You Are Accountable for Some of Your Clients' Greenhouse Gas Emissions
By Sylvie Guillon - 4 min read
We are in a race to reduce our overall Greenhouse Gas emissions (GHG) in order to limit global warming and avoid catastrophic impacts for everyone
Most of large companies are reporting their GHG emissions as well as the actions they are taking to reduce it
One of their main actions is to collaborate with their suppliers to reduce the carbon footprint of their supply chain
In the fight against climate change, reducing greenhouse gas (GHG) emissions is essential. The Paris Agreement aims to limit global warming to well below 2°C above pre-industrial levels, with efforts to limit it to 1.5°C. To achieve these targets, we need to reduce global GHG emissions by about 45% from 2010 levels by 2030 and reach net-zero emissions by 2050. Reaching net-zero emissions involves dramatically cutting our emissions and relying on natural absorption by ecosystems, including forests and oceans, as well as technological carbon removal solutions. To get there, we need concerted efforts from governments, public and private companies from all sectors, including small and medium-sized businesses (SMBs).
Understanding GHG Emissions and the Three Scopes
The Greenhouse Gas Protocol, an internationally recognized standard for calculating corporate carbon footprints, defines the three scopes of greenhouse gas (GHG) emissions as follows:
Scope 1: Direct emissions from sources owned or controlled by the company, such as emissions from company vehicles, from operations and on-site fuel combustion.
Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company.
Scope 3: All other indirect emissions that occur in the value chain of the reporting company, including both upstream (purchased goods and services, upstream transportation and distribution, waste generated by your operations, business travels...) and downstream activities (downstream transportation and distribution, used of product sold, end-of-life treatments...)
Depending on location and size, companies may have to report their scope 3. This will be the case in Europe starting in 2025 for large companies for instance.
The Challenge of Scope 3 Emissions
In some sectors, Scope 3 emissions represent the largest portion of a company’s total GHG emissions (99% for capital goods, 98% in transport services, 93% in real estate & construction...). However, these emissions are often the hardest to track and manage because they occur outside the direct control of the company. Identifying and quantifying Scope 3 emissions requires collaboration with a wide range of stakeholders, including suppliers, customers, and service providers.
If only 29% of companies are reporting at least some of their scope 3 emission in the US (MSCI Net-zero tracker, April 2024), they represent now 42% worldwide, an increase of +17% compared to last year.
What Does This Mean for Suppliers?
As companies strive to meet their GHG reduction targets and align with the Paris Agreement, they increasingly rely on accurate data from their suppliers to report their Scope 3 emissions. By collaborating with all their stakeholders in order to gain access to the data they need, they ensure that both parties work together on common GHG emissions reduction goals.
Is your main activity in B2B? Are you selling your products to other companies? If yes, you will soon face pressure from your clients to provide detailed GHG emissions data related to your products and services, and they may ask you to comply to their expectations.
Conclusion
Even if you are not legally required to publish an ESG (Environmental, Social, and Governance) report, preparing to provide the necessary data that your stakeholders will demand is crucial. Proactively tracking and managing your GHG emissions can give you a competitive edge as you will build trust with your customers. Early preparation can position your business as a preferred partner for companies committed to sustainability, opening up new opportunities and enhancing your reputation in the market.
By understanding your role in your clients' GHG emissions and taking steps to reduce them, you contribute to global climate goals and ensure your business remains resilient and competitive in an evolving market landscape.