Want to tackle your company's carbon footprint? You need to get a grip on supplier emissions. Here's what you need to know:
- Supplier emissions (Scope 3) often make up 60-90% of a company's total carbon footprint
- Only 36% of companies report all three emission types correctly
- New regulations are coming, with the EU starting scope 3 disclosures in January 2024
This guide covers:
- Types of supplier emissions
- Current and future regulations
- How to report supplier emissions
- Calculation methods
- Software tools
- Common challenges and solutions
- Supplier engagement strategies
- Real-world case studies
- Future trends
Key takeaways:
- Focus on big emitters in your supply chain
- Use both spend-based and activity-based calculation methods
- Invest in emissions reporting software
- Work closely with suppliers to improve data accuracy
- Stay ahead of tightening regulations
Quick Comparison of Calculation Methods:
| Method | Pros | Cons | Best For |
|---|---|---|---|
| Spend-based | Quick, needs only financial data | Less accurate | Initial assessments, complex supply chains |
| Activity-based | More accurate, shows specific sources | Time-consuming, needs detailed data | Targeted reduction efforts |
| Combined | Balances speed and accuracy | Can be complex to manage | Comprehensive reporting |
Ready to dive in? Let's get started on mastering supplier emissions reporting.
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Types of supplier emissions
Let's break down the three main categories of emissions:
Scope 1, 2, and 3 emissions
1. Scope 1: Direct emissions
These come from sources a company owns or controls. Think:
- Fuel in company vehicles
- On-site manufacturing
- Chemical leaks
2. Scope 2: Indirect energy emissions
These are from purchased energy:
- Electricity for buildings and production
- Bought steam, heat, and cooling
3. Scope 3: Other indirect emissions
Everything else in a company's value chain. Often the biggest chunk of a carbon footprint:
- Purchased goods and services
- Business travel
- Employee commuting
- Waste disposal
- Transportation and distribution
Supplier emissions' impact on total carbon footprint
Supplier emissions (Scope 3) pack a punch:
- They're HUGE: Often 60-90% of a company's total carbon footprint.
- They're FAR-REACHING: Value chain emissions are typically 5-25 times higher than direct emissions.
"Companies that persist in treating climate change solely as a corporate social responsibility issue, rather than a business problem, will risk the greatest consequences." - Michael E. Porter and Forest L. Reinhardt
This quote nails it: supplier emissions are a core business issue, not just CSR fluff.
Measurement challenges
Tracking supplier emissions isn't easy. Here's why:
- Data headaches: Getting accurate info from suppliers can be tough.
- Supply chain maze: Many suppliers? Multi-tiered chain? Good luck tracking it all.
- Apples and oranges: Suppliers might use different calculation methods.
- Double trouble: Risk of counting emissions twice across scopes.
- Missing pieces: Some suppliers might not track everything.
Current and future regulations
The rules for supplier emissions reporting are changing fast. Here's what SMEs need to know about global standards.
Key rules for SMEs
Big companies face strict reporting requirements, but SMEs are feeling the pressure too:
- UK's SECR impacts SMEs in large companies' supply chains
- EU's CSRD covers businesses with 250+ employees from 2024
- California's SB 253 requires major companies to report Scope 1, 2, and 3 emissions
SMEs aren't directly targeted (yet), but they're caught in the middle. Large clients now often ask for emissions data to meet their own targets.
"The new Corporate Value Chain Standard provides a much needed harmonized global methodology for businesses to measure value chain greenhouse gas emissions." - Kelly Semrau, Senior VP, S.C. Johnson
Global reporting standards
Several frameworks are shaping emissions reporting:
| Framework | Purpose | Scope |
|---|---|---|
| GHG Protocol | Sets emissions accounting standard | Global, all company sizes |
| TCFD | Focuses on climate-related financial risks | UK companies, 500+ employees |
| ISSB | Aims for universal sustainability reporting | Expected global impact |
The GHG Protocol's Scope 3 Standard is crucial for supplier emissions. It covers 15 value chain activity categories and is used worldwide.
What does this mean for SMEs?
1. Be ready to share emissions data with big clients
2. Start tracking your own emissions now
3. Join sustainability groups for guidance
Regulations are moving towards more disclosure, not less. SMEs that act now will have an edge.
"Our work with the GHG Protocol was instrumental in guiding our first efforts towards environmental footprinting." - Dan Pettit, Associate Director of Sustainability, Kraft Foods
As rules tighten, SMEs with accurate emissions data will be in a strong position with large buyers and finance providers.
