For many organizations, Scope 3 emissions make up the larger part of their overall emissions profile, so tackling those emissions is vital to the decarbonization of the economy and addressing climate change. As a result, stakeholder pressure to calculate and report Scope 3 emissions is rapidly increasing. However, measuring and managing emissions across entire value chains is complex, and currently many firms are not reporting Scope 3 emissions separately. To explore the challenges of Scope 3 emissions and how software might help, Verdantix hosted a roundtable lunch for a select group of climate leaders. These were the key points that emerged:
- Data accuracy: there was an interesting discussion around the high degree of accuracy demanded by CFOs on carbon emissions data, who view the data quality requirements in the same way as financial data (and who are being forced to pay attention to this by TCFD-aligned legislation). Some stakeholders (such as sustainability consultants) don’t need highly accurate data – some only need indicative data to allow them to focus their sustainability strategy work on the organization’s hot spots.
- Scope 3 categories: a significant portion of firms understand the downstream and upstream segmentation of Scope 3, but understanding which of the 15 categories of Scope 3 to focus on remains a challenge. This is especially the case for organizations with lower levels of carbon management maturity.
- Supplier engagement: there was discussion around the changing nature of conversations with suppliers and the genuine significance of carbon emissions (alongside pricing) in decisions to establish and maintain supplier relationships.
- Embodied carbon: sustainability professionals from the real estate sector were well represented and we heard that embodied carbon is a real consideration in a growing number of real estate investment decisions (typically as part of Category 1 and Category 2).
- Hybrid working: getting further into the detail, interesting points were raised about hybrid working and the impact on employee commuting emissions (Category 7). There is a real need for firms to reassess their calculations.
- Benchmarking: it was noted that firms are increasingly turning to benchmarking themselves against competitors on Scope 3 targets and metrics to help shape their own strategies and investment decisions.
- Software requirements: multiple examples were cited of organizations turning to software to help manage Scope 3 data challenges. But, in many cases, it was noted that software is purchased alongside services (solutions) to support in carbon reduction strategy development and execution.
- Software investment growth: we picked up a consensus view that we remain at the very beginning of the buying cycle for solutions and software that can deliver investor-grade carbon data. Non-legislative drivers continue to push the market forward but new wide-ranging legislation, such as the CSRD, is expected to drive an inflection point in spending on carbon management solutions from 2024.
Verdantix roundtable lunches provide the perfect opportunity for senior sustainability leaders to explore current challenges with their peers in the convivial surroundings of a top tier restaurant and under the cover of the Chatham House Rule. If you’d like to join us for one, please contact Lucy Hobson at lhobson@verdantix.com and indicate which topic(s) you’d like to chew over.
