January 2, 2021
The share of companies reporting on their value chain emissions remains small compared to GHG reporting overall, but practitioners and researchers have developed accounting methods that facilitate the process.
A common approach to quantifying Scope 3 emissions is comparative life cycle analysis (LCA), based on average carbon emission values of the materials, services, or processes used in a product’s value chain.
While industry data facilitates the calculation of Scope 3 emissions, the LCA method uses conservative proxy values that do not reflect any actual emissions reduction undertaken.
A more precise alternative are supplier specific methods, where GHG emissions data is requested from upstream suppliers through dedicated questionnaires or other tools of data collection, using a cascading approach.
By channelling influence from the first tier of suppliers to the next and so on, companies overcome the shortcomings of using average values through actual data.
However, a lack of direct business relationships with upstream suppliers limits follow-through using this method, and can result in data gaps for both influential suppliers or supply chain areas with the highest carbon impacts.
Companies using the supplier-specific method spend a lot of time and resources on data collection but often receive substandard-quality data from their suppliers, or no data at all beyond tiers 1 and 2.
EcoVadis assessment data has shown the extreme disparity between company sizes when it comes to GHG reporting, with under 3% of small sized companies reporting on their carbon emissions in 2019.
SMEs form an integral part of many supply chains, and reporting gaps can be detrimental to quantifying corporations’ overall supply chain footprint.
There are a number of challenges
• High-visibility barriers to Scope 3 reporting and action include limited leverage over upstream suppliers and their emissions data.
• An underdeveloped relationship with individual suppliers can cause larger data gaps, or obstruct a cascading, tier-by tier reduction strategy all together.
• Many companies lack the know-how and resources to engage in GHG accounting processes, especially through complex tools such as comparative life cycle analysis (LCA).
With rapidly changing industry expectations and best practices, training skilled staff can be a challenge, over which much-needed supplier engagement might take a back seat yet again.
Number of start-ups and established players are tackling this issue and no one company has really cracked this challenge.
SVZK believes a consultancy company or a company with wide reach (i.e. SAP or Microsoft) are well placed to solve this problem.
