How To Avoid Supply Chain Bottlenecks When Reporting Scope 3

Scope 3 emissions reporting is gaining traction as businesses recognise the importance of managing their carbon footprint.

However, the comprehensive approach to sustainability can introduce new challenges, particularly in the supply chain. Despite these hurdles, Scope 3 reporting opens the door to significant opportunities for innovation and improvement.

Here, we explore how Scope 3 impacts supply chains, highlighting potential bottlenecks and the opportunities that can arise.

PwC emphasise that "Measuring and tracking Scope 3 emissions may be tricky, but companies don’t need to do everything at once to make meaningful progress.

"In many cases, an incremental approach to data collection can ease the burden.

"This means that in principle the agency could, within about ten years, cut its Scope 3 supply chain emissions in half by focusing on just those 20 suppliers." 

Potential bottlenecks in Scope 3 reporting

1. Data collection challenges

One of the primary obstacles in Scope 3 emissions reporting is the complexity of gathering accurate emissions data from suppliers, especially those deeper within the supply chain.

Smaller suppliers or those with less mature sustainability practices may need help to provide precise data, resulting in slowdowns in reporting processes and decision-making.

The further down the supply chain you go, the more difficult it becomes to obtain reliable information, complicating efforts to build a comprehensive emissions profile.

2. Supplier readiness

Not all suppliers have the tools to measure and report their emissions accurately. This is particularly true for smaller suppliers needing more resources or expertise.

The gaps in data collection can cause significant delays in the overall reporting process, creating bottlenecks that can hinder a company's ability to meet its sustainability goals.

Without accurate data, making informed decisions that could lead to meaningful emissions reductions isn't easy.

3. Complexity of calculations

The broad scope of Scope 3 emissions, which covers everything from purchased goods to employee commuting, requires complex calculations.

The complexity can overwhelm existing systems and processes, particularly for companies beginning their sustainability journey.

The need for precise and comprehensive calculations can slow the process, making keeping pace with reporting deadlines and regulatory requirements challenging.

Opportunities for improvement and innovation

Despite these challenges, Scope 3 reporting presents numerous opportunities for companies to enhance their supply chain operations and drive innovation.

1. Focused approach to emissions

To manage the complexity of Scope 3 reporting, companies can adopt a focused approach by prioritising the most significant sources of emissions.

Research has shown that approximately 80% of a company's supply chain emissions come from just 20% of its purchases.

Companies can achieve significant emissions reductions without overwhelming their resources by concentrating efforts on these critical areas.

2. Engaging suppliers for better data

Proactive supplier engagement is critical to improving the accuracy and speed of emissions reporting.

Companies that work closely with their suppliers on climate-related issues are significantly more likely to meet their Scope 3 targets. Suppliers with the necessary training and resources can bridge knowledge gaps and improve the overall quality of the data collected. 

3. Leveraging technology for streamlined reporting

Adopting digital sustainability reporting software can be crucial in reducing bottlenecks associated with Scope 3 reporting.

The tools streamline data collection, analysis and reporting, making it easier for companies to manage the complexities of Scope 3 emissions.

By automating the process, companies can reduce the time and effort required to gather and report data, freeing up resources for other sustainability initiatives.

4. Collaboration and innovation

Scope 3 reporting necessitates new levels of collaboration across supply chains, fostering an environment ripe for innovation.

The collaborative approach can lead to the development of new business models and solutions that reduce emissions and enhance overall supply chain efficiency.

By working together, companies and their suppliers can find creative ways to address shared challenges, turning potential bottlenecks into opportunities for growth and sustainability leadership.

5. Incremental implementation

Companies can manage the complexities of Scope 3 reporting by taking an incremental approach, starting with one or two key emissions categories and gradually expanding over time.

The method allows organisations to build their reporting capabilities at a manageable pace, reducing the risk of overwhelming their systems and processes.

Success in reducing Scope 3 

Several companies have successfully navigated the challenges of Scope 3 reporting, using innovative strategies to reduce their supply chain emissions.

• HP: 80% of HP Scope 3 emissions were concentrated among its 30 most prominent suppliers. By focusing on these critical partners, the company made significant strides in reducing emissions.
• Unilever: Recognising that a substantial portion of its carbon footprint came from customers, Unilever focused on influencing its suppliers upstream, where it had greater leverage.
• Ford: Ford prioritised addressing its largest sources of Scope 3 emissions, particularly those related to vehicle use and supplier emissions, accounting for 75% and 17% of its Scope 3 emissions, respectively.
• Walmart: As a global retailer, Walmart leveraged its scale to drive emissions reductions across its sourcing footprint, engaging millions of customers to promote sustainable practices.
• Mars: Over a five-year period, Mars reduced its Scope 3 emissions by 6% compared to 2015 by engaging with major suppliers, particularly in raw materials and logistics.
  

"Last year, we published our Net Zero Roadmap promising to accelerate our carbon reductions, and with this year's results, we are delivering on our business strategy to continue to grow while reducing our carbon emissions," states Mars CEO, Poul Weihrauch.  

"We still have a long way to go, but we will continue to follow the science and show how a responsible business can both do well and do good." 

The examples above demonstrate the potential of Scope 3 reporting to address supply chain emissions and drive innovation, collaboration and overall supply chain improvement.

By tackling these challenges strategically, companies can turn Scope 3 reporting into a powerful tool for sustainability leadership.

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