Jeroen, founder of the Radical Collaboration Institute leads the Forbes Councils Sustainability group.
New regulations are requiring companies to include scope 3 emissions in their climate reports. Scope 3 encompasses the biggest contributor to greenhouse gas emissions for most organizations, as it accounts for emissions outside a business’s direct control. These emissions tend to be the toughest to tackle, but accounting for them is also one of the biggest opportunities for reducing your organization’s total carbon footprint.
To better understand the challenges of scope 3 carbon accounting, let’s take a simple example: an office desk from Ikea. To the average consumer or investor, the carbon footprint of this desk might be traced through a simple, linear production journey: Cut down trees, transport raw materials to Ikea factory, use energy to make the product, transport finished desk to showroom. The carbon footprint is then calculated based on the emissions generated from on-site activities and transportation, as well as the emissions generated from purchased electricity.
Unfortunately, that would only cover what is known as scope 1 and scope 2 emissions, which are only small slices of the total emissions pie. Ikea’s reporting for 2021 shows that over 98% of its footprint originated from its value chain, or scope 3. Scope 3 includes all other indirect emissions that result from upstream and downstream activities. For the example of the Ikea desk, emissions also originate from sources such as procurement, production and transportation of materials by Ikea’s supply chain partners, along with the energy they consume, all the way through to the processing of unsold units and end-of-life disposal by consumers.
We must bring scope 3 emissions down rapidly if we are to meet global and national GHG targets and avoid global warming. Business leaders have two options: Either wait until the inevitable is forced upon us, or get ahead of the GHG curve by developing three organizational capabilities, or “muscles.” In my experience, there are three muscles you can develop now to be prepared.
Muscle 1: Get into GHG action.
The reaction of most individuals and organizations when confronted with something unexpected or unwelcome is denial—and there is plenty of denial around scope 3! This can be in the form of willful ignorance, “greenwashing,” endless admiring of the problem or other forms of procrastination, all of which equate to kicking the can down the road. A company might well have the investment power, solution partners and capacity to start addressing its scope 3 emissions now, but if it is only willing to commit to distant targets without also implementing short-term strategies and actions, no real change will occur.
Ikea’s own Head of Climate, Andreas Rangel Ahrens, observed that setting emission goals too far away—to 2040 or 2050—would make them impossible to incorporate into a usable business plan. But “if you set them looking at a five- or ten-year horizon, you can also slice them up and see, based on where we need to be in five, ten years, how much we should achieve in the next three years. And it becomes more tangible for the business as well.”
Consider tackling your scope 3 emissions through a combination of long-range goals realized through shorter-term strategies and actions. Scope 3 targets can be built into business plans, performance targets, operational decision-making and accountabilities across the organization, rather than being vague ambitions that are outsourced to the sustainability department. In my experience, the greenhouse gas (GHG) action muscles in many organizations are underdeveloped, but the key is to commit to a clear training program that starts easily, then builds intensity and ambition as strength increases.
Muscle 2: Measure your total carbon footprint frequently.
In tandem with embedding climate targets and making them actionable, your business should be able to measure its total carbon footprint frequently and accurately, to provide feedback on the effectiveness of actions and to track progress toward targets. This is perhaps the most significant challenge, given the breadth of scope 3 and its reach across activities such as procurement, production and distribution, and product usage from its working life to its fate at end of life. But understanding your total carbon footprint is important, as decarbonization solutions can often be leveraged to reduce emissions across more than one scope.
You will likely need to triage your scope 3 measurement efforts according to the volume of emissions your company produces and focus improvements to your measurement systems on the areas you target for action. Once a measurement system has been established and embedded into decision-making and continuous improvement, the areas that require more robust or accurate measurement should soon become apparent. Like any muscle, it develops strength through usage.
Muscle 3: Work with unlikely partners—including your competitors.
Even after putting Muscles 1 and 2 to work, an organization may still fail to reduce their total carbon emissions significantly or rapidly. This is because many organizations are conditioned to only work with each other through commercial arrangements.
Scope 3 itself is primarily defined around an organization’s relationships with its suppliers, distributors and customers. However, commercial arrangements rarely include explicit GHG considerations and can create barriers to collaboration and the sharing of information due to commercial confidentiality, intellectual property protection and other forms of business risk. Modern-day capitalism also dictates that companies perceive one another as competitors. Yet when it comes to GHG emissions, competitors usually share common issues and opportunities. This means that organizations need to start partnering with others they don’t normally work with—organizations they have no commercial relationship with but with whom they share common GHG objectives, problems and opportunities.
In the long run, building partnerships, knowledge-sharing opportunities and support frameworks between diverse businesses is important if we are to effectively reduce scope 3 emissions. We need to start building those collaboration muscles now and get ahead of the GHG curve.
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