How Mining Companies Can Tackle Scope 3 Emissions Challenges

The global mining sector significantly contributes to Scope 3 emissions, which are indirect emissions occurring throughout a company's value chain.

The emissions, from the downstream use of products to transportation and supply chain activities, represent a critical area for emissions reduction in the industry. 

Mining directly contributes 4-7% of global greenhouse gas emissions (Scope 1 and 2). However, when indirect Scope 3 emissions are included, the sector's contribution jumps to as much as 28%.

The majority of Scope 3 emissions in mining come from the downstream use and processing of mined products, such as:

• Coal combustion: A significant source of emissions, particularly in power generation and industrial processes.
• Processing iron ore and other metals: Steel and other metals are highly carbon-intensive. For instance, Rio Tinto's Scope 3 emissions from iron ore processing alone amount to 400 million tonnes (Mt) of CO2, which accounts for 65% of the company's total emissions footprint.

While smaller in comparison, the transportation of mined products still contributes significantly to Scope 3 emissions.

The top eight mining companies collectively produce 39.9 million tonnes of CO2 equivalent annually from transportation alone.

Mining involves complex global supply chains, making it challenging to comprehensively track and manage Scope 3 emissions. The sector's extensive reach across multiple industries and geographies complicates efforts to monitor and reduce these emissions effectively.

Decarbonisation challenges and opportunities

Reducing Scope 3 emissions in mining is difficult due to the carbon-intensive nature of many downstream industries that rely on mining products, such as steelmaking and energy production. However, there are significant opportunities for mining companies to impact emissions reduction:

• Influence through product development: Mining companies, as key suppliers of raw materials, can exert influence over downstream emissions by developing lower-carbon products and engaging in partnerships to promote sustainable practices.
• Exploring low-carbon technologies: Many mining companies invest in low-carbon technologies and collaborations to minimise their Scope 3 emissions.
• Investor pressure: Growing investor pressure is driving mining companies to disclose and set ambitious targets for Scope 3 emissions reductions. Around 93% of investors want mining companies to lead in decarbonisation efforts.

Managing Scope 3 emissions presents several opportunities for mining companies to gain a competitive edge:

1. Product differentiation

By reducing Scope 3 emissions, mining companies can offer "greener" products with a lower carbon footprint, potentially allowing them to differentiate their offerings and charge premium prices.

For example, developing low-carbon technologies for processing mined products can increase demand and market share.

2. Meeting customer and investor demands

As sustainability becomes a priority for customers and investors, mining companies that manage Scope 3 emissions effectively can attract more investment and business opportunities, enhancing their market positioning.

3. Enhancing reputation and stakeholder relationships

Addressing Scope 3 emissions proactively demonstrates environmental responsibility, improves relationships with local communities, governments and other stakeholders and potentially reduces regulatory risks.

4. Future-proofing operations

By staying ahead of regulatory changes and market shifts towards low-carbon products, mining companies can position themselves as leaders in the green energy transition, securing future contracts and business opportunities.

5. Supply chain partnerships and innovation

Collaborating with suppliers and customers to reduce Scope 3 emissions can foster innovative solutions and stronger business relationships.

For example, forming joint ventures and R&D partnerships with downstream partners can help develop low-carbon processes.

6. Cost reduction and efficiency

Efforts to reduce Scope 3 emissions often lead to greater efficiency in the supply chain, resulting in cost savings and operational improvements.

7. Access to green finance

Companies with solid Scope, 3 emissions management may have better access to green financing options and lower capital costs.

8. Market expansion

Mining companies can expand into new markets related to the green energy transition by developing expertise in low-carbon technologies and processes.

Steps to leverage Scope 3 emissions reduction

To turn Scope 3 emissions management into a competitive advantage, mining companies should:

• Improve reporting and transparency: Enhance the accuracy and transparency of Scope 3 emissions reporting.
• Engage with suppliers and customers: Collaborate to improve data accuracy and identify reduction opportunities.
• Invest in technology and partnerships: Develop technologies and partnerships to reduce downstream emissions.
• Set ambitious targets: Establish science-based targets for Scope 3 emissions reductions.
• Communicate progress: Communicate efforts and progress to stakeholders.

By adopting these strategies, mining companies can transform the challenge of managing Scope 3 emissions into an opportunity to lead in the transition to a low-carbon future.

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