Best-practices-in-Scope3-ghg-management

Value Change in the Value Chain:
BEST PRACTICES IN SCOPE 3

GREENHOUSE GAS MANAGEMENT
Version 3.0
November 2018
Supported by
ACKNOWLEDGEMENTS
This guidance was developed by the Science Based Targets initiative, Navigant and the
Gold Standard.
The Science Based Targets initiative mobilizes companies to set science-based targets and
boost their competitive advantage in the transition to the low-carbon economy. It is a
collaboration between CDP, the United Nations Global Compact, World Resources Institute
(WRI) and the World Wide Fund for Nature
(WWF) and one of the We Mean Business Coalition commitments.
Navigant is a specialized, global professional services firm. Our teams apply experience,
foresight, and industry expertise to pinpoint emerging opportunities to help build, manage,
and protect the business value of the clients we serve.
Gold Standard develops best practice standards to quantify, certify, and maximise impacts
toward the Paris Climate Agreement and the Sustainable Development Goals. Its 1400+
certified projects in over 80 countries have created billions of dollars of shared value from
climate and development action worldwide.
Primary authors:
Alexander Farsan, WWF
Andres Chang, CDP
Annemarie Kerkhof, Navigant
Bence Cserna, WWF
Chendan Yan, WRI
Fernando Rangel Villasana, WWF
Nicole Labutong, CDP
We would like to thank the following people for their contributions to this publication:
Eoin White, CDP
Sarah Leugers, Gold Standard
Students of Utrecht University: Bauke Ketelaar, David van Petersen, Fleur de Haan, Jippe
Beltman, Joyce Swanenberg and Max Uyttewaal The Science Based Targets initiative’s
Technical Advisory Group
Supported by:
Value Change in the Value Chain: Best Practices in Scope 3 Greenhouse Gas Management | 2
Table of Contents
1 Executive summary 5
Highlights 5
Introduction: The need to manage scope 3 emissions 5
About this guidance 6
Best practices in reducing scope 3 emissions 6
Emissions reduction levers 7
How levers interact with each other 7
Future work 7
2 Introduction 8
Global need for emissions reductions 8
Emissions scopes 8
Who is responsible? 9
Company benefits 10
Scope and audience of this paper 10
3 Reducing emissions in scope 3 11
Collecting scope 3 emissions data 11
Formulating ambition 12
Emissions reduction levers 13
Measuring and tracking impact 15
Danone: Enable Recognition of Milk Value Chain Intervention through New Accounting Framework 18
4 Business model innovation 19
5 Supplier engagement 21
Supplier Engagement Framework 21
HPE: Engaging Peers to Drive Sector-Wide Supplier Actions 28
6 Procurement policy & choices 29
7 Product/service design 31
Tennant: Driving Innovations in Product Design to Reduce Downstream Emissions 33
IKEA: Decoupling emissions from growth through circular economy 35
8 Customer engagement 36
9 Operational policies 38
10 Investment strategy 40
11 How levers interact with each other 41
12 Future work 42
Carbon Analytics and Provenance: Applying blockchain to scope 3 emissions calculation and tracking 43
1
EXECUTIVE SUMMARY
HIGHLIGHTS
• Companies must help to prevent the worst impacts There is a growing urgency to reduce GHG emissions
of climate change by reducing their greenhouse gas wherever possible and this includes reducing scope 3
(GHG) emissions as much and as quickly as possible, emissions in addition to scope 1 and 2 emissions.
including reducing value chain (i.e. scope 3) emissions. To date, most companies have been focusing on reducing
Scope 3 emissions often represent the largest portion of emissions under their direct ownership or operational
companies’ GHG inventories. control (scope 1) and from their purchase of electricity,
• This paper describes emissions reduction levers heat and steam (scope 2). Indirect emissions upstream
companies can employ to reduce emissions across and downstream in the company’s value chain (scope 3)
scope 3. are often left unabated. In most sectors these emissions
• Since a company’s scope 3 emissions often overlap make up the majority of a company’s inventory. This
with other companies’ emissions, strategies to reduce differentiation between emission sources for accounting
scope 3 emissions are particularly fertile ground for purposes has often been used by companies as justification
opportunities to identify synergies and collaborate. for not taking responsibility of scope 3 emissions as they fall
Scope 3 emissions reduction efforts by one company outside of the company’s direct control or ownership. The
can therefore lead to emissions reductions in other lack of direct control and difficulty collecting high quality
companies’ inventories. data can create barriers to reducing these emissions.
Scope 3 emissions are also often accounted for by several
different companies, which leads to the question of who is
INTRODUCTION: responsible for reducing them.
THE NEED TO MANAGE SCOPE 3

Despite the challenges of addressing indirect emissions,
EMISSIONS scope 3 not only has huge potential to prevent the
worst impacts of climate change, it can also lead to
In order to mitigate the worst effects of climate change, substantial business benefits. Companies can mitigate
the global community must take swift and systemic risks within their value chains, unlock new innovations and
action to reduce its emissions. At the 21st Conference collaborations, and respond to mounting pressure from
of Parties, nearly 200 countries pledged to keep global investors, customers and civil society.
emissions within a 2°C temperature increase above pre-
industrial levels and pursue efforts to limit temperature
increase to 1.5°C. The business community is responsible There is enormous potential to reduce scope 3
for the majority of global emissions and must do its part to emissions, which would help preserve the rapidly
meet this goal. shrinking global carbon budget. Hundreds of companies
are already setting scope 3 reduction targets, and, dozens
are in line with best practices according to the Science
Based Targets initiative (SBTi), which assesses and
approves corporate emissions reduction targets in line with
climate science.
EXECUTIVE SUMMARY
ABOUT THIS GUIDANCE BEST PRACTICES IN REDUCING

To support the growing number of companies
SCOPE 3 EMISSIONS
committed to address the climate impact of their
It is best practice for companies to set emissions
value chains, this guidance document summarizes
reduction targets and/or set targets to engage
the latest best practices in reducing scope 3
their suppliers to reduce their emissions in line with
GHG emissions by describing different emissions
climate science. The Science Based Targets initiative
reduction levers companies can employ.
provides guidance on setting GHG reduction goals in
Companies using this guidance should have
line with climate science. Best practices in defining
conducted a screening of their scope 3 emissions and
scope 3 target ambition would entail setting targets that
have a robust understanding of the GHG emission
are, at a minimum, in line with the percentage reduction
hotspots in their value chain to enable them to apply
of absolute GHG emissions required at a global level
the different emissions reduction levers discussed
over the target timeframe. Alternatively, the company
below. It is intended for readers who have knowledge
may apply a sector-specific method. Though sector-
of the GHG Protocol accounting standards and
specific methods (i.e. the Sectoral Decarbonization
corporate sustainability practices.
Approach) are designed for scopes 1 and 2, they may
be applied to scope 3 where the sectors and scope 3
categories align, e.g. using transport sector pathways
for a company’s transport and distribution emissions.
Targets should be expressed as emissions reduction
targets on both an absolute (a percentage reduction of
emissions from a base to a target year) and intensity (a
percentage reduction formulated in emissions per an
indicator from base to target year) basis. This provides
information on the ambition of the target in terms of the
absolute tonnes of GHGs being reduced, as well as the
GHG intensity improvements. A further mechanism to
drive emissions reduction throughout the value chain
is engagement targets. The company can commit to
influencing a certain set of actors in their value chain,
e.g. a percentage of its suppliers, to have GHG reduction
targets in place. It is best practice for the targets these
actors set to be in line with climate science as well.
Emissions reduction levers are approaches to reduce

a company’s climate impact. In essence, reduction
levers can be projects, programs, business decisions or
other actions that reduce emissions. The levers outlined
in this guidance, though they may seem diverse in
nature, all either reduce the activity driving emissions,
improve the GHG intensity of those activities, or both.
EXECUTIVE SUMMARY
EMISSIONS REDUCTION LEVERS HOW LEVERS INTERACT WITH

Business model innovation
EACH OTHER
• Put a price on carbon.
These emissions reduction levers work in conjunction
• Increase product lifespans.
with one another, and the interdependency created
• Consider shifting toward product-service systems.
by overlapping scope 3 inventories provides
• Increase efficiency in logistics.
companies with opportunities for collaboration and
innovation. Efforts on multiple fronts can create a
Supplier engagement
virtuous cycle where every company is actively working
• Engage with suppliers so that they reduce their
to reduce emissions in its value chain and benefits from
emissions, ideally in line with climate science.
the efforts of other companies. This also creates more
Identify key suppliers to engage and maintain
robust data to base targets and performance tracking
a collaboration via two-way communication
channels, monitor progress regularly, and create on and helps to create new innovative solutions built
incentives for action. upon a systems perspective of the value chain.
Procurement policy and choices FUTURE WORK

• Continue purchasing the same products, but from
suppliers with lower carbon footprint. “Fourth Wave” technologies such as data analytics,
• Shift toward low-carbon alternatives. smart sensors, and blockchain will help companies
manage their scope 3 impacts by offering powerful
Product and service design insight into complex, global value chains and
• Design products that are more efficient so that will help reduce emissions in new ways. These
lifecycle emissions intensity is lower. technologies are playing an increasingly important
• Integrate circular economy principles in product role in business innovation, and business executives
and service design. agree that implementing new technologies will not only
improve their company’s environmental footprint, but
Customer engagement also its bottom line.
• Engage customers either directly through
education, collaboration or compensation, or
indirectly through company regulation or customer
motivation via marketing and choice architecture.
Operational policies
• Develop operational protocols.
• Launching operational incentive programs.
Investment strategy
• Invest in low-carbon projects and companies and
resilient development, and shift investment away
from fossil fuels, accelerating the transition to a
low-carbon economy.
2
INTRODUCTION
GLOBAL NEED FOR EMISSIONS
REDUCTIONS
At the 21st Conference of Parties, nearly 200 countries order to do its part to achieve climate goals defined
pledged to keep global emissions within a 2°C under the Paris Agreement. The Science Based Targets
temperature increase, compared to pre-industrial initiative’s (SBTi) goal is to make science-based target
levels, and pursue efforts to limit temperature increase setting a standard business practice and have a critical
to 1.5°C. These goals, laid out in what is commonly mass of companies set science-based targets (SBTs) by
referred to as the Paris Agreement, aim to prevent the end of 2020. This collaborative effort - by CDP, the UN
the worst impacts of climate change. To achieve this Global Compact, the World Resources Institute and WWF
monumental ambition, the global community must - has already received commitments from hundreds
take bold action and must do so immediately. Systemic of the world’s largest companies to set their emissions
and widespread change is necessary from all actors. reduction targets in line with climate science. It provides
resources and guidance that companies in nearly every
In addition to countries’ Nationally Determined sector can apply across their emissions scopes.
Contributions (NDCs), a myriad of actors from cities,
states, and regions, civil society organizations,
investors, individuals and companies are laying out EMISSIONS SCOPES
their climate mitigation plans. As of November 2018,
there are over 1,800 companies pledging nearly 3,000 Part of the global challenge is defining responsibility
individual actions and 600 cooperative actions to for the generation of GHGs. The level of influence
reduce emissions according to the UNFCCC’s NAZCA and control each company has over its emissions is
portal. In addition, there are numerous platforms and classified by scopes:
initiatives through which companies can showcase
their emissions reduction efforts, such as We Mean • Scope 1: direct emissions from owned or controlled
Business, the Science Based Targets initiative, Net Zero sources;
2050, Cement Sustainability Initiative, Global Green • Scope 2: indirect emissions from the generation of
Freight Action Plan, Low-Carbon Sustainable Rail purchased energy electricity, heat and steam;
Transport Challenge, Oil & Gas Methane Partnership, • Scope 3: all indirect emissions (not included
WWF Climate Savers and We Are Still In. in scope 2) that occur in the value chain of the
reporting company, including both upstream and
While the companies committed to the downstream emissions.
aforementioned initiatives are demonstrating that they
endeavor to mitigate climate change, the majority of
the private sector still needs to step up its efforts in
INTRODUCTION
Indirect emissions are also often double or triple

