that are external entities but are part of the value chain, are classified as Scope 3. It accounts for about 75% of the industry’s overall carbon footprint and is often ignored.
Scope 3 emissions are more relevant as a company-level measure than a country-level measure. In addition, by mobilizing our collective efforts at the corporate level, we can make a significant contribution to achieving the national net-zero target. “When sectors such as oil & gas and automotive focus on Scope 3, they are able to capture the challenges of real emissions from the industry in the space in use,” said McKinsey & Company Partner and India Sustainability Officer. Mr. Naveen Unni said he is a person. “When large organizations focus on Scope 3 emissions, they work with small and medium enterprises (suppliers/contractors) to help them decarbonise. It helps us identify decarbonization innovations in key sectors.”
Additionally, Unni explains that a company’s (for example, a large organization’s) Scope 3 emissions may be Scope 1 or Scope 2 of its vendor or partner. For example, an automobile manufacturer has Scope 3 emissions in the procurement of steel, while a steel company has Scope 1 or 2 emissions in the production of steel. Other emissions too. It looks simple at first glance, but it’s actually quite complex. The main reason is that many partners and vendors simply do not understand Scope 3 emissions and what exactly they need to do. Furthermore, it is very difficult to obtain data on Scope 3.
“There are challenges when it comes to collecting accurate data on Scope 3 emissions due to the large and geographically distributed supplier base of the organization. It becomes difficult to measure,” explains Anvesha Thakker, Renewable Energy Partner and Lead at KPMG in India. “In many companies, no organizational structure exists to collect and act on data on scope 3 emissions, and functions from all parts of the company need to be involved in this.”
Responding to emissions challenges
So some big companies are taking the lead by taking over the ecosystem along the way. For example, the French multinational Schneider Electric has operations in over 100 countries. Reducing Scope 3 emissions is essential for Schneider Electric to be net zero across its value chain by 2050. “To take this big step forward, we have launched a zero-carbon project with our top 1,000 suppliers to reduce carbon emissions by 50% by 2025. In particular, more than 40 of them are based in India. Schneider Electric India’s President, Corporate Strategy, Sustainability and CSR said 70% of these suppliers are new to decarbonization and Schneider is empowering them through capacity and community building and unique solutions. Added support for travel.
In India, Vedanta, a natural resources conglomerate working in extracting minerals, oil and gas, began reporting Scope 3 emissions two years before the target was set. “We have begun engaging with key suppliers to discuss supply chain sustainability issues and define sustainability criteria in our procurement framework. [such as] Whether it’s safety performance, child labor or energy efficiency, these will be enhanced to accommodate emissions-related work,” said a company spokesperson.
Under the common voluntary reporting framework CDP (a non-profit global disclosure system for investors, corporations, cities, states, and regions to manage their environmental impacts), responding companies will report about 12 in 2021. reported 100 million tonnes of carbon-equivalent emissions. This is largely due to an increase in the number of CDP respondents in 2021 (from 67 in 2020 to 85 in 2021). As a result, Scope 1 carbon emissions increased by 1% to 686 million MtCO2e (tonnes of carbon dioxide equivalent) in 2021, while Scope 2 increased by 34% to 30 million MtCO2e. Scope 3, meanwhile, increased a whopping 249% to 440 MtCO2e. Scope 1 comprised 59% of total emissions in 2021 compared to 82% in 2020. This is because some companies have shifted this into the supply chain by adopting more outsourcing as a policy. This has increased our percentage of Scope 3 emissions from 15% in 2020 to 38% in 2021. The percentage of Scope 2 emissions remained flat at 3%.
And hard-to-reduce sectors dominate Scope 3 emissions in this data, reported by 85 Indian companies in 2021. The largest contribution came from oil and gas, accounting for 64%, transportation equipment at 20%, metal smelting, refining and molding at 7%, and cement and concrete at 4%.
Classification of Scope 3 emissions
Depending on the nature of the organization, many activities contribute to Scope 3 emissions, but the top ones reported in 2021 include business travel, employee commuting, upstream transportation and distribution, purchased goods and Includes services, fuel and energy related activities, and waste produced. Above all, the business in which the company is actively engaged.