How to report supplier emissions
Want to manage your SME's carbon footprint? You'll need to report supplier emissions. Here's how:
Collecting emissions data
Get accurate supplier data:
- Target big emitters: Focus on your biggest spenders or highest emitters.
- Use existing tools: Try CDP or RBA's Emissions Management Tool.
- Make your own survey: Build a custom questionnaire if needed.
- Manage data efficiently: Use software to collect and analyze data.
Dell Technologies tracked emissions for 90% of their supply chain (about 300 suppliers) in weeks using Optera's Supply Chain Manager.
Working with suppliers
Get suppliers on board:
- Tell them why it matters
- Train them on measuring and reporting
- Reward good performance
| Approach | What it means | How hard is it? |
|---|---|---|
| Share info | Give out best practices | Not too hard |
| Update rules | Change procurement guidelines | Pretty tough |
| Make it mandatory | Force suppliers to disclose | Really tough |
Checking data and setting goals
Got the data? Now:
1. Double-check it: Compare supplier reports to industry standards.
2. Set achievable targets: Work with suppliers on realistic goals.
3. Keep tabs: Check in yearly to see how they're doing.
P&G wants half their innovations from suppliers, teaming up to cut emissions.
Ways to calculate supplier emissions
Let's dive into the main methods for calculating supplier emissions:
Spend-based method
This method uses your financial data to estimate emissions. Here's the process:
- Gather purchase data
- Identify suppliers
- Find emission factors
- Multiply purchases by emission factors
Example: You spent $420,467 on industrial valves. With an emission factor of 0.24 kg CO2e/USD, your estimated emissions would be:
$420,467 x 0.24 kg CO2e/USD = 100,912 kg CO2e (about 100 tonnes)
Activity-based method
This approach uses specific supply chain data. It's more detailed but requires more effort:
- Collect physical flow data (e.g., fuel used, units sold)
- Find emission factors for each activity
- Multiply activity data by emission factors
Example: You bought 200 kg of integrated circuits and 400 kg of semiconductors:
| Product | Amount | Emission Factor | Emissions |
|---|---|---|---|
| Integrated circuits | 200 kg | 10 kg CO2e/kg | 2,000 kg CO2e |
| Semiconductors | 400 kg | 70 kg CO2e/kg | 28,000 kg CO2e |
| Total | 30,000 kg CO2e |
Combined methods
Many companies use both spend-based and activity-based methods to balance accuracy and practicality.
Pros and cons
| Method | Pros | Cons |
|---|---|---|
| Spend-based | Quick, needs only financial data, good for complex supply chains | Less accurate, doesn't show product differences |
| Activity-based | More accurate, shows specific emission sources, helps target reductions | Time-consuming, needs detailed data, challenging with many suppliers |
| Combined | Balances speed and accuracy, fills data gaps | Can be complex to manage |
The Greenhouse Gas Protocol recommends starting with the spend-based method for your first calculation. This gives you a broad view of your emissions sources. As you refine your process, you can add more detailed activity-based calculations where possible.
Software for emissions reporting
Available reporting tools
There's a bunch of software out there to help businesses track and report their emissions. Here's a quick look at some top tools:
| Software | Key Features | Best For |
|---|---|---|
| Persefoni | Automated data collection, AI analytics, supplier tools | Big companies |
| Greenly | Automated tracking, personalized plans | Small to medium businesses |
| Net Zero Cloud (Salesforce) | Real-time measurement, Salesforce integration | Salesforce users |
| Sweep | User-friendly, real-time data, supplier engagement | Easy-use seekers |
| IBM Environmental Intelligence Suite | Advanced analytics, risk management, comprehensive reports | Data-driven orgs |
These tools help you calculate emissions, create reports, and plan reductions. They're great for staying compliant and boosting sustainability.
Adding tools to your business
Want to use these tools effectively? Here's how:
1. Pick the right fit
Choose software that matches your size and needs. Greenly might be perfect for a small business, while Persefoni could be better for big enterprises.
2. Connect with your systems
Many of these tools can link up with your current software. For example, Net Zero Cloud plays nice with other Salesforce products.
3. Train your team
Make sure your staff knows how to use the new software. Most providers offer training resources to help out.
4. Start simple
Begin by tracking Scope 1 and 2 emissions. Once you're comfortable, move on to the more complex Scope 3 reporting.
5. Act on your data
Don't just collect numbers – use them to set goals and create plans to cut emissions.
