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Given the urgency of the climate crisis, it is now more crucial than ever for businesses to understand their greenhouse gas (GHG) emissions and take steps to mitigate them. But, the concept of carbon footprint analysis can feel daunting.
For those that have already established their carbon footprint, they tend to have focussed on their internal emissions (Scope 1&2). This approach, however, may result in businesses overlooking 80%+ of their emission impact (Scope 3 emissions).
To try to demystify carbon foot-printing here’s a quick guide on how it works.
The 3 categorys of GHG emissions are;
Scope 1 | These are direct emissions that originate from sources that are owned or controlled by a business, including burning gas. |
Scope 2 | These are indirect emissions associated with the generation of electricity, heat, or steam purchased and consumed by the business. |
Scope 3 | These are all other indirect emissions that occur across the business value chain, including both upstream and downstream activities. |
Scope 1 & 2 emissions are now commonly measured by a wide spectrum of businesses. Relatively speaking, they are not difficult to measure once recording methods are put in place, primarily through consumption measurement. Scope 3 emissions are however, more complex to measure and account for the great majority of total emissions in most sectors.
So where are the challenges for those who wish to start to measure their Scope 3 emissions?
Measurement Complexity: | Scope 3 emissions can be highly complex and involve a broad range of activities across the value chain. Gathering accurate data can be difficult due to the involvement of multiple stakeholders. |
Data Availability and Quality: | Data on suppliers' emissions can be hard to obtain, especially from smaller or less transparent companies. Additionally, data quality and reporting standards can vary widely. |
Boundaries and Scopes: | Determining the appropriate boundaries and scopes for Scope 3 emissions can be challenging. Different industries or individual businesses may define these differently, making comparisons complex. |
Behavioural Changes: | Scope 3 emissions are often influenced by consumer behaviour and external factors, making them harder to control compared to direct emissions. |
Engagement with Suppliers: | Engaging with suppliers to reduce emissions can be challenging, as they may not have the same level of commitment to sustainability or may face resource constraints. |
Regulatory and Market Uncertainty: | For global or multiple jurisdiction businesses, regulations and market demands for Scope 3 emissions reporting and reduction vary significantly by region and industry, adding an additional layer of complexity. |
Evidence suggests that currently more time is spent analysing the footprint than taking action to reduce it. It is imperative that businesses quickly grasp the concept of greenhouse gas (GHG) emissions, in order that we move to reduce them.
To help with the move to action, let's offer a straightforward principle. Carbon foot-printing is not about achieving absolute precision or obtaining a neat, rounded figure at the end of the process.
It is about the decisions you intend to make based on the insight. It’s all about measure and reduce, measure and reduce……
For most businesses the ‘oh sh**’ moment comes when you calculate your scope 3 emissions. The scale and complexity of getting suppliers to adapt requires collaboration along the entire value chain. If you are a supplier, this type of collaboration comes in language like sustainable sourcing, product redesign, supply chain optimisation, and resilient supply chains. This just means that change is coming.
At Aethr Associates, we recognise that measuring a business’s carbon footprint is just the start. For most businesses, stakeholders such as investors or customers are starting to mandate that carbon footprints are calculated and action plans are put in place. Carbon foot-printing will become normalised over the coming years and we expect disclosure, taxation, investment and consumer decisions to start to penalise lack of action. Equally, if you are measuring and reducing your footprint, you should be able to take advantage of this with customers and consumers, giving the opportunity of higher returns.
So why wait? If you want to be seen as a leader in your peer group then getting ahead on carbon footprint action is a key component of ensuring the long term sustainability of your business.
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