Beerens’ point was one of several made on how teams can more effectively reduce scope 3 emissions across their businesses. Existing outside an organisation’s direct operations and in its wider value chain, scope 3 impacts represent most of the average company’s impact on the environment – but are also the most difficult to address.
While each organisation participating in the Accelerator is making strides towards reducing their scope 3 footprint, there is recognition that they must accelerate progress if their businesses are to drastically cut their emissions and achieve their corporate ESG targets. There were three main examples and ideas that the participating organisations outlined to achieve faster progress.
Implement an internal carbon price
Internal carbon pricing puts a tangible cost on a company’s emissions and creates incentive structures to develop more sustainable business practices. In the absence of government-mandated taxes on carbon, many companies that attended the Accelerator are now considering implementing such a pricing system.
“Putting a price on carbon will trigger action across the business, instead of only within pockets of it.” – Global Head Sustainable Sourcing, Consumer Goods
There are two dominant types of internal carbon pricing – shadow pricing, where a theoretical price is put on CO2 emissions and used to inform business decisions; and internal carbon taxes, where different functions are taxed according to their CO2 footprint and the funds typically spent on ESG initiatives.
An action for the organisations attending the Accelerator was to determine which type of internal carbon pricing is most suitable for their businesses and plan how such a system can be implemented. In doing so, the aim is to create more urgency around scope 3 across the entire business.
Share supplier ESG data with competitors
Consistency and reliability of supplier ESG data was a recurring theme throughout the session. With the supply chain accounting for 90% of some companies’ environmental and social footprint, addressing issues in the supply base is essential for companies to make progress against their scope 3 targets.
One of the main challenges companies face is obtaining supplier ESG data. To segment suppliers and materials within their supply chain, purchasing teams must first have accurate data on where CO2 is concentrated – but acquiring such information is often slow and inconsistent.
This process could be streamlined if competitors share such supplier data with one another, several participants suggested. The glass supply chain was used as an example – companies purchasing glass will almost certainly be buying from the same group of suppliers. Instead of requesting the same data from these suppliers multiple times, companies could align on their ESG standards and coordinate requesting the data just once.
“We don’t seem to have the industry momentum where companies will collaborate so that the data is sent once rather than multiple times. There must be a way where we can simplify this.” –Director Procurement Enablement, Consumer Goods – Food & Beverage
Consider sustainable product re-designs
For consumer companies whose products have a longer lifecycle, the majority of their scope 3 footprint will typically be in consumer use. For one of the companies taking part in the Accelerator, for example, 90% of its emissions are associated with how its consumers use its products.
For these companies, changing the design of products or recipes can have a sharp impact. By factoring CO2 criteria into how these products are designed, companies stand to not only reduce emissions downstream with consumers, but also upstream with suppliers. This is due to the changes that would be necessary in sourcing practices to accomplish the re-design.
Several companies have already started doing this by introducing eco-design requirements to their product launches. This usually entails that the product improve environmental performance in one or more of several areas, such as energy efficiency, packaging, or circularity.
“Pushing responsibility upstream to deliver improvements can take us so far, but changing recipes will deliver faster results and, if you do it right, even attract new consumers and improve top line of business.” – Sustainable Sourcing Director, Consumer Goods – Food & Beverage
Scope 3 is where most companies can most significantly cut their overall emissions. With growing expectations from investors, policymakers, and the public for action on climate change, addressing scope 3 is now a priority concern among businesses. By taking some of the proactive steps outlined during the Accelerator to address this footprint, companies are much more likely to achieve their ESG goals and become more sustainable.