Scope 3 for buyers, as a professional buyer it is crucial to understand the different scopes of greenhouse gas emissions as defined by the Greenhouse Gas (GHG) Protocol, especially Scope 3, which is relevant to procurement activities. Here’s a breakdown of Scope 1, Scope 2, and Scope 3 emissions, along with their implications for supply chain management, sustainability reporting, and compliance with regulatory frameworks like the EU reporting directives.’

Scope 1 Emissions

Scope 1 emissions are direct emissions from owned or controlled sources. This includes emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc., as well as emissions from chemical production in owned or controlled process equipment. For a company, these are the emissions they have the most control over and are typically the first area of focus in corporate sustainability efforts.

Scope 2 Emissions

Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. Scope 2 emissions physically occur at the facility where electricity is generated but are accounted for in the emissions inventory of the company that purchases and uses the electricity.

Scope 3 for buyers.

Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization but that the organization indirectly impacts in its value chain. Scope 3 emissions include all sources not within an organization’s Scope 1 and 2 boundary. The Scope 3 emissions for one company are the Scope 1 and 2 emissions of another company.

In the context of supply chains, Scope 3 emissions can include:

• Upstream activities such as the production of purchased goods and services, transportation of purchased fuels, and waste disposal.
• Downstream activities such as the transportation of sold products, processing of sold products by third parties, and end-of-life treatment of sold products.

Examples in Supply Chain:

1. Purchased goods and services: Emissions from the production of goods or services that are purchased by the company in the reporting year.
2. Transportation and distribution: Emissions from the transportation of finished goods from the manufacturer to the end consumer, including intermediate transport stages.

Initiatives to Reduce Scope 3 Emissions:

• Supplier Engagement: Work with suppliers to reduce their carbon footprint through sustainable sourcing criteria, energy efficiency programs, and renewable energy procurement.
• Product Design: Design products that require less energy to produce, use, and dispose of.
• Logistics Optimization: Optimize transportation routes, increase shipment loads, and shift to less carbon-intensive modes of transport.

Connection to EcoVadis Evaluation Method

EcoVadis provides ratings that reflect how well a company has integrated the principles of CSR into their business and management system. Scope 3 emissions are part of the EcoVadis assessment, particularly under the “Environment” theme, which evaluates a company’s actions to reduce the environmental impact of its production processes and products, including the management of carbon emissions across its supply chain. Learn more about Ecovadis in the blogpost “Verifying the sustainability of supply chains“.

Supplier Code of Conduct and Scope 3

The supplier code of conduct can be a powerful tool to influence suppliers’ environmental practices, including their carbon emissions. It sets out the expectations that a buying company has of its suppliers in terms of regulatory compliance, environmental impact reduction (including GHG emissions), labor practices, and ethical behavior. More about Supplier Code of conduct.

Company Sustainability Reporting and EU Reporting Directives

Under the EU Non-Financial Reporting Directive (NFRD), large companies are required to disclose certain information on the way they operate and manage social and environmental challenges. This includes reporting on Scope 1, 2, and 3 emissions. The company’s sustainability report, which includes detailed Scope 3 emissions data, can help stakeholders understand the company’s full environmental impact and measure progress towards sustainability goals. Procurement on Corporate Sustainability Reporting Directive.

Scope 3 for buyers

Managing Scope 3 emissions involves several key activities that directly relate to the professional buyer role. These activities are centered on understanding and influencing the environmental impacts that occur upstream and downstream in the supply chain. Here’s how a professional buyer typically encounters and can proactively manage Scope 3 emissions:

Supplier Selection and Management

A buyer encounters Scope 3 emissions primarily through the procurement choices made. By selecting suppliers that prioritize sustainability, a buyer can ensure that their company’s purchases minimize environmental impact. This involves:

• Assessing Supplier Emissions: During the supplier selection process, evaluating potential suppliers based on their carbon footprint and sustainability practices. This might include reviewing their sustainability reports, carbon disclosures, and EcoVadis ratings.
• Sustainable Sourcing Policies: Implementing purchasing policies that favor suppliers with lower emissions profiles or those committed to reducing their carbon output. This might include prioritizing local suppliers to reduce transportation emissions or selecting suppliers that use renewable energy sources.

Contractual Obligations

Once suppliers are selected, managing Scope 3 emissions extends to negotiating and enforcing contracts that include sustainability clauses:

• Incorporating Emission Reduction Targets: Contracts can require suppliers to achieve certain sustainability benchmarks, such as reducing GHG emissions by a set percentage over the contract period.
• Regular Sustainability Audits: Including terms that allow for regular reviews of suppliers’ environmental performance, ensuring they adhere to agreed-upon sustainability standards.

Collaborative Initiatives

A buyer can also encounter Scope 3 emissions through participation in joint initiatives aimed at reducing emissions across the supply chain:

• Joint Carbon Reduction Projects: Engaging with suppliers to co-develop projects that reduce emissions, such as investments in renewable energy, energy efficiency improvements, or waste reduction programs.
• Industry Consortia: Participating in sector-specific initiatives that aim to standardize and improve sustainability practices across an industry. This can help scale the impact of carbon reduction efforts.

Education and Training

Educating suppliers and internal stakeholders about the importance of reducing Scope 3 emissions and the strategies to achieve these reductions is another critical role for buyers:

• Supplier Training Programs: Organizing workshops and training sessions for suppliers on how to track, report, and reduce GHG emissions.
• Internal Capacity Building: Educating internal procurement teams on the importance of Scope 3 emissions and integrating sustainability considerations into all procurement decisions.

Monitoring and Reporting

Finally, a buyer is involved in monitoring the effectiveness of the sustainability initiatives and reporting on progress:

• Data Management: Collecting and managing data on GHG emissions from suppliers to monitor changes and identify areas for improvement.
• Sustainability Reporting: Contributing to the company’s sustainability report that includes detailed information on Scope 3 emissions as required by the EU’s Non-Financial Reporting Directive (NFRD) and other regulations.

By effectively managing these aspects of the procurement process, professional buyers can significantly influence their company’s environmental footprint, helping to reduce Scope 3 emissions and driving sustainability across the supply chain.

Sustainable Procurement Course by Dr. Aurora Dawn Benton

Sustainable Procurement Course by Dr. Aurora Dawn Benton includes all a buyer needs to know to get started towards a sustainable supply chain.

A procurement expert tasked with guiding suppliers towards sustainable practices, have to understand the pivotal role that procurement plays in driving environmental and social responsibility across the supply chain. This is where Dr. Aurora Dawn Benton’s Sustainable Procurement Course becomes an invaluable resource for both buyers and suppliers. 

The bundle The sourcing engine room – a modern sourcing process is build around three courses presenting the basics of a modern sourcing process. Learn about the key activities when preparing, negotiating and implementing a new improved supply chain.

Learn more at the Ellen McArthur Foundation.

Summary Scope 3 for buyers

Scope 3 emissions in the supply chain can arise from various activities such as the production of purchased goods, transportation of products, and waste disposal. Examples include emissions from the production of goods and services the company buys, and from the transportation and distribution of finished products. Engaging with suppliers to promote sustainability, such as through sustainable sourcing criteria and energy efficiency programs.

Note: Illustration to the blogpost “Scope 3 for buyers – basics you need to know” is created by CHAT-GPT on April 13, 2024.