WHO IS RESPONSIBLE? counted, with many companies’ value chains
significantly overlapping. One company’s direct
Scope 3 emissions are the largest source of a
emissions can be the upstream and/or downstream
company’s emissions in most sectors, often accounting
emissions of others. This could be used as an excuse
for several times the impact of its scope 1 and 2
for inaction - as one company’s emissions inventory
emissions. In fact, approximately 40% of global GHG
overlaps with those of one or more other companies
emissions are driven or influenced by companies
or consumers, the question of responsibility becomes
through their purchases (i.e. purchased goods and
unclear.
services) and through the products they sell (i.e. use of
sold products).1
At the same time, this overlap creates collaborative
opportunities that increase the likelihood of success in
To date, most companies have been focusing their
both preserving the global carbon budget and meeting
efforts on scopes 1 and 2, where they have more direct
company goals. For example, if two companies request
control. However, as the remaining global carbon
a supplier to disclose to CDP, there is a 68% probability
budget is being rapidly depleted, there is a growing
that the supplier will respond. If three companies send
need to reduce GHG emissions wherever possible. This
a response request, then there is a 76% likelihood they
means also reducing scope 3 emissions (emissions in
will respond. The more requests a supplier receives, the
the company’s value chain).
more likely they are to take action and the more likely
it is for these companies to achieve their shared supply
Companies may see the division of scopes as
chain emission reduction goals.
justification for not taking responsibility for indirect
emissions. Scope 3 emissions do fall outside of the
Companies are already demonstrating that it is
company’s direct control/ownership. It is, therefore,
possible to address scope 3 emissions. Over 2,800
more difficult to collect scope 3 data and the inherent
companies that reported to CDP in 2017 reported scope
control and ownership structure can create barriers
3 emissions, and 26.7% of these companies calculated
to reduce these emissions. However, how scopes
emissions for all categories they consider relevant.
are classified for accounting purposes may divide
emissions and activities in somewhat arbitrary ways
Moreover, 368 companies publicly listed scope 3
when it comes to who should take responsibility for
emissions reduction targets in their 2017 CDP response
reductions. For example, one might expect Apple and
and over 150 companies have had their targets
Samsung to have similar emissions profiles. Yet, since
approved as ‘science-based’ by the Science Based
Apple outsources much of its manufacturing - some
Targets initiative, ~90% of which had scope 3 targets.
of it to Samsung - Apple has a much higher portion of
The opportunity for companies to use their influence
emissions in scope 3 than in scopes 1 and 2 compared
within value chains to act as catalysts for the deep
to Samsung (over 99% and ~61% of total emissions
decarbonization of the global economy is immense,
respectively).2
particularly those segments that other drivers for
reductions have difficulties reaching.
1 Global Supply Chain Report 2018 - CDP

2 Hugh Sawbridge, Dr. Paul Griffin: Technical Annex IV: Scope 3 Overview and Modelling CDP Full
GHG Emissions Dataset 2016
INTRODUCTION
COMPANY BENEFITS
In addition to the opportunity this presents in long-term reduction targets, helping companies to
preserving the remaining carbon budget, there are shift their focus from incremental improvements to
several benefits for companies in reducing scope 3 transformative change.
emissions.
Respond to external pressures
Improve risk & cost management
The GHG-intensive segments of a value chain are Pressure on companies from investors, customers,
inherently more vulnerable to risk from increasing peers, suppliers and civil society to fully measure,
resource prices and a changing regulatory landscape, manage and reduce their impact on the climate
such as increasing production costs of key suppliers, continues to increase. Consequently, reporting and
tightening efficiency standards for products, or taxation reducing scope 3 emissions has become an integral
on carbon emissions. The mapping and mitigation of aspect of reporting frameworks such as the CDP
these risks requires a sophisticated understanding of climate change questionnaire, the recommendations of
key sources, hotspots and drivers of GHG emissions the Task Force on Climate-related Financial Disclosures
across a company’s value chain. In a world committed (TCFD), and initiatives to drive ambitious corporate
to ambitious climate action, a robust system for action like the Science Based Targets initiative and
scope 3 accounting and management is, therefore, WWF’s Climate Savers program.
an essential component of a company’s strategic
risk management, and a valuable tool to proactively
address value chain risks.
SCOPE AND AUDIENCE OF THIS
PAPER
Unlock business opportunities and innovation
To help address the growing need for companies
As the global economy decarbonizes, existing markets to reduce their scope 3 emissions, this guidance
are disrupted and new markets emerge. Staying document summarizes the latest best practices
competitive in this changing landscape means offering in reducing scope 3 GHG emissions by describing
solutions that are fit for a low-carbon world. The map different emissions reduction levers companies can
of GHG emission hotspots created through scope 3 employ. Companies employing this guidance should
accounting can dramatically improve companies’ ability have conducted a screening of their scope 3 emissions
to forecast these changes and thus identify emerging and have knowledge of their value chain hot spots
business opportunities, as well as at-risk business so they can apply the different emissions reduction
segments, early. levers discussed herein. It is intended for readers who
have knowledge of the GHG Protocol and corporate
Taking scope 3 into account also helps companies sustainability practices.
understand their value chain from a systems
perspective, thereby unlocking opportunities for
improved design and collaborative innovation with
suppliers. Innovation is further catalyzed by ambitious
3
REDUCING EMISSIONS IN SCOPE 3
COLLECTING SCOPE 3 EMISSIONS DATA
In line with the oft-quoted adage that “you can’t should pursue an iterative approach to improve the
manage what you can’t measure,” quantifying a accuracy of its scope GHG inventory by collecting
company’s scope 3 emissions is an essential starting more granular and accurate data for emission hotspots,
point for effective management. This paper focuses on using primary data where available. Detailed guidance
emissions reductions, but as an initial step, companies for the calculation of scope 3 inventories is provided
should conduct a scope 3 screening to determine in the GHG Protocol Scope 3 Standard as well as the
which scope 3 categories are most relevant in their supplementary Technical Guidance document. Once
value chain. A number of tools are available for a baseline GHG inventory is established, a company
companies to conduct a scope 3 screening, including should formulate ambition through reduction targets,
a free Scope 3 Evaluator Tool by the GHG Protocol. plan interventions towards achieving those targets, and
Based on the results of the screening, the company finally, measure and track progress against the targets.
Box 1: Avoided emissions
Companies are increasingly interested in quantifying and communicating the GHG impact of
their products in comparison to other products that serve equivalent functions. This comparative
impact is calculated as the difference in total life cycle emissions between the two products. If the
difference is positive, the product has lower life cycle emissions than the reference product. This
positive difference is often referred to as “avoided emissions”.
Avoided emissions should be differentiated from scope 3 emissions, as they occur outside of a
product’s life cycle (e.g. low-temperature detergents, building insulation) and are the result of a
product or service “avoiding” emissions by substituting for a similar, but more carbon intensive
alternative. Scope 3, on the other hand, covers only the emissions directly generated during the
product lifecycle, upstream and downstream of the company. Products that avoid emissions provide
a lower-emissions alternative to those that are more intensive. However, there is currently no
standard to account for these emissions within scope 3.
Any claims made of avoided emissions should be reported separately from a company’s scope
3 inventory. Calculating and communicating avoided emissions should not take priority over
accounting for and reducing emissions directly within a company’s value chain.
FORMULATING AMBITION
Absolute and intensity GHG emission targets emissions increase if intensity reductions aren’t
sufficient to compensate for activity growth. Due to
The most robust approach to formulating an ambition these trade-offs, it is best practice to set both absolute
for the reduction of a company’s scope 3 impact is and intensity targets for maximum transparency.
setting quantitative emissions reductions targets.
These can either be expressed in absolute terms, Where possible, scope 3 targets should be set in line
where the company commits to an absolute reduction with the rate of decarbonization required as defined
of its scope 3 emissions over a defined time frame by climate science. Science-based targets help
(e.g. a 30% reduction in emissions by 2030 from a 2018 companies determine how much and how fast they
base-year), or in intensity terms, where the company need to reduce their emissions to avoid the worst
commits to the reduction of the scope 3 GHG intensity impacts of climate change. The Science Based Targets
of its activities as measured against a meaningful initiative provides guidance and tools to support
physical or economic activity indicator over a defined companies in setting these targets. Their criteria
time frame (e.g. a 30% reduction in CO2e/tonne of and recommendations also define other meaningful
steel produced by 2030 from a 2018 base-year). Both aspects of targets such as their timeframe and
approaches have advantages and disadvantages. boundaries.
From the perspective of preserving the global carbon Engagement and other non-emission targets
budget, the more robust approach is setting absolute
targets. They provide a higher degree of confidence In some cases, challenges in developing sufficiently
that a company’s scope 3 emissions will reduce in line accurate scope 3 GHG inventories that allow the
with the global reductions required by climate science. tracking of progress towards quantitative GHG
However, they sometimes fail to capture a company’s emissions reduction targets lead companies to use
emissions impact relative to its activity. In cases where alternative target formulations to plan and track
companies don’t grow or even shrink in size, the interventions to achieve emission reductions. A
ambition indicated by an absolute reduction target common example of this is supplier engagement
can be misleading as it does not necessarily reflect targets, where companies commit to moving their
improvements in performance. In these cases, a more suppliers towards a specific course of action, e.g.
meaningful way of setting targets is on an intensity to set GHG reduction targets themselves. Further
basis, which demonstrates ambition while taking examples are targets to engage customers to change
increasing or decreasing output into account. Working their behavior or context-specific ambitions that
towards achieving intensity-based targets also often demonstrably lead to scope 3 emissions reductions. For
corresponds more closely with how a company can these alternative target formulations, it is best practice
influence scope 3 emissions, i.e. making improvements to estimate the emissions reductions the targets will
linked to a specific indicator or unit of output. However, correspond to and explicitly include these into the
focusing on emission intensity can mean that absolute target formulation.
Emissions reduction levers
The GHG impact of any activity can be expressed as activity (e.g. the amount of CO2e emitted per km driven
a simple product of two drivers: the activity level (e.g. by a lorry). This relationship is illustrated in Figure 1
the km driven by a lorry) and the GHG intensity of that below.
Activity level GHG intensity GHG impact
Figure 1: Levers for reducing emissions
These two drivers are simultaneously the levers which Many of these reduction measures will have an impact
companies can address to reduce their GHG impact. on several different scope 3 categories. Table 1 below
Any measure to address one or both of these levers provides guidance on which types of measures are
is described as a reduction lever in this guidance. In most relevant for each scope 3 category. Companies
essence, reduction levers can be projects, programs, can use the table below to help identify which levers are
business decisions or other actions, which either most relevant for hotspots in their value chain and learn
reduce the level of activity or improve GHG intensity more about the different levers starting in Section 4.
and result in emissions reductions.
The sections below will discuss these different

