Managing Emissions and Reporting Across the Value Chain

Today thousands of organizations worldwide have integrated Scope 3 in their GHG reporting to provide a 360° view of their environmental impact to investors, communities, customers, employees and to simply meet reporting requirements. But what is exactly scope 3 and why is a supplier management framework important to report on it?

A Renewed Focus on Shipping Emissions

To summarize this new reporting challenge, a company’s impacts, risks and opportunities related to GHG emissions and climate change depends on their upstream and downstream impacts, not only their direct operations. A complete GHG inventory across scope 1, scope 2 and scope 3 is needed to enable companies to understand and manage climate related impacts, risks and opportunities.

Scope 3 emissions have significant opportunities for strategic engagement and management for companies to make key decisions or influence choices concerning the selection of suppliers and other value chain partners, material inputs, investments, and product types and design.

So, what are the strategies that companies should adopt to address risks and create opportunities across the value chain:

• Develop an inventory of risks and opportunities associated with emissions sources identification and accurate reporting
• Set realistic and progressive emission targets across the value chain and invest in the technology and processes to report on them
• Focus on engaging all partners in the value chain to co-own developing, measuring and meeting these targets
• Invest time and resources to regularly inform stakeholders at all levels to manage reputation and buy in

The risks of not developing a robust emissions reduction and reporting strategy across the value chain are multiple:

• Cost: Energy costs have a direct impact on product cost and are passed on to consumers affecting margins and profits
• Regulatory: Non-compliance comes at a high cost in terms of government-imposed fines, market access limitations and reduction in public contracts opportunities
• Reputation: Consumers have become acutely aware of the impact of their purchasing choices. Local communities are increasingly vocal about the emissions of companies established in their vicinity

But these fundamental risks can be offset by increasing opportunities for companies who deploy a holistic emission reduction and accurate reporting strategy across the value chain:

• Product cost reduction: Energy accounts for up to 55% of cost in manufacturing and even more in transportation
• Innovation: A focus on GHG reduction has consistently shown to be a key driver in innovation, automation and safety
• Brand reputation: Consumers have become "activists" and chose product and services that have a positive environmental impact-The increasing number of passengers who chose to travel by train instead of flying in the EU is a good example-
• Improved stakeholder relations: This area is key to demonstrate a focus on voluntary disclosure and garner support from investors, government agencies and investors

The opportunities that a comprehensive emissions reduction and reporting strategy across the value chain can no longer be ignored by business leaders. This strategy is and will remain a key lever for growth and competitivity. Engaging and collaborating with all stakeholders - particularly suppliers- to meet emissions reduction goals and create a culture of transparency through meaningful accurate reporting will require a shift in corporate governance, skills requirements and most of all leadership focus.