Scope 3 emissions are missing link in climate change monitoring

Even as businesses look to prove their sustainability credentials to increasingly discerning customers, many are failing to track the largest source of their emissions. Indirect Scope 3 emissions are estimated to account for up to 95% of a company’s carbon footprint, however a new report shows that fewer than one-quarter of organisations were well informed on the emissions sources in their supply chain.

According to Capgemini Research Institute’s Data for Net Zero report, 92% of firms say they aim to achieve net zero by 2040 – and 42% suggest they will do so by the end of the present decade. To help achieve this, a similar number have set short-term targets in addition to long-term goals – while 33% plan to soon.

Most organisations also know that monitoring progress of their net zero drives constantly is essential to their success. Around 85% of the 900 organisations organisations polled recognise the value of emissions data to this end. But Capgemini also found that 48% are not using data adequately to that end, while 48% are not “well positioned enough” to use data to drive further decision making.

Without the information that embedding emissions data into decision making could provide, the vast majority of respondents are coming up short, when it comes to their net zero ambitions. In particular, firms are currently neglecting their supply chains and ecosystems when it comes to the impact their work has on the environment.

When it comes to Scope 1 emissions, the majority are already well informed about the scale of their problems. Around three-quarters of organisations measure emissions from company facilities, and 65% do so for company vehicles. Similarly, Scope 2 emissions are covered by a majority of 56%, who evaluate the electricity, steam, heating, and cooling purchased for their own use.

When it comes to emissions which are not directly the result of a company’s own activities, however, many organisations are keeping themselves in the dark. In terms of upstream activities, Capgemini could not find a majority of organisations which monitored any emission from their supply chain. The largest majority said, for example that they did not keep an eye on emissions caused by goods and services they purchased, while a third admitted they did not know if they did or not. Worse, 71% of firms do not monitor the emissions impact the commuting of their employees create.

In terms of downstream activities, firms were even less likely to keep up with their Scope 3 emissions. While calls to divest from fossil-fuel-intensive companies rise, around 48% still claimed to be unsure how their investments might create emissions, while 43% said they did not consider how their products were treated at the end of their life – in other words, if they could be recycled, or if materials in them might harm the natural world upon disposal.

The implications of this are grave. Capgemini noted that Scope 3 emissions are actually the largest portion of most organisations’ carbon footprint.  Scope 3 emissions are estimated to account for 65%-95% of a company’s emissions, so failing to get a handle on them will scupper any meaningful efforts to reach net zero. However, at present it is precisely these emissions which are being overlooked. While 89% of companies note that their net zero plans cover Scope 1, and 48% cover Scope 2, only 25% cover Scope 3 upstream – and a tiny 16% cover Scope 3 downstream.

Zhiwei Jiang, CEO of the Insights & Data Global Business Line at Capgemini, said, “Our planet is in crisis right now. And if you want to track your progress; if you want to make headway on new regulation or legislation; if you want to respond to consumer demands – data and analytics are the entry point. Too few are taking a truly data-driven approach in their journey towards these targets. Collaboration also plays a crucial role here – be it across the value chain or through global alliances to collectively improve emissions management systems. Organisations must also invest in carbon accounting talent and define clear emission targets so that they can move from ambition to action.”