categories of reduction levers:
• Business model innovation

• Supplier engagement
• Procurement policy and choices
• Product and service design
• Customer engagement
• Operational policies
• Investment strategy
Table 1: Levers for reducing emissions by scope 3 category
Scope 3 Category Most relevant emissions reduction levers
Supplier engagement, procurement policy and choices,

1. Purchased goods and services
product and service design, business model innovation

2. Capital goods
product and service design
Procurement policy and choices, product and service design,

3. Fuel and energy related activities
operational policies

4. Upstream transportation and distribution
Product and service design, business model innovation,

5. Waste generated in operations
operational policies
6. Business travel Procurement policy and choices, operational policies
7. Employee commuting Operational policies
8. Upstream leased assets Procurement policy and choices

9. Downstream transportation and distribution
10. Processing of sold products Product and service design, customer engagement
Product and service design, customer engagement,

11. Use of sold products
business model innovation
Product and service design, customer engagement,

12. End-of-life treatment of sold products
business model innovation
13. Downstream leased assets Product and service design, customer engagement
14. Franchises Product and service design, operational policies
15. Investments Investment strategy
MEASURING AND TRACKING IMPACT

While the focus of this paper is emissions reductions consistency with emissions reduction targets. The
in scope 3, measuring and tracking impact is essential method combines quantitative and qualitative
to demonstrate progress against reduction targets. information in order to rate the organizations based on
Ongoing measurement is needed to validate the performance, assessment and trend ratings.
effectiveness of interventions towards achieving a
company’s reduction targets, including the public Standardized Measurement, Reporting and Verification
reporting of progress to ensure credibility and (MRV) processes are already widely applied. For
transparency. A company’s inventory and progress example they provide support for keeping Nationally
towards its targets should be updated and published Determined Contributions on track or for the European
on an annual basis. Union Emissions Trading System to operate in a
robust, consistent and accurate way. Corporations with
Approaches to collecting the information needed to ambitious emissions reduction targets need to measure
track emissions vary by category. While companies and disclose the actual state of their GHG reductions
with a majority of emissions coming from purchased goal to recognize gaps and inform stakeholders.
goods and services might need to engage directly
with suppliers to collect data, companies with energy- An MRV process involves three steps:
consuming products could use surveys and polls to
map customer behavior. However, while companies • Measure or monitor (direct or estimation) of
need to work on specific solutions individually, the emissions, mitigation measures and support.
main principles and processes remain the same for all • Report the interpreted data and findings in
entities. accordance with a standard.
• Verify accuracy and completeness to establish
An example of impact tracking initiatives is the credibility.
Assessing low-Carbon Transition (ACT) project by
ADEME and CDP. The initiative estimates, rates and MRV processes can be implemented for GHG
classifies organizations’ progress in transitioning to a emissions at national, sub-national, sector, organization,
low-carbon economy, including measuring progress facility or product level. They include measuring or
toward targets. It predicts future trends based on estimating, reporting and verifying emissions over
recent data with sector specific methodologies. a specified reporting period. MRV can also provide
The evaluation is based on five aspects of the low- valuable analytical insights into the progress and
carbon transition: 1) commitment to a low-carbon effectiveness of mitigation measures by assessing
vision, 2) transition plan to achieve targets, 3) actions emissions reduction projects and actions.3 Companies
to decrease emissions in the short-term and in the should build on existing best practice for MRV when
long-term, 4) impact of past decisions and 5) strategy designing their internal processes.
3 WRI: MRV 101
Box 2: Making assumptions to fill gaps in primary scope 3 data
While primary data may often be limited, aggregated data (e.g. information reported to CDP) helps
to identify emissions hotspots in different sectors. Where developing a complete scope 3 inventory
is impractical, companies can use sectoral information to conduct a gap analysis and determine
where to focus measurement efforts. Figure 2 illustrates the average breakdown of scope 3
emissions in each of the GHG Protocol scope 3 categories for the highest emitting sectors.
Food & Beverage Progessing Banks, Diverse Financials, Insurance Real Estate
Technology Hardware & Equipment Banks, Diverse Financials, Insurance Professional Services
Electrical Equipment & Software & Services Telecommunication Service

Machinery
Construction & Engineering Automobiles & Components Retailing
Pharmaceuticals, Biotechnology & Electric Utilities & Textiles, Apparel, Footwear

Life Sciences Independent Power Producers and Luxury Goods
Purchased goods and services Employee End of life treatment of sold products
Capital goods Upstream leased assets Downstream leased assets
Fuel-and-energy-related activities (not included in Scope 1 or 2) Downstream transportation and distribution Franchises
Upstream transportation and distribution Processing of sold products Investments
Waste generated in operations Use of sold products Others
Business travel
Figure 2: Percentage of scope 3 emissions per category for SBTi sectors with the most committed and approved companies as of
November 2018
As mentioned above, creating an inventory is not always straightforward and there may be barriers
against formulating robust emissions reduction targets. Firstly, according to the GHG Protocol
Scope 3 Standard it is at the discretion of the company to choose between one of three different
consolidation approaches to draw the boundaries of the inventory. While the flexibility allows the
company structure to be considered, this also provides difficulty with data aggregation, reporting
consistency and the comparability of the results. As noted above, classification of scopes may vary
significantly within the same sector depending on how the company chooses to draw its boundaries.
In addition, emissions can move from one scope to another, leading to reductions in a particular
scope, without changing total emissions. Similarly, the criteria for identifying “relevant” scope 3
activities are qualitative, which leads to ambiguity in their interpretation (see Table 6.1 of the GHG
Protocol Scope 3 Standard). Furthermore, primary versus modeled data can produce substantially
different results. Many companies tend to report more emissions in categories where it’ is easy to
collect information (e.g. business travel) despite it being insignificant compared to other categories.
Companies should be mindful of these challenges as they make assumptions, set boundaries, and
develop their inventory so that they can do their best to avoid overestimating or underestimating
their scope 3 emissions.
Danone: Enable Recognition of Milk Value Chain

Intervention through New Accounting Framework
In November 2015, Danone, a leading global food and beverage company, committed to reduce its
full scopes 1, 2 and 3 emission intensity by 50% between 2015 and 2030, covering 100% of its total
scope 3 emissions.
Danone has implemented numerous emissions reduction measures in the U.S., Europe and Africa, including
redesigning farmers’ feeding strategies and capturing and converting biogas emissions from manure to
energy. As a top global dairy producer, Danone promotes regenerative milk production practices which
improve soil carbon sequestration, a process in which CO2 is removed from the atmosphere and stored
in a soil carbon pool that has the capacity to store or release carbon. In France, the company is aiming to
leverage regenerative agricultural practices to achieve a 15% reduction in farm-level emissions by 2025.
Danone’s supply chain is complex and global: its milk is sourced directly from 120,000 suppliers,
many of which are subsistence farms with fewer than ten cows. Danone has used the Cool Farm Tool
to measure the emissions impact of dairy farms. To generate emissions estimates from its global
suppliers, the company developed a framework of representative farms across the globe that are
monitored daily, and extrapolates data from these farms to similar ones.
While recognizing the importance of collecting high-quality data, Danone also sees the importance of
identifying which farming practices drive the most improvement in soil carbon sequestration. Instead
of striving for exhaustive data collection, which can be costly and overwhelming, Danone’s proxy
assessment is more feasible and cost-efficient. The data on soil quality and degradation Danone
collects is now quite precise. Though it may not be comprehensive, using a proxy assessment with
representative farms is sufficient for Danone to develop strong models to assess the correlation
between change in farm practices and change in soil conditions.
However, Danone still faces the challenge of accounting for emissions reductions from changes
in farm practices in line with Greenhouse Gas Protocol standards and its science-based targets. To
address this challenge, in 2018, Danone joined forces with several leading companies to pilot a new
Accounting Framework led by the Gold Standard that enables inclusion of value chain activities in
reporting towards targets. Using the guidance, companies can account for interventions, include them in
emissions reporting to the maximum credible amount.They can also quantify and communicate about
any additional emissions reductions and carbon sequestration beyond what can be claimed in their own
GHG inventory to capture the “net emissions change” resulting from the interventions they introduce. This
framework will be released in 2019 as part of a larger ‘Value Change’ program that includes this guidance
document, supported by EIT Climate-KIC. The framework will then seek “built on GHG Protocol” status.
Together with Gold Standard, Danone developed a specific method for calculating and accounting for soil
carbon sequestration. With a plan to seek approval for the guidance to use the Built on GHG Protocol mark,
Danone will be able to account for emissions reductions for many of its farming practices in a way that is
consistent with the GHG Protocol Scope 3 Standard and the Science Based Targets initiative criteria.
Being able to credibly account for emissions reductions and identify the right practices creates strong
incentives for Danone to make value chain investments that reduce scope 3 emissions.
4
BUSINESS MODEL INNOVATION
COLLECTING SCOPE 3
EMISSIONS DATA
Companies can shift to or create new innovative According to CDP, in 2017 nearly 1,400 companies
business models to substantially reduce their scope 3 were already factoring an internal carbon price into
emissions. Reconsidering what the company can offer their business plans, an eight-fold increase from
and how it can be offered at a systematic level can help four years ago. This includes over 100 Fortune 500
it meet marketplace demands and generate revenue companies with annual revenues of approximately
in new ways while reducing emissions across the value USD$7 trillion.4 The number is expected to continue
chain. to increase alongside external pressures from climate
regulation and carbon taxes. For those companies that
aren’t already setting a price on carbon as a response
PUT A PRICE ON CARBON to policies (most are concentrated in North America
and Europe), setting one now can prepare them for
Emissions performance can be assigned a monetary future regulation.
value by putting an internal price on carbon that covers
scope 3 emissions. This creates a financial incentive Regardless of whether a carbon price is in place, there
for low-carbon business models and can catalyze are two partly related trends companies may want to
the development of innovative approaches. A carbon consider to positively influence emissions performance:
price can also be used to collect fees that can then be increasing product lifespans and shifting from products
reinvested in new low-carbon activities, products and to services.
services.
A price on carbon can cover both upstream and INCREASING PRODUCT

