The Three Most Important Actions to Tackle Scope 3 Emissions
Many companies find straightforward strategies to reduce Scope 1 and 2 emissions.
𝐒𝐜𝐨𝐩𝐞 𝟏: Through focusing on both stationary and mobile combustion, organizations can switch to green alternatives or enhance fuel efficiency to lower fossil fuel consumption.
𝐒𝐜𝐨𝐩𝐞 𝟐: The shift towards purchasing greener energy is facilitated by options like Renewable Energy Certificates (RECs) and Power Purchase Agreements (PPAs).
These steps mark tangible progress in corporate decarbonization efforts.
But then, we hit the complex world of 𝐒𝐜𝐨𝐩𝐞 𝟑 𝐞𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐬. With its wide-ranging indirect emissions spanning the entire value chain, the pathway isn’t as clear.
So, what are the three most effective actions to tackle Scope 3 emissions? Let’s delve into them.
Establishing a Climate-Responsible Board
A climate-responsible board is essential for embedding climate considerations into the highest levels of corporate governance and aligning with global sustainability goals. 🌍
But here’s a startling fact:
According to the CDP, only 1 in 3 companies disclosing through CDP have a climate-responsible board—defined as having oversight on climate issues and at least one climate-competent board member.
Why is this so important? Companies with climate-responsible boards are:
4.8x more likely to have a Scope 3 target
These companies proactively reduce emissions across their supply chain.4.8x more likely to have a 1.5°C-aligned transition plan
They align their strategies with the critical global goal of limiting temperature rise to 1.5°C.3.4x more likely to include climate requirements in supplier contracts
Climate-responsible boards extend climate considerations into supplier relationships.3.8x more likely to collaborate with suppliers
They foster partnerships to develop low-carbon products and innovate across the supply chain.
Beyond setting targets, climate-responsible boards play a crucial role in steering and tracking progress. They integrate climate KPIs into management performance assessments, ensuring accountability and protecting shareholder value by mitigating financial, regulatory, and reputational risks associated with climate change.
A climate-responsible board is a key driver of effective climate action, especially in managing Scope 3 emissions. By embedding climate oversight at the board level, companies can more effectively navigate sustainability challenges and align their value chain with global climate goals.
Enhancing Supplier Engagement
Supplier engagement is crucial for any meaningful action on Scope 3 emissions. It directly impacts the emissions footprint across a company’s entire value chain. 🌍
According to CDP, companies that engage with their suppliers are 6.6 times more likely to have a target and transition plan aligned with the 1.5°C goal set by the Paris Agreement. Yet, corporate action in this area is alarmingly low:
Only 4 in 10 corporates engage with suppliers on climate-related issues – This means that a significant majority of companies are missing out on the opportunity to influence their supply chain's emissions.
Less than 9% of corporates collaborate closely with suppliers – Collaboration is essential for driving innovation and implementing effective emissions reduction strategies across the supply chain, yet it is vastly underutilized.
Less than 3% of corporates require suppliers to have set Science Based Targets – Setting science-based targets ensures that suppliers are aligned with the broader climate goals, but very few companies are making this a requirement.
Why this matters:
The supply chain often represents the largest portion of a company’s carbon footprint. Without active collaboration and clear expectations, suppliers may not prioritize emissions reductions, putting your climate goals at risk.
Enhancing supplier engagement is not just recommended—it’s essential. By fostering collaboration and setting clear expectations, companies can ensure their entire supply chain works towards a common goal of reducing emissions and mitigating climate risks.
Adopting Internal Carbon Pricing
Adopting an internal carbon price (ICP) is a powerful tool for embedding climate considerations into every aspect of a company’s operations. 🌍 It ensures that the true cost of carbon emissions is factored into decisions, from capital investments to procurement.
Why is this important?
Companies that implement ICP are:
3.7x more likely to have a Scope 3 target and a 1.5°C-aligned transition plan.
4.1x more likely to achieve this alignment when ICP is mandated across all business decisions.
3.5x more likely to include climate requirements in supplier contracts.
The challenge?
Despite its effectiveness, ICP adoption remains limited and often undervalued. In 2023, the median internal carbon price was just $30 per ton—far below the IMF’s recommended floor price, which ranges from $25 to $75. Setting a low ICP can lead to ineffective decision-making and inadequate climate risk assessment.
The solution?
To maximize impact, companies must align their ICP with global benchmarks like the IMF’s International Carbon Price Floor. Mandating ICP use across all business decisions further embeds climate considerations into corporate strategy.
Appropriately valuing and adopting an internal carbon price is essential for reducing Scope 3 emissions and aligning with global climate targets. It’s a critical step towards sustainable, resilient business operations and supply chains.
Conclusion
Addressing Scope 3 emissions is one of the most challenging yet essential aspects of corporate sustainability. While the path forward may be complex, the actions outlined—establishing a climate-responsible board, enhancing supplier engagement, and adopting internal carbon pricing—provide a clear and actionable roadmap. These strategies not only help reduce emissions but also align companies with global climate goals, protect shareholder value, and build resilient, future-proof businesses.
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If you are enjoying this content don’t forget to follow me on LinkedIn for more updates and insights.
Also subscribe to my YouTube channel for upcoming content—stay tuned for exciting videos! Once we hit 500 subscribers, I'll start transforming all the content into engaging video format. Stay tuned!