Solving common problems
Supplier emissions reporting can be a pain. Let's tackle some common issues:
Handling missing data
Missing data? It happens. Here's what to do:
- Figure out why it's missing. Is it random? Related to other data? Or linked to the missing value itself?
- Pick the right fix:
| Data Type | Fix | Example |
|---|---|---|
| Numbers | Use average | Missing salaries? Use the job role average |
| Categories | Use most common | Missing product type? Use the most frequent one |
| Both | Use AI | Try Random Forests to guess missing values |
- Try different methods. Compare results to see what works best.
Managing complex supply chains
Multi-tier supply chains are tricky. Here's how to simplify:
1. Map your carbon footprint
Do a life cycle assessment. It'll show you emissions across your whole supply chain.
2. Focus on big impacts
Target the worst offenders. Food, construction, and fashion are often big culprits.
3. Work with suppliers
Team up with suppliers for better data. It'll improve your reporting over time.
Helping suppliers with limited resources
Some suppliers might struggle. Here's how to help:
- Train them. Run workshops on how to calculate and report emissions.
- Share tools. Give them easy-to-use software for data collection and analysis.
- Set up support. Create a helpline or team to answer questions.
- Start small. Begin with basic stuff, then ramp up as they get comfortable.
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Creating a supplier engagement plan
Getting suppliers to report emissions is crucial. Here's how:
Talking to suppliers
Be clear about your goals and needs:
- Set specific emissions reduction targets
- Request regular Scope 1 and 2 emissions data
- Encourage joining initiatives like Science Based Targets
Don't just demand - offer support. TDC NET created a tool to measure product carbon impact and helps suppliers reduce emissions over time.
Supplier training and support
Equip suppliers with knowledge and tools:
- Run emissions calculation workshops
- Offer expert sessions for complex issues
- Provide emissions tracking software
Nike's Energy and Carbon Program trains suppliers to measure and cut energy use, including factory visits to identify savings.
Long-term supplier relationships
Build lasting sustainability partnerships:
- Include emissions goals in procurement talks
- Reward target-meeting suppliers
- Collaborate on new emission-cutting methods
P&G aims for 50% of new ideas from suppliers, like developing cold-water detergents to reduce energy use.
Supplier engagement is ongoing. Keep communicating, supporting, and pushing for progress to tackle Scope 3 emissions effectively.
Real-world examples
Let's look at how some big companies are tackling supplier emissions:
Mars
They've cut Scope 3 emissions by 6% since 2015, even while growing. How? By zeroing in on key suppliers in raw materials and logistics.
HP
HP got smart with data:
- Dug into their supply chain numbers
- Found 30 partners causing 80% of emissions
- Focused on these big fish for max impact
Unilever
Unilever's killing it:
- 65% less CO2 per ton since 2008
- Aiming to halve product impact by 2030
- Shooting for net-zero on ALL products by 2039
Ford
Ford knows where to look:
- Car use? 75% of Scope 3 emissions
- Suppliers? 17%
- They'll tackle the rest later
Sodexo
This food company slashed emissions from 790,792 to 624,812 tCO2e. Their secret? Fighting food waste.
Compass
They've cut Scope 3 emissions by 8.5% since 2019. That's nearly 100,000 ktCO2e gone!
What can we learn?
1. Find your big emitters
HP nailed it by focusing on 30 partners causing 80% of emissions. Smart move.
2. Set clear goals
Unilever and Mars have specific targets. It gives suppliers something to aim for.
3. Team up with suppliers
Don't just bark orders. Help them measure and cut emissions.
4. Use data
Numbers don't lie. Use them to spot problems and track progress.
5. Know your industry
Food companies? They tackle food waste. Car makers? They focus on vehicle use.
6. Play the long game
Ford's got it right. Start with the big stuff, but plan to tackle it all eventually.
What's next in supplier emissions reporting
The supplier emissions reporting landscape is changing fast. Here's what's coming:
New technologies
Blockchain and AI are set to shake up emissions tracking:
- Avery Dennison's atma.io platform uses blockchain to track 30 billion items across supply chains, pinpointing scope 3 emissions at the item level.
- AI tools will soon help companies crunch massive amounts of emissions data, spotting trends and cut opportunities.
Right now, only 10% of global firms fully measure and report scope 3 emissions. These tech advances could boost that number quickly.
Changing standards
Reporting rules are tightening up:
- By 2027, the EU plans to roll out Digital Product Passports for textiles, batteries, and electronics.
- Climate reporting is becoming mandatory for big companies worldwide. By 2025, it's expected to cover nearly half the global economy.
Only 25% of reporting companies currently have a climate transition action plan. This number will likely grow as rules get stricter.