downstream emissions. For upstream emissions, the
carbon price can be used, for example, as a factor
LIFESPANS
influencing materials sourcing. Likewise, it can be
Finding ways to increase product life spans reduces
a metric that can influence supplier behavior or
emissions associated with creating new products i.e.
inform a company’s purchasing policy (see Supplier
the emissions from the embodied energy of materials
Engagement and Procurement Policy sections).
used to create the new products and the processing
Downstream, a carbon price can help reduce emissions
of these materials. Business models need to be
through more informed product designs that reduce
reconsidered in that customers would likely have to pay
waste and emissions in the use or end of life phases
a larger upfront cost for a more durable and longer-
of a product. It can also financially quantify the
lasting product, but would save money in the long run
environmental performance of products or services
by eliminating the need for replacements or repairs. A
relative to those of a company’s competitors.
paper by BSR, Sustainable Business Models: Time for
4 https://www.cdp.net/en/climate/carbon-pricing
BUSINESS MODEL INNOVATION
Innovation, provides some innovative prototypes that this. An added benefit is that services are also generally
might inspire new ways of thinking. Another approach associated with higher value added than goods (with some
to amortize the increased production costs is turning exceptions).
from a product to a service model, discussed below.
REALISING EFFICIENCIES IN
PRODUCT-SERVICE SYSTEMS LOGISTICS
Finding successful business models that are
Companies should consider optimizing their logistical
profitable but reduce the promotion of unnecessary
network to reduce downstream scope 3 emissions. One
consumerism likewise decrease material demand.
option is to reduce the distance that goods travel through
Product-service systems, for example, provide services
intelligent route planning systems, strategic placement
as well as products for collaborative consumption with
of warehouse and distribution centers, and minimal
the intention of reducing environmental impact.
intermediate storage. New production sites should be
located close to key customers and consumption centers
Redefining the way we think about product ownership
to reduce shipping distances. Additionally, companies
by sharing products eliminates the aforementioned
should reduce the GHG intensity of a tonne-km by shifting
emissions associated with new products. Belongings
toward more efficient modes of transport e.g. from road
can remain idle for long periods of time (e.g. the
haulage to rail or from air freight to sea freight or by
average European car is only in use 2% of its lifetime).5
Thus, there is an opportunity to decrease material improving the efficiency of current transportation modes,
demand by creating services that share high-valued which can be achieved by increasing back-haulage, load
assets among multiple parties (e.g. Lyft). Another capacity, and load factors.
example is providing a platform for online shopping
thereby reducing the need for brick and mortar stores. The Global Logistics Emissions Council (GLEC) Framework
Companies can also enable employees to reduce for Logistics Emissions Methodologies provides detailed
business travel or commuting by using technologies guidance on accounting for the GHG impact of logistics
like conferencing services. and shipping. Further guidance for designing interventions
to reduce emissions from logistics and shipping can be
While the extension of a product’s life span and a found in the Low Carbon Freight program of the Low
higher rate of use may increase the emissions per Carbon Technology Partnerships initiative (LCTPi).
product, setting an intensity reduction target with
a denominator that takes the full product life cycle
and the useful service (e.g. efficiency in the use
phase) of the product into account would adjust for
5 https://media.sitra.fi/2018/06/12132041/the-circular-economy-a-powerful-force-for-climate-mit
igation.pdf
5
SUPPLIER ENGAGEMENT
Within a company’s value chain, upstream emissions
are indirect GHG emissions related to purchased or
SUPPLIER ENGAGEMENT
acquired goods and services, capital goods, upstream FRAMEWORK
transport and distribution, business travel, etc. These
emissions span scope 3 categories 1 to 8 of the GHG The framework in Figure 3 below describes how an
Protocol.6 The most significant of these stem from effective supply chain engagement strategy can
purchased goods and services (category 1). be developed and implemented. Companies may
choose to adopt one or more of these of the options
On average, supply chain emissions are approximately presented at each step of the framework. These best
four times that of operations; this number is lower for practices are based on an analysis of approaches
companies further up in the value chain, like energy used by the first 105 companies that have had their
and mining companies, and higher for companies lower science-based targets8 approved through the Science
down in the value chain, like retailers.7 A large number Based Targets initiative (SBTi). Approximately 90% of
of companies are engaging with their supply chain, and the first 105 companies with SBTs have targets that
the number is quickly growing. address upstream scope 3 emissions. The other 10%
only target consumers for reducing downstream
Supply chain emissions can be reduced by one or more scope 3 emissions or do not specify how they
of the following: influence their suppliers.
1. Optimizing a company’s own production processes

resulting in reduced demand for goods and
services (see Operational Policies section);
2. Making different purchasing decisions to favor
low-carbon products or services (see Procurement
Policies section);
3. Purchasing from suppliers with a low carbon
footprint (see Procurement Policies section); and
4. Engaging with suppliers to reduce emissions across
the value chain (see below).
The following section provides a framework for supplier

engagement that can be employed by a wide range of
companies to address their upstream emissions.
6 GHG Protocol: Corporate value chain (scope 3) accounting and reporting standard
7 CDP: Committing to climate action in the supply chain
8 Research was carried out by Master students of Utrecht University Navigant in 2018
SUPPLIER ENGAGEMENT
Stage 1: Develop a supply chain engagement strategy
Step 1. Identify (suppliers to engage)

Step 2. Formulate (the strategy)
Stage 2: Implement the supply chain engagement strategy
Step 3. Communicate
Step 4. Collaborate
Step 5. Support
Step 6. Monitor
Step 7. Reinforce
Figure 3: Supplier engagement framework
with their suppliers. The apparel and food sectors are

STAGE 1: DEVELOP A SUPPLY examples of sectors where intermediary suppliers
CHAIN ENGAGEMENT STRATEGY and the purchasing companies are actively reducing
emissions beyond tier 1 suppliers.
In the development stage, companies first decide Other factors for selecting suppliers considered by
which suppliers to engage and which key elements to companies with approved SBTs and worthwhile to
include in their supplier engagement strategy. These consider for other companies are: risk of not meeting
decisions are based on the company’s resources and the company’s expectations, willingness to cooperate,
priorities as well as the characteristics of their suppliers. desire to build a strategic relationship, and location (e.g.
regions with less advanced environmental standards).
Step 1. Identify suppliers These factors may be influenced by the company’s
preferences, resources, goals and its procurement
When setting up a supplier engagement strategy spend (i.e. related influence on suppliers).
aiming to reduce GHG emissions, it is best practice
to target those suppliers that have the highest Step 2. Determine approach
contribution to the company’s upstream scope 3
emissions, regardless of their tier in the supply chain At this stage it is important to consider how to engage
or revenue. In practice, companies have the greatest with suppliers: 1) enforcing, 2) being supportive/
influence on their tier 1 suppliers that comprise the informative, or 3) inducing competition among
largest portion of their spend, and so this is typically suppliers. The first approach is appropriate for larger,
the focus of their engagement efforts. Efforts to reduce high revenue companies that have leverage over their
emissions beyond tier 1 can be achieved by setting direct suppliers, while the second and third approaches
the expectation that intermediate suppliers engage are suitable for all companies. The third approach
SUPPLIER ENGAGEMENT
requires a range of competing suppliers. The approach can help with every step of implementing a supplier
and resources should have Chief Executive Officer or engagement strategy by streamlining requests to
Chief Purchasing Officer buy-in and involve suppliers thousands of suppliers at once via its annual disclosure
when developing their engagement strategy. This helps request. This reduces supplier survey fatigue, provides
to ensure all parties are aligned and in agreement. companies with standardized responses built around
The benefits of building better relations can ultimately established best practices, and focuses on action.
influence communications, product development Supply chain members are also provided with multiple
and sourcing, and drive transparency of the supplier’s facilitated opportunities per year to engage with their
operations leading to lower risks and helping to ensure peers and suppliers.
the likelihood of success.
Step 3. Communicate
STAGE 2: IMPLEMENT THE To successfully implement a supplier engagement
SUPPLIER ENGAGEMENT strategy, companies need to communicate their
expectations to their suppliers. Communication is
STRATEGY also important in obtaining data on supplier carbon
footprints or understanding the progress towards
Although most companies combine only a few of targets. Most effective communication is interactive;
the implementation elements discussed below however, this may not always be possible or
(communication, collaboration, support, monitoring efficient with a large number of suppliers. Common
and reinforcement), it is considered best practice to communication methods and recommendations for
combine all elements in the supplier engagement how they can be used are listed below.
strategy if possible. CDP’s Supply Chain Program
Table 2: Methods to communicate with suppliers
Communication method Description
Online platform Facilitates the exchange of views and ideas on best practices between suppliers.
Verbal or written contact from a company to its suppliers, without an interactive

Non-interactive contact open dialogue. Example: McDonald’s sends out regular newsletters to suppliers
communicating expectations and sharing best practices.
An open meeting between company, suppliers and third-parties, where ideas and
Open events
views on best-practices can be exchanged.
Interactive meetings Regular meetings, often at management level.
Webinars and videos Often one-way communication in an engaging way.
SUPPLIER ENGAGEMENT
Table 3: Methods to collaborate with suppliers and company examples
Types of
Description Recommended use Company Examples
agreements
Capgemini Group: every supplier

General minimum has to accept and acknowledge
Companies with goals
requirements set for the Supplier Standards of
Company-set distinct from those
suppliers, for example Conduct. Capgemini only works
standards described in third-
with a code of conduct or with suppliers and partners who
party standards.
section in the contract. accept and operate under its core
principles.
Promote action for GHG Tesco: informs suppliers through

emissions reduction the Tesco Supplier Network, an
For companies that
by supplier, usually online engagement platform,
want a less direct
without obligations. This Tesco employees, and expert
approach, perhaps
includes marketing, organizations. An active online
Promote action with suppliers who are
informing, communicating community of suppliers, who are
not as far along in their
expectations, and lobbying. engaged on the issue of carbon
emissions reduction
A soft agreement, that can reductions, in which practical
journey.
be applied to direct and advice on carbon reduction and
indirect suppliers. sustainability is shared.
A project regarding GHG Suez: collaborates with upstream

