(Adapted from the GreenBiz article, extra explanation added)
With “science-based targets” (SBTs), companies voluntarily set dramatic greenhouse gas emission reduction goals for the next 5 to 15 years. SBTs require a company to apply goals to its own operations as well as its supply chain, where supply chain emissions are significant (spoiler: for most organizations, supply-chain is significant). Supply chain emissions are also referred to as “Scope 3” emissions in the GHG tracking realm.
If you and your company are publicly committing to SBTs, it is critical to think through 1) how you’re quantifying your Scope 3 baseline, and 2) how readily you’ll be able to track progress toward goals. As sustainability teams that have grappled with greenhouse gas management know, there are a wide range of approaches to quantify Scope 3 baseline. Those include:
1. Estimates based on purchasing dollars. The assumption is that for every dollar you purchase of printer paper, cleaning chemicals, coffee, or any other purchase, there is some amount of GHG that is generated. Find the right stat for what that amount is, and you can use your purchasing records to come up with supply chain footprint.
2. Estimates based on life-cycle analysis (LCA). The LCA approach is similar to the purchasing approach above. (More accurately, the purchasing approach is a simplified form of LCA.) Rather than associate each purchasing dollar with some amount of GHG, each pound of office supplies, ingredient and other purchases are associated with some amount of GHG. LCA tools to calculate GHG can be quite complex, essentially allowing you to model the creation of a given supply, with the results varying depending on supplier production process and more.
3. Collecting actual data on the company’s supply chain. Rather than estimation tools, here you work with your supplier to get data on building energy, transport fuel and other GHG sources used to create the supplies that you buy.
In many (most) cases, it’s hard to get the actual data under option number 3. For example, if you’re a cereal company sourcing rice flour, it’s difficult to actually measure rice patty methane (growing rice generates methane, a potent greenhouse gas) over the growing season. So companies often go with pathways 1 or 2.
Pathways 1 and 2 are fine for generating an emissions number you can report for your Scope 3 emissions, and that emissions number then becomes the baseline that you need to reduce. HOWEVER, those pathways are problematic when you want to measure progress toward your reduction goal.
Consider the following for approach 1: If you are using purchasing dollars, and that data is tied to a GHG/$ metric for a given type of purchase, you don’t need a Ph.D. in math (but if you do have one, super-cool!) to see that there are only three ways to demonstrate improvement (that is, that GHG is lower):
> The company buys less (so the purchasing dollars go down)
> Industry-wide shifts change the GHG/$ metric (so GHG/$ goes down)
> The company sources something different if that’s an option (substituting a purchase with lower GHG/$)
Unless you’re trying to downscale your business, purchasing less isn’t an option, outside of some efficiency improvements, which will play out after you’ve optimized processes and eliminated waste. Making the GHG/$ metric go down goes well beyond the actions of one company. IF shifts in that metric are unlikely to happen within a five-year goal timeline. The only real strategy that’s measurable here is the substitution option: making a purchase that has lower GHG/$.
Your company will run into the same issue when using option B and life-cycle analysis to quantify Scope 3 emissions. Rather than $, you’re using weight, but it’s the same result.
IN PRACTICE, what should happen under any of the options is identification of priorities in your supply-chain where you then work on improvements: more efficient equipment, installing renewable energy, shift fuels, avoid wastage, etc. To measure the impact of that improvement, you have real data: kWh of solar energy produced, kWh of utility energy reduced, etc. IF you used option C and did the extra upfront work to get actual data, you’ll now be able to see how much of that footprint you’ve eliminated, as it’s drawing on the same data. (Yes, year on year comparisons aren’t always completely straightforward due to process changes, et. al, but that challenge is generally surmountable). Your project savings are in sync with that Scope 3 baseline. Project savings identified that way are NOT in sync with options 1 and 2. Purchasing and LCA-generated footprints are completely separate from actual project data.
On the big picture of real world GHG benefit, clearly, advancing GHG reductions with key suppliers is great work to move forward. The fact that you can’t measure those well against your goal isn’t the worst thing in the world. But don’t you want to be able to say you hit your goal, if going through the right actions?
The key lesson: Make sure your methods allow you to track progress toward your goals.
The method by which Scope 3 emissions are measured has real implications for any company setting science-based targets. Do you just need a number to report? Or do you want/need to be able to measure reductions that come from improved actions? If the latter, how do you demonstrate dramatic GHG reductions when the way you measure doesn’t allow for it?
The cleanest way to do the above is by collecting actual supply-chain data, even if it’s painful to go through that effort. Given the difficulties of obtaining that data, though, a valid hybrid approach is to use LCA data to see hotspots and selectively collect data on key GHG sources of concern – particularly as you start working with them on improvements and get better data. You can then adjust your baseline.
Otherwise, going the path of least resistance to come up with Scope 3 numbers just might generate a great deal of resistance later.