Decarbonisation Technology - February 2024 Issue

Based on screening, does the purchased good or service contribute significantly to S cope 3 emissions or is supplier engagement otherwise relevant to the business goals?

Can the tier 1 supplier provide product-level cradle-to-gate GHG data (of sufficient quality to meet the business goals) for the purchased good or service?

Are data available on the physical quantity of the purchased good or service?

Use the supplier- specic method

Yes

Can the supplier provide allocated S cope 1 and 2 data (of sufficient quality to meet the business goals) relating to the purchased good or service?

Are data available on the physical quantity

Use the hybrid method

Yes

of the purchased good or service?

Yes

Use the average data method

Use the spend-based method

Figure 4 Scope 3 emissions decision tree

studies available online. The GHG Protocol’s decision tree underscores a critical challenge for companies employing supplier-specific methods: ensuring the availability and quality of data to align with business objectives. While many companies effectively assess emissions using industry-average databases, complications arise when a substantial part of the inventory is comprised of suppliers with limited resources to provide data. The 80-20 rule posits that 80% of Scope 3 emissions stem from 20% of suppliers; however, in numerous instances, this 20% can represent more than 50 suppliers, making it a formidable task to monitor emissions from each one (Laoyan, 2022). According to the GHG Protocol, there are four methodologies for emissions calculation. However, organisations have predominantly concentrated on the spend-based method. The majority of consultants or software providers that corporations currently collaborate with offer a one-time summary of spend-based Scope 3 computations. It is imperative for companies to leverage this as a benchmark for analysing top suppliers for targeted data collection rather than confining the estimation-based data solely for reporting purposes. Obtaining precise emissions data can pose a challenge, and the artificial intelligence capabilities promised by software companies cannot replace data directly procured from your own suppliers.

Nonetheless, by instituting an effective procedure for gathering and verifying data from your suppliers in accordance with international standards, you can ensure access to dependable and precise information. This will aid in making informed decisions regarding your sustainability initiatives. Furthermore, this could have a direct influence on your future financial performance, particularly in light of the escalating tax implications associated with carbon emissions. Balancing specificity and accuracy When gathering data from suppliers, there is a delicate balance between specificity and accuracy. The specificity of the collected data, tailored to the purchased product or service, hinges on the reliability of the supplier’s data sources and the level of detail in the information gathered. Ensuring the accuracy of collected data requires substantial effort to validate that the supplier’s allocation method aligns with industry standards. The risk of the data not truly representing the emissions of the supply chain underscores the need for a robust process to guarantee data quality. In this landscape, initiatives like the Partnership for Carbon Transparency (PACT) hosted by the World Business Council for Sustainable Development (WBCSD) play an important role in creating a global standard that can standardise the exchange of carbon emissions data.