For companies with
emissions reduction and downstream partners through
intertwined activities
measures, undertaken industrial symbiosis, e.g. the
Joint venture/ with the supplier e.g.
in equal measure by a industrial symbiosis initiative with
project in emissions sources,
company and supplier, Shanghai Chemical Industry Park
location, operations,
retaining their distinct (SCIP), which is among Asia’s
equity.
identities. biggest petrochemical platforms.
For companies that

Minimum requirements set seek established Coca-Cola HBC: recognize supplier
Third-party for suppliers, as defined by recognition and want certifications as per international
standards an external independent to invest limited time standards (ISO9001,14001,50001,
organization, such as ISO. in developing bespoke FSSC2200 & OHSAS18001).
requirements.
Hewlett Packard Enterprise: HPE’s

manufacturing spend has a social
For companies that
A comparative assessment and environmental responsibility
want to engage
of supplier standards, (SER) scorecard. A supplier’s SER
large numbers of
Rating / scoring quality, GHG emissions score acts as a multiplier to its
suppliers and assess
system reduction performance general supplier management
them against widely-
and progress, creating score. This allows suppliers with
recognized best
competition. strong SER performance greater
practices.
opportunities for new or expanded
business with HPE.
SUPPLIER ENGAGEMENT
Step 4. Collaborate
This is arguably the most important element of stem from beyond tier 1. In a tailor-made contract
the engagement strategy. How a company sets minimum requirements are set for individual suppliers,
collaboration agreements with their suppliers differs depending on the characteristics of the supplier. This
based on how they wish to influence the behavior approach is recommended for companies that want to
of the suppliers they are targeting. Methods can emphasize specific actions from suppliers, especially
be forceful (‘company-set standards’, ‘third party those that have a high potential to drive emissions
standards’ and ‘tailor-made contracts’), voluntary impact.
(‘promotion of GHG reduction’) or competitive
(‘rating/scoring system’). ‘Company-set standards’ The cascade approach in particular can be highly
and ‘promoted action’ are the most commonly used impactful since action propagates up the value chain.
methods since influencing suppliers to reduce One illustrative example is provided in the supplier
emissions is a new working field, and these two hierarchy in Figure 4.9 Companies at the bottom of the
methods can augment existing sustainability strategies. ladder are just starting to measure and disclose their
For example, if a company has already set certain scope 1 and 2 emissions. As a company progresses by
standards for their suppliers, like a Request for measuring and disclosing scope 3 emissions, setting
Proposal or in contracts, including GHG emissions targets and so on, progresses up the ladder and may
reduction can be a relatively easy addition. receive more and more procurement benefits from
the purchasing company. For example, when certain
Two other agreements, ‘joint venture/project’ and GHG emission conditions are met the supplier may
“cascade’, are complementary to those above because receive a virtual discount on its price in the selection
they are most often found in combination with one process (ProRail) or it may receive a multiplier to its
of the other five types of agreement. In the ‘cascade” general supplier management score (HPE). At the top
method a company encourages a number of suppliers of the ladder, the suppliers’ suppliers set science-
to take certain measures, which require the supplier based targets. Those suppliers would then have their
to request a similar action from their suppliers. suppliers set SBTs and so on, proliferating action.
This is useful for companies where most emissions
5 Supplier of the supplier needs to set science-based

targets according to requirements of SBT initiative
4 Supplier needs to report on the progress made to meet
n
tio
the science-based targets

bi
Am
3 Supplier of the supplier needs to set science-based

targets according to requirements of SBT initiative
2 Supplier needs to also calculate and disclose its
Scope 3 emissions
1 Supplier needs to calculate and disclose its
Scope 1 and 2 emissions
Figure 4: The Ladder Approach to Supplier Emissions Reduction Targets
9 Navigant: Looking for a chain reaction
SUPPLIER ENGAGEMENT
Step 5. Support
Companies can provide financial support, resources, or listed below are grouped by the source of support:
information to help suppliers meet their agreements.
Some methods are more time and labor intensive Some suppliers have also started to hold their
to carry out than others. As an example, Tetrapak purchasers accountable as well. The Better Buying
provided all of its base material suppliers with training, Index empowers suppliers to assess apparel, footwear,
support and material for data collection. The interaction and household textile retailer purchasing practices.
is handled by the purchasing organization as an integral This anonymous platform allows suppliers to share
part of their ongoing partnership. The types of support information about the companies they work with.
Table 4: Ways companies can support suppliers by engagement actor
Engagement actors Types of support
• Workshop / training
• Goal setting
Company to supplier
• Technical guidance
• Financial support
Supplier to supplier • Knowledge sharing
• Workshop / training
Third party to supplier
• Tools (e.g. frameworks or software)
Step 6. Monitor
This step tracks whether or not parties are sticking to whether GHG emissions reductions are resulting from
the agreements they made with the company, and these agreements. Methods are described in Table 5.
Table 5: Methods to track supplier progress
Methods to track progress Description and recommendations for use
Private reporting of supplier to • Reporting information can be tailored to the company’s specific
company needs.
• Established mechanisms and questionnaires can streamline

Public reporting of supplier
information asks to suppliers from multiple purchasers.
Audits • Costly and time consuming but the most accurate.
SUPPLIER ENGAGEMENT
Step 7. Reinforce
This important step involves providing incentives for consequences as a response to the success or failure
the suppliers to uphold their end of the agreement. The of a supplier in carrying out an agreement as outlined in
company can choose to enforce positive or negative Table 6.
Table 6: Methods to reinforce supplier behavior
Methods to reinforce supplier

Description and recommendations for use
behavior
Giving high-performing suppliers priority in contract biddings, or

Priority in contract procurement making environmental performance a part of the procurement
decision in a different way.
Mandatory implementation of an improvement program to measure

Improvement program
and reduce the climate impact of the supplier.
Changing to another supplier, when supplier is not fulfilling the

Switch supplier
agreement. Likely a last resort for failure to comply.
Private appraisal Award a supplier with non-public appraisal.
SUPPLIER ENGAGEMENT
HPE: Engaging Peers to Drive Sector-Wide Supplier Actions

A radical transformation in IT procurement is happening today as manufacturers feel the increasing
weight of sustainability in purchasing decisions. It is increasingly clear that collective action is needed
to drive low-carbon strategies. Solutions lie in the innovations and standards that companies like
Hewlett Packard Enterprise (HPE) drive.
In 2017, HPE launched the world’s first comprehensive supply chain management program based on
science to manage the climate impact of its suppliers. To create a long-term commercial incentive
for its suppliers, HPE committed that by 2025, 80% of HPE’s manufacturing spend will go to suppliers
with science-based targets in place. As part of the goal, HPE will reduce manufacturing-related GHG
emissions on an absolute basis within its supply chain by 15% by 2025. HPE was an early mover in the
IT industry to establish a supply chain goal that is in line with climate science.
HPE is enabling its suppliers to set science-based targets within their own operations.The company
is working with partners to develop tools that suppliers can use to customize and achieve their own
science-based targets. HPE is also providing them with tailored feedback, as well as webinars on
setting and achieving SBTs, best-in-class climate management systems and renewable energy
procurement. This helps suppliers overcome complexities involved in target-setting, measuring
ongoing progress and achieving reductions.
The IT industry has a complex supply chain with a vast global reach and suppliers that often share
multiple customers. The shared supply chain of the electronics industry provides an opportunity to
send a strong and consistent signal from customers and the industry broadly to adopt SBTs. HPE
sees the need to create a unified approach to enable climate ambition by ensuring suppliers are held
to a common standard with common goals derived from a common set of values, and encourages
companies to use accountability and transparency as a lever for action. There is opportunity for the
industry to align by replicating HPE’s best-in-class measures such as publicly reporting supplier social
and environmental responsibility (SER) performance, or tying SER performance directly to purchasing
decisions via scorecards that align with CDP leadership standards.
Holistically, this is a commitment to taking a leadership stance with a goal to catalyse the industry
and set a new global standard. Partnering with BSR and POINT380, HPE is creating a white paper that
outlines a supply chain standard for GHG emissions engagement and abatement. Much like assessment
fatigue and duplication of data collection may be overcome via collaboration, reducing duplication and
the value of consistent messages from customers is clear. A group of customers requesting a supplier
complete a common training on a common topic is much more impactful than a single customer.
To be released in the first half of 2019, the white paper will shed light on HPE’s emissions calculation
method and science-based target setting process and methods. It will also highlight the business
case for the IT industry to act on climate change. Most importantly, It will serve as a call to action to
the IT industry and beyond — helping laggard suppliers progress to a leadership position by providing
them with a pathway to a best-in-class SBT strategy as part of an industry standardized approach.
In order to truly move the needle in the IT industry and beyond, HPE is challenging other companies
to join them in compelling their suppliers to set science-based targets and work collectively across
the IT supply chain to implement best in class capability-building programs.
6
PROCUREMENT POLICY & CHOICES
GHG emissions generated by suppliers add to a
company’s scope 3 emissions (see Figure 5). Reducing
OPTION 1. PURCHASE FROM
scope 3 emissions can start in the procurement SUPPLIERS WITH A LOW
department. Two main options for reducing scope 3
emissions through procurement are 1) purchase from CARBON FOOTPRINT:
suppliers with a low carbon footprint (same products)
and 2) shift towards low-carbon alternatives (different It is helpful to first differentiate suppliers based on the
products). Another way of reducing scope 3 upstream amount of GHG emissions generated by their goods
emissions is by engaging with suppliers to reduce and services and the type of relationship a company
emissions across the value chain (see Section 4). has with the supplier. This helps to understand where
emissions reduction potential could be high. Figure 6
shows where various suppliers can be plotted against
their GHG emissions (per product, or in total) and the
relationship with the specific supplier. The suppliers
to focus on are the ones with high emissions related
to their products as there is probably substantial
emissions reduction potential for the company’s scope
Scope 1
Scope 2
Scope 3
Scope 1 Purchasing
Scope 2 company
Scope 3
Scope 1 Tier 1
Scope 2
Scope 3
Tier 2
Figure 5. Emissions from suppliers add to the scope 3 emissions of a company
PROCUREMENT POLICY & CHOICES
3 emissions. Often companies have complex supply

