What exactly are Scope 3 emissions?

The term scopes first appeared over 20 years ago in the Greenhouse Gas Protocol, which created a comprehensive global standardised framework to measure and manage greenhouse gas (GHG) emissions. (15) It has now become the most commonly used tool to quantify and measure greenhouse gas emissions. (3)

Scopes are divided into three different types, two of which a company is able to control:

Scope 1 emissions are direct emissions caused by a retailer, such as the operation of stores, regional distribution centers (RDCs) and offices, as well as fuel and energy usage.

Scope 2 emissions are caused indirectly by a company, for example, when they purchase energy to run their stores, offices and RDCs.

Scope 3 emissions are not produced by the company itself but rather those produced by suppliers and after the product has been sold, such as the disposal of plastic bottles from a soft drink company. (4)

However, it might surprise you to learn that Scope 3 emissions account for up to 90% of all emissions in the F&B sector. This means, even if a business completely optimises its own emissions, they have barely even begun to scratch the surface in terms of harm caused to the climate by its product. What is more, they are not controlled by the company and are therefore much more difficult to tackle. (2)

Scope 3 emissions can be further broken down into upstream and downstream emissions. Examples of upstream scope 3 emissions are upstream transportation and distribution, waste generated in operations or business travel and employee commuting. Downstream Scope 3 emissions on the other hand include downstream transportation and distribution, end-of-life treatment of sold products and franchises. (5)

7 Quick Facts about Scopes 1, 2 & 3

1. Scope 1 and 2 are most within an organisation’s control.
2. Scope 3 carbon emissions are harder to track.
3. Scope 3 is often where the impact is. Remember, 90% of F&B company emissions are Scope 3.
4. Businesses also have less control on how Scope 3 emissions are addressed. Suppliers affect emissions through their own purchasing decisions and product design.
5. Reaching net zero means businesses must tackle their Scope 3 emissions. Focusing on the emissions hot spots within easy reach will get companies started on this sizeable task. (7)
6. Companies worldwide must reduce their Scope 3 emissions by approximately 45% by 2030 from the 2010 levels, according to the Paris Agreement. (6)
7. Companies should refrain from “de-scoping”. An attempt to outsource emissions-heavy activities such as manufacturing can damage a brand’s reputation. (8)

How Scope 3 Assessments are a Business Opportunity

Businesses are realising that, aside from helping tackle the climate crisis, analysing their value chain (scope 3) and product’s impact offers great ROI. According to the Carbon Disclosure Project (CDP), in 2020 suppliers undertook activities that reduced emissions by 619 million t CO2e and as a result saved €33.7 billion. (9)

Here are some further benefits for companies who analyse their scope 3 emissions.

1. Mitigate risk and save money

Processes that cause a lot of GHGs are bound to be affected by raising resource prices and new regulations, such as carbon emissions taxes.

2. Create new business opportunities and kickstart innovation

To stay competitive in the face of a changing market landscape focusing on low emissions, companies will have no choice but to optimise their value chain. This can be an opportunity to improve their product design, especially when they work in collaboration with suppliers to innovate low-carbon processes.

3. Respond to increasing pressure

Change is coming. As governments legislate to restrict carbon-intensive production processes and consumer’s demand for sustainable, low-impact products is growing quickly, companies will face pressure from many stakeholders. In 2021, over 200 purchasers leveraged a combined €5.5 trillion in buying power to request environmental data from over 24,000 strategic suppliers. (12) This issue won’t disappear, so it is smartest to meet the challenge head-on and avoid being abandoned by the growing number of sustainability-conscious consumers. (10)

What can businesses do to limit Scope 3 emissions?

1. Begin by conducting a product impact assessment (PIA) or product impact estimate (PIE): If you are unable to access certain information regarding your suppliers emissions, you can still conduct an estimate of the environmental impact of your products. After all, a reasonable estimate with which you can tackle impact hot spots is a better course of action than focusing entirely on the accuracy of your data and as a result not taking any measures to mitigate your impact. We at inoqo offer both PIA and PIE methodology, so if you would like to know more, you will find our contact at the end of this article.

2. Focus on easy emission hot spots: You could evaluate your current suppliers and either choose lower impact partners or partner with your current ones to decarbonise. We at inoqo can help you identify the low-hanging fruit that are easy emission hot spots.

3. Focus on those suppliers who cause 80% of the GHG emissions: Instead of combing through tens of thousands of suppliers, focus on the major offenders, which will make the pool of suppliers to evaluate much smaller. (10)

4. Switch to low-carbon alternatives (when available) when working with suppliers. This can improve your Scope 3 emissions considerably.

5. Appoint someone to be responsible for all company actions. Your company’s leadership team is important to push a decarbonisation agenda so they need to be involved in decisions about your value chain.

6. Collaborate with others. You should consider working with both suppliers and competitors. Communicate to actors in your supply chain that you are working on decarbonising. This can bring much more impactful change. For example, suppliers can consider switching to renewable energy, electric vehicles or even materials for production processes. However, remain open to considering new suppliers if progress is too slow.

7. Integrate the circular economy principle into your product. This reduces unnecessary waste and increases the products’ lifespan.

8. Support your customers on their sustainability journey. Nudge them towards choosing the most sustainable product through education, collaboration, compensation and marketing. We provide a great option to do so easily with our consumer app. Furthermore, provide them with the information they need to correctly dispose of your product. (11)

Hope and Potential for Scope 3 Emission Reductions

While optimising emissions is certainly a highly complex task, it is definitely an important one in order for companies worldwide to make drastic changes and realise net-zero commitments.

However, the number of businesses seeing the need for change is growing. 1,700 companies have set science-based climate targets or committed to do so within two years. In addition, over 700 of these companies are committed to remaining within the 1.5-degree Celsius threshold. (13) In the food sector however, there remains much room for growth. A mere 26 of the world’s 350 largest food and agriculture companies are taking steps to reduce GHG emissions in line with the Paris Agreement. (16)

Yet, while the task ahead of us may seem gargantuan, in fact the necessary change we need could be achieved a lot quicker than one might think.

Let us collaborate on your scope 3 emission reduction!

We at inoqo conduct product impact assessments for F&B brands. This means we can calculate any product’s impact across all three scopes. We can also provide you with suggestions on how to optimise your processes to reduce your emissions as much as possible. Let us guide your business towards a low-impact future.

If you would like to know more about what we can do for you, we would be happy to give you an introduction to our services. Simply write us an email at hello@inoqo.com.