Scope 3: The Overlooked Key to Tackling Corporate Climate Action
by Tim Weiss Co-founder & CEO of Optera
Regulators, investors, customers, and employees all want to know the answer to a few big questions. How hard will it be for your company to adapt to the low-carbon economy? How far along are you on that journey? These questions have little to do with whether you have solar on the rooftop of your headquarters. It's about understanding how you deliver value to the global economy today and whether you can continue to do that in a low-carbon way.
Much of the emissions a company contributes to the atmosphere are not directly under their operational control, but stem from the upstream manufacturing or downstream use of their products. In most industries, these Scope 3 emissions make up a vast majority of their corporate footprint. Therefore, a company cannot answer these hard questions without understanding Scope 3.
The Scope 3 network effect
Your organization’s Scope 3 emissions are someone else’s operational emissions (their Scope 1 and 2). For large companies, this often spans thousands of organizations (suppliers, customers, portfolio companies, etc.). This web cast across corporate value chains creates the single biggest lever for catalyzing action on climate change around the globe.
There may never be regulation that touches every company in the world, but that may not matter because of Scope 3. As long as the largest companies are required to measure, manage, and mitigate their Scope 3 emissions, the ripple effects will cascade out to every company that touches these corporate value chains. We have seen this begin to work via CDP’s supply chain program, where more than 200 companies are requesting carbon data from over 40,000 suppliers. At Optera, we are partnered with the RBA to promote deeper supply chain engagement across the global electronics industry, which may ultimately reach a similar scale.
It’s not the “Wild West”
The problem is that many companies have paralysis around Scope 3. This lack of action is caused by the notion that Scope 3 is the “Wild West” or it is nearly impossible to measure, let alone manage. This idea is perpetuated because many ESG practitioners are missing the point of Scope 3 altogether.
The solution is to treat Scope 3 like all other big business problems. We must remember that data is not valuable in and of itself. It is valuable when it can inform effective strategy and decision making. Thus, calculating Scope 3 emissions illuminates the largest hurdles to achieving net zero emissions that exist outside of your operational control. It is not about perfect accuracy and never should be.
That said, to make Scope 3 meaningful and actionable you must get past assumptions and industry averages and into direct data. That means quantifying your emissions based on the data from entities within your value chain. You must know which suppliers, products, or customers pose the greatest risk to your decarbonization efforts. Then you can begin to craft an informed strategy and ultimately manage the entities that comprise your Scope 3 emissions.
Direct data is key to actionability, and it already exists
The good news is that there is enough quality data in the world to get started. There are tens of thousands of companies publicly reporting their emissions annually across every industry; this data should serve as the backbone to supply chain calculations. Energy Star collects data from all energy-consuming products sold in the US; this data provides the foundation for downstream product use emissions. These are just a few examples, but ultimately you must remember that your Scope 3 is someone else's Scope 1 and 2. Your job is to figure out which entities and products are the most important and how you can get that data. In doing so, you’ll clarify what Scope 3 means for your organization and make actionable steps towards reducing your emissions.
If you quantify your emissions using as much direct data as possible, important questions bubble up and your decarbonization strategy begins to take shape.
How much of your Scope 3 emissions are comprised of your suppliers’ Scope 1 vs. Scope 2, and how far can renewables get you?
Can you switch away from certain heavy emitting suppliers and commodities?
Are certain suppliers way ahead of others, and can they serve as a model?
Do you need to fund or support R&D efforts with your suppliers to eliminate certain chemical or heavy emitting processes?
Can you vertically integrate some of your value chain (e.g. selling products as a service) to regain some control?
Can you electrify more of your product energy use?
These are the core questions that inform a strategy on Scope 3, and they are all reliant on better direct data from across your value chain.
Science-based targets are based on a simple premise: if every company sets and hits their goal, we will achieve the 1.5 degree pathway. The only way for this to happen is if every large company begins to take Scope 3 seriously and engage with their suppliers, customers, and portfolio companies. Let’s move past the Wild West narrative and into the next chapter where Scope 3 is the lever for meaningful corporate action.
✍️ The Draw-down
Weekly climate art by Nicole Kelner
🍿 The Lean Back
See how Paris is leading a sustainable transportation revolution in the latest from Distilled.
🎙My Climate Journey Podcast
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🌎 Lucas Joppa, Chief Sustainability Officer and Senior Managing Director at Haveli Investments, shared his journey leading Microsoft's overall environmental sustainability vision, strategy, and program execution, plus Haveli’s approach to climate investing.
🪵 Cody talked to John Bissell and Rich Riley, co-CEOs at Origin Materials, a carbon-negative materials company that turns carbon found in biomass into chemical outputs. They covered Origin's theory of change, its technical processes, the market it operates in, and the chemical outputs its customers purchase.
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🗓 May Events
Click the event title for details & RSVP info. For more climate events, check out the #c-events channel in MCJ Slack.
🙌 Climate Career Advancement Meetup: If you are thinking about advancing your career to work in climate, please join us for an hour of learning and networking. (5/10)
🇬🇧 London Energy Meetup: Hosted by MCJ x Intercalation x Energy Revolution Ventures. Come by for a few drinks and talk about everything energy! (5/10)
🚙 Monthly Idea Jams: The theme is transportation. We’ll have two presenters pitch their ideas to the group, and attending community members will provide their feedback. (5/12)
🌲 AMA: James Sedlak - Kodama Systems: James is driving Operations and Community Engagement for Kodama. In this role, he is implementing forest thinning practices with autonomous machines, benchmarking operation productivity, and streamlining coordination between field equipment. (5/17)
📚 MCJ Book Club: Join us for a discussion of Regeneration by Paul Hawken. (5/17)
🍻 Minneapolis / St. Paul Climate Meetup: Whether you're a veteran or looking to transition, come chat about sustainability and climate tech. (5/18)
⚡️ AMA: Jigar Shah - DOE: Jigar Shah is the Director of the Loan Programs Office at the United States Department of Energy. Set your reminders, and get your questions ready! (5/31)
👭 Women in Climate Meetup: Monthly meetup for women who work in, or want to work in, climate. (5/31)
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