chains with tens of thousands of suppliers. By focusing
OPTION 2. SHIFT TOWARDS LOW-
on the suppliers covering, for example, 80% of the GHG CARBON ALTERNATIVES:
emissions, the number of suppliers will be reduced
drastically. Moreover, a company’s relationship with its Sometimes a company can produce the same
suppliers largely determines the emissions reduction products with different inputs, e.g. using low-carbon
options. technologies or ingredients. This could only be
decided in close collaboration with the operations
Flexible suppliers: The purchasing company has short- team because the production process would need to
term agreements with these suppliers, or multiple be revised to a certain extent. A company could even
suppliers compete on the same market. In these decide to change its product portfolio by including new
situations, it is relatively easy for a company to shift to a (low-carbon) products which would need low-carbon
supplier with a lower carbon footprint, e.g. shifting from inputs or by moving from products to services (see
supplier 2 to 1 in Figure 6. Business Model Innovation section).
Fixed suppliers: The purchasing company has long-

term agreements with these suppliers, or suppliers
provide very specific goods and services (fewer market
players). In these situations, it is less easy to shift to
another supplier (e.g. from supplier 3 to 4 in Figure 6).
In these cases, it could be wise to set up a supplier
engagement program to encourage the supplier to
reduce its own emissions (see Supplier Engagement
section).
GHG emissions 2 3
1
4
Relationship with supplier
Figure 6: Differentiating suppliers based on amount of GHG emissions and relationship
7
PRODUCT/SERVICE DESIGN
Among the most powerful tools for a company to the GHG intensity of the electricity consumed. For
mitigate its scope 3 emissions is a focus on lowering some product categories, a further significant source
lifecycle GHG emissions during the design of products of emissions can be fugitive emissions from these
and services. The design process can play a crucial role products, e.g. leaked refrigerants from HVAC systems.
in defining the range of GHG intensity reductions that
can be achieved through other reduction measures. These drivers also represent the key levers for
The impact of these different design choices do not reductions of use phase emissions from EEE.
simply aggregate, but often interact in complex ways Depending on the market that manufacturers operate
to create trade-offs. In the face of this complexity, it is in, energy efficiency standards and labelling may
best practice to include agile product lifecycle GHG already set a floor for equipment performance.
assessment approaches in the product design phase to However, there are several ways for EEE manufacturers
carefully weigh the impact of different choices. to push further reductions:
• Align measurement of performance with energy

PRODUCT DESIGN AS A LEVER efficiency ratings and aim for the highest levels of
FOR PRODUCT USE PHASE ratings.
• Focus on improving aspects of the equipment that
EMISSIONS might not be captured by standards, e.g. reducing
base load demand by optimizing standby and auto
How customers ultimately use products is strongly switch-off settings.
influenced by the specific design of each product and • Market equipment based on lifecycle costs, rather
its user-interface, for example the difference between than upfront investment costs, to encourage
wasteful and efficient application of the product, or customers to purchase efficient equipment, even if
one-way use versus circular reintegration of materials. at higher upfront cost.
Basic aspects of product design such as weight and
size of the product, as well as packaging choices, will Furthermore, companies should establish eco-design
also have significant implications for emissions from principles to reduce life cycle emissions by identifying
logistics. opportunities for optimization through product
characteristics, such as energy and material efficiency,
An example for a sector where emissions from the weight, durability, substitution of hazardous materials or
product use phase make up the bulk of scope 3 refrigerants, and opportunities for end-of-life treatment
emissions is electrical and electronic equipment (EEE) (e.g. product recovery management), as outlined above.
manufacturers.The key drivers for emissions from the
use of EEE are the products’ energy efficiency and
Another sector where product design focused on use the case of electric or hybrid drivetrains, emissions
phase efficiency is critical is vehicle manufacturers. from electricity generation. However, the quality of
Transport accounts for 28% of global final energy disclosure and management of scope 3 emissions is
demand and 23% of global carbon dioxide (CO2) still low and lagging in the automotive sector, and a
emissions from fuel.12 If unchecked, transport emissions push towards better accounting practices in the sector
could increase 60% by 2050 largely owing to increased is urgently needed.14 The Science Based Targets
use of road transport for freight and passenger travel.13 initiative has developed specific guidance and tools to
Vehicle manufacturers have a crucial role in enabling support vehicle manufacturers in addressing the use
a transition to low-carbon transport, particularly phase emission of their products and aligning their
since most (~80%) of cradle-to-grave emissions for performance with the rate of decarbonization required
road vehicles happen during the use phase and to meet a 2C pathway.
are generated from fossil fuel combustion, or in
12 IEA. “Energy Technology Perspectives 2017 - Catalyzing Energy Technology Transformations.” https://www.iea.org/etp2017/
13 OECD/ITF. “Transport Outlook 2017”. https://www.itf-oecd.org/transport-outlook-2017
14 CDP. “Bridging low-carbon technologies.” http://cdp.net/en/reports/downloads/3668
Tennant: Driving Innovations in Product Design to Reduce

Downstream Emissions
Tennant Company might not immediately ring a bell in everyday consumers’ minds. With a focus on enterprise
customers that often operate “behind the scenes,” Tennant is a leading U.S.-based company for premium cleaning
products, solutions and customer support. The company which operates in Europe-Middle East-Africa, the Americas
and Asia-Pacific geographies, has a top global market share of 20% in the industrial cleaning sector and offers a
diverse product portfolio, serving customers in vertical sectors ranging from retail to manufacturing to mining.
Tennant is focused on enterprise sustainability, guided by data and analytics. The company was aware that
indirect emissions from usage of its products could be significant, but it was not until Trucost S&P Global - a
company that assesses climate-related risks - conducted a scope 3 screening (economic input/output LCA
methodology based on spend) that Tennant quantified this scope 3 category as over 68% of its total greenhouse
gas emissions. That’s around 12 times its scope 1 and 2 emissions combined. In 2017, along with a target to reduce
25% of its scope 1 and 2 emissions, Tennant developed a target to reduce emissions from its scope 3 use of sold
products category 50% per USD of equipment revenue by 2030 from a 2016 base-year.
With a history of investing in product differentiation with eco-advantages, setting a scope 3 target was a natural
evolution for Tennant. Actual implementation of the reduction goal, however, required the company to create a new
position in the Sustainable Enterprise team. The newly hired Senior Product Stewardship Engineer initiated a three-
month internal stakeholder engagement process and developed relevant methodologies and tools to calculate
use of sold products emissions. With as many as six to seven product development teams working on the pipeline
simultaneously, the product stewardship engineer is involved in a very early stage to influence the strategic choices and
specifications of equipment design. Indeed, in 2014, Tennant integrated sustainability into its New Product Development
(NPD) process. Not only are sustainability concerns embedded into NPD templates, tools, and resources, each cross-
functional product development team is committed to developing meaningful, quantifiable targets for environmental
impact reduction. Achievement of targets is measured as each product is launched. With the new scope 3 use of sold
products target now in place, a high priority for each specific project will be carbon emissions reduction.
In 2008, Tennant introduced one of its signature product innovations, ec-H2O™ technology. This product electrically
converts tap water into a floor cleaning solution to replace conventional chemicals. Using results from a Life Cycle
Assessment (LCA) done for ec-H2O™, which compares emissions from using packaged cleaning chemicals to that of
ec-H2O, Tennant reported that this novel product has helped its customers avoid more than 75,000 metric tons of CO2e,
while generating over $1.2 billion in revenue for the company. This amount of avoided emissions, reported separately
from Tennant’s scope 3 inventory, is equivalent to more than two years of Tennant’s total global GHG emissions.15
Tennant has also been at the forefront of product electrification. The Tennant overall product mix is increasingly
electric and this trend has been playing out for many years. Battery technology continues to improve, while
internal combustion (IC) related fuel and service costs increase. Those trends make battery power the lowest
total cost answer for more customers each year. In most applications, Tennant products are used indoors and do
not run continuously. With a total cost benefit, along with the increasing importance of indoor air quality, Tennant
customers continue switching to battery power. As a result, fewer IC products are developed and sold. As time
progresses, the IC power source will be available only on the larger equipment that is more likely to be used
outdoors. These trends will contribute to Tennant Company achieving the new scope 3 target.
15 Please refer to Box 1. Avoided emissions for guidance on making claims about avoided emissions
INTEGRATE CIRCULAR ECONOMY PRINCIPLES

INTO PRODUCT AND SERVICE DESIGN
If a product is designed to be manufactured using a reduces the embodied energy of the new materials as
specific material, the possibilities to lower embodied well as their processing, which according to the 2018
GHG emissions and processing emissions; the range report by Material Economics: The Circular Economy:
of options for upstream and downstream logistics; A Powerful Force for Climate Mitigation,16 is essential
the optimum possible use phase efficiency, and for meeting the Paris Agreement’s long-term goal of
the feasible end-of-life treatments are all invariably net zero emissions. Industry currently accounts for
determined by this design choice. Making sound approximately 40% of global emissions and demand is
design choices for products and services enables expected to increase two to four-fold by 2100. Most of
more possibilities to lower embodied emissions in raw the emissions reduction potential lies on the demand
materials, and to reduce emissions from processing, side, calling for innovative methods to reuse or recycle
upstream and downstream transportation, use phase existing materials that have already been produced.
efficiency and end-of-life treatments. The report estimates that a circular economy could
reduce up to 3.6 billion tCO2 in heavy industry per year
A robust framework for the accounting of lifecycle globally.17
emissions from products and services is provided in
the GHG Protocol Product Life Cycle Accounting and As a first step, companies should consider where
Reporting Standard. Furthermore, a broad range of to reduce material inputs. This includes using more
tools and analysis services is offered by specialised efficient materials as well as designing products that
commercial providers, including Quantis, thinkstep, and require less material. This eliminates any lifecycle
the Carbon Trust. emissions associated with the material. Examples
include high-strength steel in construction, design and
A circular economy approach can achieve large logistics systems that minimize material needed for
improvements in environmental performance packaging, and creating smaller cars that are more
by redesigning systems and business models to suitable for fewer passengers which are expected to
simultaneously reduce upstream and downstream be in higher demand as shared ride services become
emissions. Prevailing linear processes consume more popular. In addition, shifting from primary to
resources and generate waste (‘take ⇀ make ⇀ use secondary materials in production prevents waste by
⇀ dispose’). By closing the loop and recirculating effective re-utilisation of materials. This is contingent
materials, companies extend product lifespans and upon designing products so components can be
reduce new material demand and waste. This in turn disassembled and sorted for recycling.18
16 The Circular Economy A Powerful Force for Climate Mitigation

17 Ibid.
18 Ibid.
IKEA: Decoupling emissions from growth through

circular economy
IKEA, a Swedish multinational group, has been the world’s largest furniture retailer since 2008. In June 2018,
INGKA Group (the largest IKEA franchisee) announced its science- based targets to reduce scope 1 and 2
emissions 80% from 2016 to 2030. Inter IKEA Group, the worldwide IKEA franchisor and entity responsible for
the company’s supply chain, commits to reduce value chain GHG emissions by at least 15% over the same time
period. This translates to a 70% reduced climate footprint on average per IKEA product. The announcement is
part of the IKEA commitment to become climate positive by 2030 by reducing more GHG emissions than the
IKEA value chain emits, while growing the IKEA business. This will be achieved without using any carbon offsets.
To transform into a low-carbon business, IKEA is going in the following directions:

