This article is sponsored by Pure Strategies.
Marathon runners frequently divide the race into smaller goals, such as focusing on the next mile. Likewise, slicing up scope 3 challenges into smaller chunks and zeroing in on them can yield impressive results when aiming for success in Scope 3 emissions reduction. When the Science Based Targets Initiative (SBTi) was first established in 2015, only a handful of companies had developed Scope 3 inventories and targets. However, eight years in, the SBTi has achieved success with over 95 percent of SBTi-validated targets including Scope 3 emissions. Setting targets, though challenging, represents the start of the SBT marathon.
Every company faces challenges in meeting these ambitious targets. Let’s examine how companies have set and achieved incremental targets effectively progress towards their long-term sustainability objectives. Pure Strategies’ client work points to five Scope 3 difficulties that companies face: poor alignment; data challenges; and implementation barriers related to suppliers, technology and the market. Targeting each represents a benchmark on your company’s Scope 3 journey.
Scope 3 Challenges
- Poor Alignment
- Data Challenges
- Supplier Barriers
- Technology Barriers
- Market Barriers
Complexities of Implementing Scope 3
Surprisingly, some companies fail to align the C-suite when developing and implementing their climate commitments. For the many that do, alignment challenges persist, most commonly involving the mismatch between procurement’s focus on cost reduction and redundancy and the needed flexibility to meet climate targets. According to a recent Efficio survey of procurement professionals, 46 percent of respondents reported “conflicting procurement priorities in which incentives are not aligned to climate-related goals.” Only 38 percent said they were responsible for environmental sustainability, compared to 72 percent focusing on traditional procurement duties, such as executing contracts and cost control. We have seen similar mismatched priorities between research and development (R&D), marketing, supply chain and corporate climate priorities.
Furthermore, nearly every company experiences Scope 3 data challenges. When managing corporate Scope 3 inventories, compiling and updating data is a significant undertaking. With over tens of millions of data points from sources such as raw material purchases, supplier information, emissions factors, logistics data and more, staying on top of ever-changing and increasingly complex corporate Scope 3 inventories requires significant time and investment. Some companies built through acquisition often operate multiple PLM/ERP systems, making it difficult even to understand what goods they buy, no less their carbon impacts. Companies managing multiple tiers across numerous regions may find amassing this data and developing insights complex and costly.
For most companies, Scope 3 emissions concentrate in their supply chains, where the emissions stem from supplier actions. Supplier barriers include supplier willingness and capacity to engage, the lack of long-term contracts, the limited influence companies have over their vendors and low or long-term ROI. Sustainability teams are quickly overwhelmed when they must also deal with the sheer number of suppliers and the resources needed to engage with multi-tier supply chains in far-flung geographies.
As teams grapple with the challenges of managing numerous suppliers and navigating complex supply chains spanning various geographic regions, they also face technology barriers. Technology barriers include scaling promising solutions which may be more costly or difficult to integrate into existing supply chains. Ben and Jerry’s sought manure digester technology appropriately sized for the small Vermont farms in their supply shed. Digesters are pricey, difficult to run and not feasible for small farms. European innovators now market mini-digesters costing a fraction of their full-sized cousins. With a smaller footprint, they can be easier to permit. Unfortunately, these systems tend to be sold in Europe and lack sales and service operations in North America. Thus, while solving a technology barrier, these systems face another barrier — a market barrier — here in the U.S.
Finally, a plethora of market barriers hinder further advancements in scope 3 emission management. Market barriers abound in scope 3, ranging from the adoption of new products and services by industry and consumers to region-specific regulatory barriers. On the consumer side, the public tends to hold onto habits. P&G’s admirable efforts to make cold water wash “the next broadly adopted eco-habit shows how challenging this can be. On the regulatory side, energy market barriers as reported in a recent IEA report highlighted the difficulties of procuring renewable energy in Asian supply chains, including nationalized grids, incumbent interests and inflexible commercial arrangements. For companies such as Apple and others working in the region, renewable energy costs remain high despite falling costs and increasing availability elsewhere.
Notwithstanding the challenges encountered in Scope 3 emission management, solutions are available to overcome market barriers. Just as marathon runners push through physical and mental hurdles, businesses can master these barriers and reach their sustainability goals.
From barriers to solutions
While solutions to Scope 3 challenges vary from company to company, common themes emerge. To align C-suite and functional leaders in the company, building sustainability into the bonus structure is an effective approach. Seventh Generation has tied bonuses to sustainability goals and aligned leadership and staff on corporate targets. And much like how a marathoner breaks down the race into short goals — such as focusing on the next mile — shorter-term climate goals are another effective tool. Breaking a 10-year climate target into smaller chunks helps teams plan, execute and deliver meaningful progress toward the larger goal. The last step in aligning leadership is to make sure to involve them and other key stakeholders while developing your commitments. Doing so helps gain internal buy-in at the outset of your climate journey.
To overcome data challenges, start by focusing on the core data elements you need to track. Avoid overwhelming suppliers and internal teams with expansive supplier data collection efforts. Run supplier communication and data collection through your procurement team; otherwise, suppliers will ignore data requests sent by the sustainability team. Use technology wisely. With the proliferation of options on the market, finding the data partner(s) that best fit your needs can be daunting. Reports from Verdantix and Forester are available for purchase to help sift through the information.
Additionally, supply chain challenges are endemic in scope 3 work. Engaging with multi-tier supply chains across the globe is costly and complex work. Technology helps, but suppliers need to understand their customer’s goals and often need financial and other incentives to cooperate. Some retailers, including Walmart, PVH, and Levi Strauss use financial instruments to give suppliers faster payment terms if they meet specific sustainability objectives. Supplier education and engagement tools, such as one Pure Strategies will announce during Climate Week, ease the education and reporting burden for companies with SBTi supplier engagement targets. Industry collaboration can reduce the cost and increase the impact of supplier engagement. For example, the Apparel Impact Institute coordinates the needs of apparel brands, providing a clear market signal, technical services and access to financial resources.
For many businesses, solving market barriers feels like the hardest hill to climb. In the past year, plant-based meat alternatives fell 20 percent due to higher costs and inferior flavor. Low-carbon products need investment in R&D, consumer insights and procurement strategies to compete with traditional, carbon-intensive products. Regulatory barriers such as the aforementioned renewable energy challenges in southeast Asia require investment. Apple’s Clean Energy Program has expanded five times over in recent years, owing to policy advocacy, green bonds and supplier education through its Clean Energy Academy.
Addressing these specific challenges requires tailored strategies, such as building strong supplier relationships, investing in technology and innovation, advocating for supportive policies, fostering a culture of sustainability and collaborating with industry partners to collectively overcome obstacles. In the case of scope 3 reductions, this is the marathon we have been training for. Given the scale, scope and immediacy of the climate crisis, there is no race more worthy for today’s sustainability leaders.