Having embarked on its net-zero journey long ago and achieved carbon neutrality in 2020, IT giant Infosys’ Scope 3 emissions, excluding capital goods and T&D losses, are primarily related to business travel and employee commuting. Includes emissions. The company’s strategy for reducing its Scope 3 emissions includes a hybrid working model and optimizing business travel by enabling seamless digital collaboration. “Apart from this, our strategy also includes promoting carpooling, using public transport, promoting electric vehicles (EVs) among our workforce, and shifting our owned vehicles and rental cabs to EVs. Increasing the share of renewable energy in our consumption mix and adopting a lifecycle approach to capital goods will also help reduce our Scope 3 emissions,” explains Nilanjan Roy, CFO of Infosys.
But there is no one-size-fits-all strategy. While the task at hand looks daunting for companies in the service industry, measuring and reducing scope 3 for manufacturing companies is even more difficult due to their large and complex supply chains.
Headquartered in Kolkata, ITC has a diversified presence across industries such as fast-moving consumer goods, hotels, software, packaging, paperboard, specialty paper and agribusiness, with a broad range of scope 1 and 2 emissions over the years. Scope 3 emissions we are working on and with the help of external subject matter experts. ITC has implemented several interventions to address Scope 3 emissions across the agricultural value chain, logistics infrastructure and plastic packaging. To reduce their carbon footprint across the agri value chain, the company works closely with farmers to implement climate-friendly measures such as no-tillage, soil conservation measures, balanced crop nutrition, drip irrigation and large-scale watershed development programs. We promote volatile practices.
“We have implemented the Climate-Smart Village initiative, which aims to build the climate resilience of farmers, and to date covers more than 800,000 acres in 2,500 villages. We have increased net income for farmers of soybean crops in Madhya Pradesh by 93% while reducing volume by up to 66%,” explained Madhulika Sharma, Chief Sustainability Officer at ITC.
Since Scope 3 emissions occur along the value chain, organizations working towards sustainable business practices should also ensure the adoption of sustainability measures by their value chain partners. “Value chain partners should be incentivized to adopt these measures. [and] Sankar Chakraborti, Chairman of ESGrisk.ai and Group CEO of Acuité, said:
Unilever, a British multinational consumer goods company, has set ambitious science-based targets. We are committed to being carbon-free from our operations by 2030 and achieving net zero emissions across our entire value chain (from materials to point of sale) by 2039. Its Indian arm, Hindustan Unilever Limited (HUL), has started work on Scope 3 emissions. This mainly arises from the materials used and logistics. HUL has identified a subset of suppliers whose materials have the greatest impact on the climate. Under the ‘Unilever Climate Program’, HUL will bring together top suppliers and provide access to practical guidance and tools to help them measure, report and reduce their emissions to accelerate their climate commitments To do. A HUL spokesperson said, “We are exploring cutting-edge technologies such as carbon capture technology to reduce the carbon footprint of materials on the supplier side.”
long way to go
Industry experts reveal that scope 3 is in its early stages globally. This is where Scope 1 and Scope 2 were five years before him. And while companies are starting to focus on Scope 1 and Scope 2, there is a compelling need to push Scope 3 forward. Even the most advanced countries and sectors are beginning to call for scope 3 targets and actions.
“Indian companies have also started doing this, but we are more aggressive if our customers and regulators in our major export markets are pushing this forward. We expect measurement, aspirations and plans of action to become more of an expectation than an exception,” adds McKinsey’s Unni.
But in reality, when companies start looking deeper into Scope 3, its sheer complexity becomes apparent, especially when looking at sustainable materials, sustainable transportation and logistics, and more. A lot of effort is needed for each element to become truly sustainable, and once it is achieved, it will start moving towards decarbonization. But the world is in a climate emergency as he has just over six years left to limit global warming to 1.5 degrees. Aggressive affirmative action towards Scope 3 could help avert a climate catastrophe.
@nidi singal