• Become truly circular and ensure all products are designed from the very beginning to be repurposed,
repaired, reused, resold and recycled;
• Strive towards 100% renewable energy throughout the entire IKEA value chain;
• Inspire and enable people to live a better life within the limits of the planet.
IKEA made several ambitious commitments to make the transformation, including to use only renewable and
recycled materials and removing all single-use plastic products globally by 2030. IKEA also made a commitment
to increase plant-based food, such as the veggie hot dog, which launched globally in August 2018.
IKEA approached the process of determining the ambition of its scope 3 target with a fact-based mindset that
turns the high-level climate agenda into hands-on actions. In spring 2017, a simulation tool was developed
internally to help IKEA determine its scope 3 target goal based on what’s known and what potential there is
for innovation. Covering 99% of the scope 3 emissions, with focus on raw materials extraction and processing,
production, food ingredients, customer travel, deliveries and product use in customers’ homes, the simulation
tool evaluates the potential outcome of different actions, e.g. 100% renewable electricity at first tier suppliers. It
also generates a gap analysis on what innovation is needed to fulfill the goal. Based on this tool, IKEA mapped
out concrete road maps to achieve its targets.
For instance, with raw materials, the company compiled a base year inventory with purchased material volume
and emission factors. It then mapped out areas of actions among its suppliers and identified top parameters that
would influence emissions impact, including sourcing country and if materials were recycled or renewable. With
aluminum, for example, the three key parameters are whether the material is recycled, where it’s sourced from
and the renewable electricity share during production. The climate footprint of recycled aluminum is significantly
lower than that made from virgin material. Since significant amounts of electricity is used in the extraction of
bauxite ore to produce aluminum, IKEA also takes the sourcing region into consideration as aluminum from
regions with carbon-intensive electricity generation can have a much higher carbon footprint. Over time, as more
primary data is collected and the emissions factors used for recycled materials become more specific, IKEA can
better assess the feasibility and value of materials substitutions and capture the emissions reduction impacts of
its circular economy initiatives.
8
CUSTOMER ENGAGEMENT
An important lever for reducing downstream emissions made to reduce indirect use-phase emissions such as
is customer engagement. There are several different creating a cold-water detergent.
approaches a company can take to deliver such an
intervention. Customers can be engaged either directly In addition to designing efficient products and applying
through education, collaboration or compensation, or circularity principles, corporates can influence
indirectly through company regulation or customer consumers to positively influence behavior to promote
motivation via marketing and choice architecture. intended and expected use patterns.
Furthermore, companies can use reactive strategies
that respond only to customer demand for more Introducing customer engagement interventions can
low-carbon products or active strategy to attempt to have cross-cutting impacts on several downstream
change the existing customer demand towards low- emission categories including processing (e.g.
carbon alternatives.19 preparing food), use (e.g. driving vehicles, washing
clothes) and disposal of sold products (e.g. recycle
The fundamental challenge in managing downstream opportunities) and can affect leased assets as well.
emissions is the limited influence a company has over These actions are key to addressing the downstream
how its products are processed, used, transported, emissions that companies have less control over.
and disposed of once they leave its direct sphere Commitments to engage customers to change their
of control. Upstream emissions are also considered behavior demonstrably lead to emission reductions in
outside the company’s direct control, but the influence a company’s value chain and help to build stakeholder
the company has on upstream emissions by being relationships. End-user education and behavioral
a customer affords relatively more control than over change efforts usually aim to encourage less GHG
its downstream emissions. Another complication is intensive utilization patterns (e.g. product/user-
distinguishing between direct use-phase emissions interface design, consumer engagement campaigns
(e.g. the use phase of an auto manufacturer’s car) or collaboration with downstream segments of the
and indirect use-phase emissions (e.g. the emissions value chain that foster circular end-of-life treatment of
associated with heating the water in the wash cycle products and downstream logistic efficiency).
for a fast-moving consumer goods company’s (FMCG) These interventions are an important component in
detergent). The vehicle manufacturer has more control reducing emissions by complementing technological
over the fuel efficiency and fuel type used during changes and allowing emissions reduction targets to
vehicle operation than the FMCG company. What be reached more cost-effectively overall. A reduction
distinguishes it as direct emissions is that the fuel use in GHG emissions via energy efficiency in household
is within the lifecycle of the car. The FMCG in this case and organizational settings encompasses a wide range
has less control over the intensity of the wash cycle. of relevant interventions that stimulate behavioral
Nevertheless, some design considerations can be changes including recycling, domestic heating,
19 ACT – Assessing low-Carbon Transition Retail methodology: http://actproject.net/wp-content/uploads/2017/02/ACT-Pilot-Retail-methodology-Final-draft-6-0-0.pdf
CUSTOMER ENGAGEMENT
mobility, and appliance utilization. campaigns to influence consumers’ energy-efficiency

While incentives for environmental behaviors behavior (e.g. opting for lower temperature wash
have historically relied on financial or policy-based cycles, efficient use of heating and cooling appliances,
approaches using principles of reward and punishment, or by participating in standard-setting processes). Other
nowadays business are also turning to social science consumer interfacing elements can include public
methods to mobilize individuals and communities emissions and efficiency calculators, interactive energy
towards target behaviors, colloquially called “nudging.” efficiency tools, home energy audits, eco certified
By providing tailored information and giving feedback audits and renewable energy incentives in order to
to users, commitment making (pledging) and goal reduce use phase emissions. In addition to energy
setting, recruiting leaders from within social networks, efficiency initiatives, real estate companies can install
and using a variety of other social influence strategies smart meters that give customers more information
(e.g. social comparison, gamification, community based about their energy usage and enable them to manage
programs), companies can successfully motivate long- consumption more efficiently, consequently addressing
term climate-friendly behavior. emissions form downstream leased assets.
In the transport sector, companies can educate their

CUSTOMER ENGAGEMENT IN customers to drive efficiently by educating them
PRACTICE on eco-driving. Customer emissions can be also
influenced by providing high-quality infrastructure and
There is currently no overarching framework that can traffic management with the goal of improving travel
apply across sectors (such as supplier engagement), times and vehicle efficiency. Vehicles travelling in
and so this guidance shows a few examples where free-flow traffic conditions operate more efficiently and
customer engagement can lead to significant emission produce less greenhouse gas emissions compared to
reductions. stop-start traffic situations.
Generally, for consumer facing companies, best The A-S-I approach formulates a concept to reduce
practices include conducting regular polls and GHG emissions from transport sector by a combination
surveys to map customer behavior, directly providing of technological and behavioral interventions. Its three
information on climate change impact, interactive elements are avoiding trips when possible by demand
communications and providing bespoke advice. Since management, shifting to low-carbon transport systems
some emissions from the use phase of electrical and like electrified public transportation and improving
electronic equipment (EEE) are part of the indirect carbon intensity per passenger kilometer or ton
use phase, interventions should also focus on kilometer by switching to low-carbon energy sources.
levers available to the respective company such as
9
OPERATIONAL POLICIES
Operational policies encourage sustainable decision- The results of a waste inventory will shed light on
making by aligning business goals and employee specific opportunities to reduce emissions, while
satisfaction with GHG reduction measures. These also generating value and social benefits. Walmart,
internal guidelines are especially important for in pursuit of their Zero Waste by 2025 target, not only
companies with significant commuting and business uses data-driven forecasting to minimize unsold food,
travel emissions and companies that produce large but the company also discounts food that is close to
amounts of waste. Additionally, operational policies its expiration date, donates unpurchased food, and
are commonly used to promote energy efficiency and converts inedible food into animal feed, compost or
reduce scope 2 emissions, which has the co-benefit energy20. In addition to directly affecting operations,
of reducing scope 3 fuel-and-energy related activity waste protocols may specify a company’s stance on
emissions. key decision such as advocating for refurbishment and
repair of company goods rather than new purchases
Most operational policies can be classified as protocols or setting a preference for recycled materials. There
or incentive programs. Protocols tend to be most is strong potential for these protocols to overlap
effective at achieving specific, predetermined targets with other levers such as procurement policy &
by shifting business procedures and KPIs, while choices and business model innovation, particularly
incentive programs are commonly used to reinforce for companies that are drawn to circular economic
protocols and to encourage employees to make practices. Energy efficiency goals, such as ensuring
“greener” choices related to travel and commuting. that a certain proportion of company buildings are
ENERGY STAR or LEED certified or upgrading electrical
equipment, primarily affect scope 2 emissions, but may
DEVELOPING OPERATIONAL consequently reduce scope 3 fuel-and-energy related
PROTOCOLS emissions.
As a first step, companies should collect data and