What this means for you
1. Invest in tech
Look into AI and blockchain tools. They can save time and boost accuracy.
2. Plan ahead
Start working on your climate transition plan now. Don't wait for new rules to force your hand.
3. Work with suppliers
Help your suppliers get ready too. Remember, 87% of a food company's emissions are scope 3 - mostly from suppliers.
4. Keep learning
Standards are changing fast. Stay up-to-date to avoid falling behind.
The future of supplier emissions reporting boils down to better tech, stricter rules, and closer teamwork with suppliers. Companies that adapt quickly will have an edge.
Conclusion
We've covered a lot about supplier emissions reporting. Here's what you need to remember:
- Scope 3 emissions are huge. In some industries, they make up 99.84% of a company's carbon footprint.
- Only 36% of companies report all three emission types correctly.
- New rules are coming. The EU's starting scope 3 disclosures in January 2024.
- You need to work well with suppliers for good reporting and cutting emissions.
What's next?
Keep pushing forward:
1. Use new tech
Blockchain and AI are changing things. Avery Dennison's atma.io platform tracks 30 billion items, showing scope 3 emissions for each one.
2. Get ready for tougher rules
The SEC's new climate rule is coming in April 2024. Start collecting your supply chain emissions data now.
3. Team up with suppliers
Take a page from Unilever's book. Their Partner to Win Program works with key suppliers to cut emissions through training and tech investments.
4. Set goals
P&G wants 50% of their new ideas from their supply chain. What's your big goal?
5. Join forces
Work with other companies in your industry. It'll give you more power and make things easier across the supply chain.
Extra resources
Key terms explained
Here's a quick guide to important supplier emissions reporting terms:
| Term | Definition |
|---|---|
| Carbon accounting | Measuring and reporting greenhouse gas emissions |
| GHG Protocol | Leading standard for greenhouse gas emissions measurement and management |
| Scope 1 emissions | Direct emissions from owned or controlled sources |
| Scope 2 emissions | Indirect emissions from purchased energy |
| Scope 3 emissions | All other indirect emissions in a company's value chain |
| Carbon footprint | Total greenhouse gases emitted by a company over time |
| Carbon credit | Unit representing one metric ton of carbon dioxide equivalent |
| GHG inventory | Accounting of greenhouse gas emissions and removals within a boundary |
More information
Want to dive deeper into supplier emissions reporting? Check these out:
1. GHG Protocol
The emissions reporting bible. Their Corporate Value Chain (Scope 3) Standard is a must-read for supplier emissions.
2. Carbon Disclosure Project (CDP)
A global system for companies to manage environmental impacts. They've got great stuff on supplier engagement and emissions reporting.
3. Task Force on Climate-related Financial Disclosures (TCFD)
These folks offer recommendations for better climate-related disclosures, including supply chain emissions.
4. Intergovernmental Panel on Climate Change (IPCC)
Want the latest climate science? This is your go-to. It'll help you understand why supplier emissions reporting matters.
5. World Resources Institute (WRI)
They've got tools and resources for carbon accounting, including scope 3 emissions guidance.
FAQs
What is the scope 3 reporting framework?
The scope 3 reporting framework is part of the GHG Protocol's Corporate Value Chain Standard. It's a tool for companies to:
- Spot GHG reduction chances across their value chain
- Keep tabs on performance
- Work with suppliers at the corporate level
It covers 15 categories of indirect emissions:
| Upstream | Downstream |
|---|---|
| Purchased goods/services | Transportation/distribution |
| Capital goods | Processing of sold products |
| Fuel/energy activities | Use of sold products |
| Transportation/distribution | End-of-life treatment |
| Waste from operations | Franchises |
| Business travel | Investments |
| Employee commuting | |
| Leased assets |
Why is scope 3 tough to measure?
Scope 3 emissions are tricky for a few reasons:
1. Data overload
Companies need info from all over their value chain. It's a lot.
2. Resource limits
SMEs often lack the money and people to crunch all that data.
3. Supplier struggles
Getting accurate data from suppliers? Not always easy.
4. Calculation confusion
Different methods can give different results. Standardization is hard.
5. Indirect influence
Companies have less control over scope 3 than their direct operations.
But here's the kicker: The CDP says scope 3 makes up about 75% of a company's total GHG emissions on average. So it's crucial to measure.
To tackle these challenges, companies can:
- Start small with easy data, then improve
- Use industry averages when specific data's missing
- Team up with suppliers for better reporting
- Invest in emissions tracking software
