10 business benefits to reporting your Scope 3 emissions

As the deadline approaches for businesses to publish their emissions data under Streamlined Energy and Carbon Reporting (SECR) rules, it may seem strange that some are voluntarily doing extra work by reporting on their Scope 3, or “value chain” emissions. Reporting at this level isn’t yet compulsory (with a couple of exceptions), but there are strong business reasons for going beyond the legal minimum and including Scope 3 in your first year’s reporting.

1. Gaining valuable information

Scope 3 emissions are those associated with the activities of your business, but not directly generated by your business or the energy it buys. This means they are generated by other businesses connected with yours: suppliers, distributors, end users, franchisees, waste disposal and so on. The process of measuring your Scope 3 emissions means doing a thorough evaluation of your entire value chain, from the raw materials you buy through to the distribution, processing, disposal and use of your products. This mapping exercise will provide you with a valuable source of detailed information about your business.

2. Having a true picture of your emissions

Experts tend to agree that for most businesses, the biggest proportion of total greenhouse gas emissions are in Scope 3. The proportion varies from business to business, but you can expect them to be over 80% of your total. If you just measure Scope 1 emissions and Scope 2 emissions, as required by the current legislation, you will never get a realistic idea of your company’s true emissions footprint. Any credible scheme to reduce emissions has to include Scope 3.

3. Identifying opportunities for improvement

Most businesses will find that taking a forensic look at their entire value chain will reveal many ways in which processes can be improved. This could lead to a boost in productivity or a reduction in unnecessary costs.

4. Deciding what’s important

If you do the work of mapping your value chain emissions, you will see that some emissions sources are more significant than others. Since it’s not yet compulsory to report most Scope 3 emissions, you can choose to include only the biggest emissions sources in your reporting, or only those you’re choosing to focus on. This is different from simply ignoring Scope 3, because you’re making an informed decision about what’s important to your business and what isn’t.

5. Strengthening relationships with stakeholders

The process of gathering Scope 3 data necessarily means engaging with your suppliers, distributors and others. This extra communication can strengthen working relationships and might lead to conversations about how to improve the way you work together.

6. Making better choices about your value chain

The process of mapping your Scope 3 emissions will involve learning a lot about your business, identifying opportunities for positive change and working more closely with your value chain. In the process, you will come to realise which businesses are responsive and delivering good value for money, and which aren’t. This is information you can use when you are making decisions about who to work with in future.

7. Preparing the ground for a net zero target

Last month the NHS and banking giant HSBC joined the many well-known organisations who have set themselves ambitious net zero targets. Over a thousand companies have signed up to the Science-Based Targets initiative (SBTi) with a pledge to take science-backed action on their climate impact. If you want to sign up to the SBTi, it is compulsory to include your Scope 3 emissions if they make up over 40% of your total (which they probably do). Even if you don’t sign up, any valid net zero goal will include Scope 3.

8. Futureproofing your compliance

At the time of writing (November 2020), it is only compulsory to report one type of Scope 3 emissions (relating to fuel consumed for business travel) and even this is only compulsory for large unquoted companies and LLPs. But if Scope 3 emissions are a substantial proportion of your company’s emissions, which they almost certainly are, you are “strongly encouraged” to report them. It is very likely that more types of Scope 3 emissions will become compulsory to report in future. If you get the processes in place now, you will increase your company’s regulatory resilience.

9. Protecting your business from reputational risk

Companies that ignore Scope 3 and just do the legal minimum of SECR reporting are exposing themselves to reputational risk, especially if their competitors are doing the work of measuring and reporting on Scope 3. You don’t want to be the only business in your sector that doesn’t seem to be taking action on energy and carbon efficiency, and you don’t want to be the only one that isn’t engaging with its value chain on these issues.

10. Getting started with carbon insetting

Carbon insetting is a similar concept to carbon offsetting: you invest in a project to reduce or absorb carbon in order to balance out your own emissions. The important difference is that with insetting, the projects you invest in are part of your own value chain. So, rather than paying a third party to do something like planting trees or installing solar panels, you are working with your existing partner firms and helping them to bring down their emissions. For example, fashion firm Burberry is investing in helping its wool suppliers to boost carbon capture in the soil their sheep graze on. It is a smarter way to offset because your money works harder for you – but it’s only possible if you first do the groundwork of measuring your Scope 3 emissions.