develop an understanding of their “baseline” processes,
LAUNCHING OPERATIONAL
for example, by completing an inventory of waste INCENTIVE PROGRAMS
sources and flows or a review of energy expenditures
and the age of equipment. In cases where the initial By encouraging employees to commute sustainably
inventory relies heavily on estimation, operational (e.g. via bicycle, mass transit, or carpool) and to
protocols should also include steps to improve data travel less for business, companies may reduce their
collection over time. scope 3 emissions, while also improving employee
20 https://corporate.walmart.com/2018grr/reducing-waste
OPERATIONAL POLICIES
wellbeing and retention. The most common bike-to- may still be necessary, video conferencing has many
work incentives include onsite bicycle storage, locker benefits: more frequent meetings between offices
rooms and showers, bike-to-work subsidies, bike paths and with remote colleagues, reduced travel costs,
around the workplace, and bike-share memberships.21 minimal time lost to travel, and reduced travel burden
Companies may also provide shuttle service to on employees. Research also supports that in many
employees to supplement existing transit routes. cases, employees are more productive when permitted
An important step, regardless of which incentives to work from home.22 These examples, which cover
are offered, is to make employees aware of their employee commuting and business travel, are the
commuting options by providing information on transit most common scope 3 operational incentive programs;
routes, tax benefits, and potential savings. however, incentives can be formulated for processes
such as waste management and resource efficiency by
Companies may reduce their emissions from aligning KPIs and bonuses with best practices. These
business travel and long commutes by encouraging incentive programs may be an important driver of GHG
employees to video conference rather than travel reductions for companies with franchise emissions.
for short meetings. While occasional business travel
10
INVESTMENT STRATEGY
Investors are well-placed to shift capital and accelerate emissions impact of investments. The latest updates on
the transition to a low-carbon economy. The types of progress of this work can be found here.
measures appropriate to drive reductions in emissions
from those investments will highly depend on the level In lieu of a specific methodology, there is still a clear
of influence the company has over the subject of its need to divest from fossil fuels and invest in zero-
investments and can range from active measures like carbon projects, technologies and companies. In
influencing managerial decisions through shareholder addition, investors should actively engage companies,
proposals to passive measures such as lending especially those in high-impact sectors, to set
conditions or divestment. The SBTi is developing a science-based emission reduction targets and/or net-
method for financial institutions based on asset classes zero targets.
(expected in 2019) and this will help to quantify the
21 IFEBP: http://www.ifebp.org/bookstore/transportation/Pages/default.aspx
22 Harvard Business Review: https://hbr.org/2014/01/to-raise-productivity-let-more-employees-work-from-home
11
HOW LEVERS INTERACT WITH EACH OTHER
As has been emphasized multiple times through this likelihood that the planet avoids the worst effects of
guidance, the scope 3 emissions of a company overlap climate change. The benefits of such a network are
with the emissions of other companies. The emission similar to those displayed by distributed networks. In
reduction levers described above are not deployed Figure 7 we see the transition from one (centralized
in isolation. Rather, these levers work in conjunction system) to several (decentralized system) to all
with one another, and the boundaries defined actors working together (distributed system) toward a
by greenhouse gas accounting standards create common goal.
opportunities for collaboration and innovation.
In a distributed system each node is a company
As each company’s position in the value chain is a actively trying to reduce its scope 3 emissions and
matter of perspective, a company may be upstream in turn supporting the emission reduction goals of
and/or downstream from another company depending others. Rather than relying on a few climate leaders, it
on what point of reference and what value chain is is everyone’s shared responsibility to reduce emissions.
being used. Customers help to drive the demand to be Accountability is distributed and therefore a single
met by producers who create the supply. The inverse is node or few nodes (i.e. company) do not carry the
just as true. Producers can create innovative business responsibility the system’s failure or success. This
models that open up new markets and shift the way we structure also helps any innovative tools, products and/
do business towards a low-carbon economy. As more or services that are built upon it to come to scale more
actors in the private sector take action, more data will quickly since there will be more actors using them
become available to create more accurate and robust and more opportunity for those ideas to flourish as
targets and reduction strategies and there will be more the network grows as a whole. With all actors working
potential to accurately track the progress against these together at once, every company can help to solve a
targets in a reinforcing feedback mechanism of action. bit of this global, complex issue threatening our planet.
It is everyone’s responsibility to take whatever actions
All these efforts taken together can help build a more possible to mitigate climate change and avoid further
resilient and effective network that will increase the adverse effects and we need to do so immediately.
Centralized Decentralized Distributed
Figure 7: A distributed system of climate actors working toward common emission reduction goals
12
FUTURE WORK
FOURTH WAVE TECHNOLOGIES
“Fourth Wave” technologies such as data analytics, for reporting corporations, suppliers, and consumers
smart sensors, and blockchain will help companies alike. To provide the greatest degree of transparency,
manage their scope 3 impacts by offering powerful operational data should conform to a “Single Source
insight into complex, global value chains. These of Truth” (SSOT) model, where possible. Blockchain
technologies are playing an increasingly important is one example of an SSOT technology because
role in business innovation, and business executives each transaction is securely validated with a digital
agree that implementing new technologies will not “signature” and all parties access information from the
only improve their companies’ environmental footprints, same, immutable database.
but also their bottom lines.23 A key step in unlocking the
potential of emerging technologies is to identify areas Online sharing platforms are an increasingly important
where business and environmental goals align. For way that companies can drive cooperative action,
example, the use of smart sensors in manufacturing facilitating collaboration and communication between
and transportation can improve efficiency and provide purchasing companies and suppliers, as well as the
greater supplier transparency, while also enabling sharing of best practices amongst both suppliers and
companies to produce more accurate scope 3 consumers. Companies should implement transparent
emissions inventories and track progress toward goals. data analytics into these platforms, increasing trust
between parties and enabling participants to reduce
With hardware spending on the “Internet of Things” their own emissions more easily. These benefits are
(IoT) expected to reach almost $3 trillion for business not limited to a corporation and its tier 1 suppliers:
applications alone in 2020, companies that utilize sharing platforms can be used to link suppliers,
digital infrastructure to monitor external services operators, and consumers up and down the value
will have the opportunity to connect with suppliers chain, empowering a vast network of actors by
to track production activity and transportation in providing greater transparency and highlighting
almost real time.24 Smart sensors will facilitate the shared values. The tech startup Provenance, which
collection and sharing of various streams of data, uses blockchain to log primary data at every step in
enabling multinational corporations to engage with the supply chain to be shared with consumers (see
suppliers and assess their progress toward meeting case study)25, is just one example of how fourth wave
scope 3 targets. Similarly, IoT technology and artificial technologies may enable companies to improve not
intelligence (AI) can be incorporated into end products only their environmental impact, but also their service
that adapt to usage patterns and automatically offerings and reputation.
schedule tasks to optimize energy efficiency. Data
analytics will translate these into actionable insights
23 EDF: Business and the fourth wave of Environmentalism

24 WEF: Impact of the Fourth Industrial Revolution on Supply Chains
25 Provenance: https://www.provenance.org/how-it-works
FUTURE WORK
Carbon Analytics and Provenance: Applying blockchain

to scope 3 emissions calculation and tracking
Consumers are increasingly aware of the roles they play in combating climate change and interested in the
carbon footprints of the products they purchase. While businesses are becoming better equipped to measure
the impact of their own operations, there is a gap for tools and methods with which they can measure, track,
and clearly communicate the scope 3 footprint of their products. Without credible data and methodology for
measuring and communicating product carbon footprints, sustainability claims can easily be perceived as
“greenwashing.” Besides consumers, there is also growing interests from businesses to increase the level of
accuracy in measuring THE supply chain and product-level carbon footprint from their suppliers.
Responding to the needs of existing customers and backed by an Innovate UK grant at the end of 2017,
Provenance partnered with Carbon Analytics — pioneers in environmental impact measurement — to develop
a blockchain-based solution to enable businesses to track and communicate supply chain emissions (scope 3)
using a consistent, industry-comparable methodology.
The project is about to complete the initial phase of technological platform integration. It is preparing to start
the pilot testing phase with several companies, which will be followed by multiple rounds of iterations. The
pilot companies are mainly from the Food and Beverage sector as it’s currently an area with strong consumer
interests. The relatively simple sector supply chain structure of food also makes it an ideal fit for the initial testing
phase of the project. The pilot results will be launched next year.
Companies will be able to combine Provenance’s transparency and traceability software service with Carbon
Analytics’ platform to measure and communicate their business-level carbon footprint. Carbon Analytics has
developed a method to estimate a company’s carbon impact from every monetary transaction made, including
electricity, water, stationery, etc. Public information about suppliers’ resource consumption is used to calculate
the resulting impact of a transaction. With this method, companies can use financial data that’s readily available
to link to carbon emission impacts. The fundamental motivation behind the method is to embed the carbon
impact into each financial transaction to surface the negative externalities from the very beginning.
The platform currently provides an estimation of corporate level emissions with companies that have simple
product offerings. Over time, as the method is gradually refined, it will be able to provide emissions estimates
from a product perspective. The guiding standards used for the method are Greenhouse Gas Protocol and the
PAS 2050 method for assessing the lifecycle greenhouse gas emissions of goods and services.
As applications of blockchain to areas such as product traceability, food safety, certification, and fair trade
are quickly emerging, the use of blockchain for scope 3 data collection is still a nascent field. However, the
introduction of the most cutting-edge technology to scope 3 emissions tracking will help increase awareness
and resources to continuously improve the system over time.
SCIENCE_
BASED Gold Standard·�
TARGETS ,_ Clima�e_ Secu�ty&:.._Sustainable Development

Best-practices-in-Scope3-ghg-management

Uploaded by

Copyright:

Available Formats

Best-practices-in-Scope3-ghg-management

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Best-practices-in-Scope3-ghg-management

Uploaded by

Copyright:

Available Formats

Value Change in the Value Chain:

BEST PRACTICES IN SCOPE 3

THE NEED TO MANAGE SCOPE 3

ABOUT THIS GUIDANCE BEST PRACTICES IN REDUCING

Emissions reduction levers are approaches to reduce

EMISSIONS REDUCTION LEVERS HOW LEVERS INTERACT WITH

Procurement policy and choices FUTURE WORK

Indirect emissions are also often double or triple

1 Global Supply Chain Report 2018 - CDP

Box 1: Avoided emissions

Emissions reduction levers

Activity level GHG intensity GHG impact

Figure 1: Levers for reducing emissions

The sections below will discuss these different

• Business model innovation

Table 1: Levers for reducing emissions by scope 3 category

Scope 3 Category Most relevant emissions reduction levers

Supplier engagement, procurement policy and choices,

Supplier engagement, procurement policy and choices,

Procurement policy and choices, product and service design,

Supplier engagement, procurement policy and choices,

Product and service design, business model innovation,

6. Business travel Procurement policy and choices, operational policies

7. Employee commuting Operational policies

8. Upstream leased assets Procurement policy and choices

Supplier engagement, procurement policy and choices,

Product and service design, customer engagement,

Product and service design, customer engagement,

14. Franchises Product and service design, operational policies

15. Investments Investment strategy

MEASURING AND TRACKING IMPACT

3 WRI: MRV 101

Box 2: Making assumptions to fill gaps in primary scope 3 data

Electrical Equipment & Software & Services Telecommunication Service

Construction & Engineering Automobiles & Components Retailing

Pharmaceuticals, Biotechnology & Electric Utilities & Textiles, Apparel, Footwear

Danone: Enable Recognition of Milk Value Chain

A price on carbon can cover both upstream and INCREASING PRODUCT

1. Optimizing a company’s own production processes

The following section provides a framework for supplier

Stage 1: Develop a supply chain engagement strategy

Step 1. Identify (suppliers to engage)

Stage 2: Implement the supply chain engagement strategy

Figure 3: Supplier engagement framework

with their suppliers. The apparel and food sectors are

Table 2: Methods to communicate with suppliers

Communication method Description

Verbal or written contact from a company to its suppliers, without an interactive

Interactive meetings Regular meetings, often at management level.

Webinars and videos Often one-way communication in an engaging way.

Table 3: Methods to collaborate with suppliers and company examples

Capgemini Group: every supplier

Promote action for GHG Tesco: informs suppliers through

A project regarding GHG Suez: collaborates with upstream

For companies that

Hewlett Packard Enterprise: HPE’s

5 Supplier of the supplier needs to set science-based

the science-based targets

3 Supplier of the supplier needs to set science-based

Figure 4: The Ladder Approach to Supplier Emissions Reduction Targets