An enterprise’s environmental footprint extends far beyond the confines of the organization, and companies aiming to make significant strides in emissions reductions can’t abdicate responsibility for their indirect operational impacts.
When it comes to greenhouse gas emissions, Scope 3 — or emissions not directly owned by the enterprise — can be more than 11 times higher than direct operational emissions, according to the CDP 2021 Global Supply Chain Report.
Despite the greater impact, these indirect emissions have been historically overlooked.
McKinsey & Company reported that 74% of currently disclosed emissions targets are from companies working to reduce emissions close to core operations — Scope 1 and Scope 2. By contrast, just 26% are aimed at reducing Scope 3.
Scope 3 emissions — like those resulting from supply chain operations — are much more difficult to monitor and control, partially for a large enterprise.
Still, with Scope 3 accounting for more than half of most companies’ total GHG emissions, the endeavor is more than worthwhile but vital in the effort to limit global warming to 1.5 degrees Celsius.
Given the challenges, how can large companies actually move the needle on Scope 3 emissions? We examine three paths of action.
1. Collecting the right data
Data plays a crucial role in setting any climate target, and for Sharon Vidal, Senior Director of Corporate Social Responsibility and Sustainability at Illumina, it was invaluable.
During an ESG & CSR Board panel discussion, “The Climate Crisis: Taking Action at the Enterprise Level,” Sharon shared how the company assessed all 15 Scope 3 categories — employee commutes, and capital goods, to name a few — to get a glimpse at what the largest emissions categories were for the company.
Like most enterprises, Sharon said Illumina found that the vast majority of its greenhouse gas emissions emerged from its value chain.
“We found looking holistically across our full footprint that 87% of our greenhouse gas emissions are in our value chain,” Sharon said. “Overall, the impact of how we can make a change is going to be in that broader category.”
According to Sharon, Illumina wanted to follow The Science Based Targets initiative [SBTi] framework, a credible international source that can help provide definitions and draw boundaries and is often considered the gold standard of climate target setting.
The team took a closer look at Scope 3 emissions to narrow down its largest contributors, which Sharon said were primarily purchased goods, capital goods, and transportation and logistics.
With a more narrow focus, Illumina was able to set key initiatives to drive reductions in these specific areas, including design plans that enabled the company to transport products with lower emissions.
“Once we defined those material categories, then it turned into action, and having the data again was really helpful to show where we’re going up in terms of the environmental footprint and how and where we should reduce it. It was holistic, and it included leadership across many, many functions,” Sharon said
2. Engaging your suppliers
The initiative to reduce enterprise Scope 3 emissions may begin in-house, but it can’t stay there. In order to make significant strides in decarbonization, companies need to proactively partner with suppliers and vendors.
However, this can be a challenging task as each supplier will likely be at a different maturity level as it relates to environmental, social, governance, and emissions reductions.
Jami Haaning, Director of ESG at Lam Research, shared during the ESG & CSR Board panel how the company developed a supplier engagement strategy.
She said one of the first steps Lam Research took was to launch a public climate pledge asking supplies to join in on their sustainability journey. Jami called this a larger, “We’re all in this together” message.
Much like Sharon, Jami shared that Scope 3 accounts for roughly 98% of the brand’s total emissions footprint, and the team spent the past two years assessing its suppliers to determine their current capabilities and areas where they may need additional support.
This assessment began by launching a survey in 2022 to collect more granular greenhouse gas data from key suppliers. The results — once received — will better inform the team’s overall supplier strategy.
“Based on that, I think we’ll refine our strategy and figure out which suppliers we want to target first. And then, what kinds of additional support or resources do we want to offer,” Jami said.
To better support suppliers, the company is in the process of developing science-based target training and has already distributed resources on greenhouse gas emissions accounting to its suppliers.
Jami said it’s likely some suppliers will already be fairly sophisticated in these areas, while others may need more hands-on assistance, which Lam Research is willing to offer.
3. Benchmarking with other sustainability leaders
It’s no secret that there’s a great deal of newness and evolution in the corporate sustainability space, and companies are constantly developing creative ways to reach their climate and ESG goals.
Benchmarking strategies with other senior-level sustainability and social impact leaders can be an invaluable tool in accelerating your own program, especially when it comes to Scope 3 challenges.
During the ESG & CSR panel, Jami shared, “I’m bolstered by hearing the experiences of my fellow panelists, and I think it’s just a good reminder that we’re all in the process of figuring this out.”
Running a corporate sustainability program can be equally rewarding and challenging, but leaders like Jami Haaning, Sharon Vidal, and many others have a confidential community of trusted peers they can turn to in the ESG & CSR Board.
