- Companies tackle Scope 3 emissions
as it is an essential step towards meeting net zero targets.
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Scope 3 emissions are generated indirectly
by activities other than the usage of fuel
and energy in one zone operations.
According to the Greenhouse Gas Protocol,
there are 15 categories,
both upstream and downstream of the core business,
that relate to Scope 3 activities.
This can be the purchasing of raw materials,
of packaging of services,
and further downstream the usage of transport, travel,
even the treatment of products at the end of their life.
And so, for companies that are further down the value chain,
such as retailers, consumer goods companies,
Scope 3 emissions can account for 75 to 90%
of the total emissions footprint.
Therefore, it is material and it needs to be addressed.
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There are many advantages to addressing
Scope 3 beyond the obvious climate benefits, of course.
As I said, it is an important step
on the pathway to net zero,
but not only from an emissions standpoint.
Addressing Scope 3 brings alignment
amongst leaders of a company,
towards a portfolio of products and services
that better meets consumer expectations.
Now let's be honest, addressing Scope 3 is very hard,
but my experience is that it creates a sense of unity
across all functions of an organization
who come together to solve a very difficult problem.
And this generates creative tension,
which leads to innovation in raw materials,
in recipe design.
It even drives business model innovation.
And undoubtedly, all of this will be
a source of competitive advantage.
Another benefit is that some decarbonization levers
can bring a cost reduction.
For example, removing waste from some processes
or reducing overconsumption, for example, less packaging,
or replacing more conventional solutions
with others that are lower cost.
A good example is utility-scale solar PV,
which today is the cheapest way
to generate electricity in most countries.
Another benefit is that there is
a plethora of public and private funding available.
One example could be the $479 million
of government incentives in the US by the IRA and the IIJA.
And this will make sustainable materials
easier to produce and to access.
Also on regulation, this is evolving.
For example, the European Carbon Border Adjustment
will make materials that are high-emitting
the more expensive option.
So, there are many advantages,
be it developing a portfolio
which is better meeting consumer expectations,
Scope 3 can bring an innovation boost,
which can drive competitive advantage
and there are mechanisms that are being put in place
that will make the economics quite appealing.
2030 and 2050 seem like a very long time from now,
but I would argue we're running out of time.
A few reasons for that:
Given the large share that
Scope 3 emissions have in the overall baseline,
it will take the transformation of the extended supply chain
to meet net zero goals.
This will mean engaging suppliers,
peers, others in the industry,
and coordinating that will take time.
So, starting now is important.
Another reason is that the scarcity
of sustainable resources is real.
There is in recycled plastics alone,
a 45% mismatch between supply and demand
to meet the 2025 targets.
And we see that the competition
for these sustainable resources is increasing.
This is the right time to accelerate.
It can be done effectively
when Scope 3 becomes a strategic priority.
It will take time to see results
and therefore, it'll require
what I call some corporate patience.
The first step is to build a reliable baseline
and identify the Scope 3 emission hotspots
and therefore focus.
It is important to stop the fragmentation
across the hundreds of projects
that may not deliver results on time
and possibly not with the right return on investment.
A second point would be to internalize the need to be bold.
We see this, for example,
in the pharmaceutical industry or in consumer goods,
that making small re-engineering changes of the business
will not be sufficient to meet net zero targets.
Companies will have to make big bold moves
and therefore, starting to plan for that early
will be a big part of the success.
I would advise starting to engage with strategic suppliers,
and particularly, the big emitters
and addressing emissions at the source.
The unlock here will be to move on from pilot projects
onto larger transformation at scale.
It is equally important to start being more collaborative
and forming partnerships with strategic suppliers
to be part of innovation groups and buying groups
in order to be a member of that
broader system transformation and play a part in that.
And then, surely the talent gap in climate is there.
And so my advice would be to start upskilling internal teams
that will be responsible for the Scope 3 transformation
and equipping them with the right skills and tools
to be able to be effective.
And I would even advise extending that support
to a select set of strategic suppliers.
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