How Businesses Are Tackling Scope 3 Emissions in 2025
Have you ever thought about how companies aim to hit their net zero goals? Most of their emissions come from outside their direct control. In 2025, businesses are working hard to tackle Scope 3 emissions. These are indirect emissions in their value chain that they don’t control.
These emissions are key to any climate action plan. They have a big impact on a company’s environmental footprint. This is because they spread across supply chains and product lifecycles.
Key Takeaways
- Scope 3 emissions can account for more than 70% of a business’s carbon footprint.
- Automotive sector examples: Volvo Trucks with fossil-free steel, and Komatsu’s zero-emissions mining equipment.
- Role of value chain integration: LKAB’s shift towards lower emissions technology for iron processing.
- Partnerships like Vale and Boston Metal’s collaboration for low-carbon steel production.
- Green portfolio strategies, such as Schneider Electric’s energy management solutions, to lower overall carbon footprint.
Understanding Scope 3 Emissions and Their Importance
For businesses, understanding Scope 3 Emissions is key to fighting climate change. These emissions come from activities a company doesn’t own but affects. They include goods production, transportation, and product disposal. Categories 1 and 11 are especially big, showing how wide and complex Scope 3 Emissions are.
Scope 3 emissions are crucial because they make up over 70% of a company’s carbon footprint. Accurately measuring these emissions is vital for reducing carbon footprints. By focusing on these emissions, companies can find areas to improve, manage risks, and find ways to use energy better.
Even though the SEC doesn’t require Scope 3 emissions reporting, places like Europe and California are moving forward. The Corporate Sustainability Reporting Directive in Europe will require Scope 3 disclosures for certain companies. California has also passed laws that will affect over 10,000 companies.
To reduce Scope 3 Emissions, companies need strong strategies. They can use tools and frameworks to measure and cut these emissions. The goal is to reach net-zero by 2050. Companies should set short-term targets for Scope 1, 2, and 3 emissions and long-term targets for all emissions.
| Strategy | Description |
|---|---|
| Leveraging Procurement | Including carbon reporting and reduction requirements in tender proposals and performance management contracts. |
| Building Capability | Conducting supplier forums, workshops, and training to upskill suppliers in decarbonization. |
| Rewarding Progress | Financially rewarding suppliers for meeting emissions targets or investing in longer-term supplier initiatives. |
| Enforcing Performance | Applying direct financial penalties for failing to meet net zero targets. |
Challenges in Measuring Scope 3 Emissions
Measuring Scope 3 emissions is tough because of complex supply chains and data collection issues. The Carbon Disclosure Project (CDP) says Scope 3 emissions are 11.4 times bigger than direct emissions. This shows how big their impact is.
It’s hard for businesses to get accurate numbers for Scope 3 emissions. The main problem is tracking data through long, complex supply chains. Suppliers use different methods and don’t always report in the same way.
Rules for reporting emissions are changing all the time. Governments want more detailed reports. Companies need to follow standards like the GHG Protocol and new rules from the International Sustainability Standards Board (ISSB).
Finance sectors face an even bigger challenge. They have to deal with emissions that make up almost 100% of their total. Services also have unique problems because they are hard to measure.
Companies that can measure Scope 3 emissions well can lead in sustainability. But, without good data, it’s hard to manage these emissions. Here are some key points that show the challenges:
| Challenge | Impact | Solution |
|---|---|---|
| Complex Supply Chains | Obscured emission sources | Enhanced data collection methods |
| Data Collection | Lack of standardized reporting | Implementation of GHG Protocol |
| Compliance Standards | Stricter regulatory requirements | Robust tracking systems |
To solve these problems, we need to work together. We must collect data carefully and understand the environmental effects of complex supply chains.
Effective Strategies for Reducing Scope 3 Emissions
Businesses are finding many ways to tackle Scope 3 emissions. Since Scope 3 emissions can make up over 70% of a company’s carbon footprint, it’s key to have a solid plan.
Supplier engagement is a big part of the solution. Working with suppliers helps companies adopt green practices and get accurate emissions data. This teamwork is crucial because up to 90% of a company’s carbon footprint comes from its supply chain.
Using technological innovations is another smart move. Companies are using new data tools to better manage their supply chains. Tools like machine learning and data analytics help cut down on fuel use and emissions.
Choosing suppliers who use green practices is also important. By doing this, businesses can lower their environmental impact. Moving towards renewable energy and circular economy models helps reduce Scope 3 emissions.
Improving internal processes is also key. Making transportation more efficient, using resources wisely, and using smart technology can all help lower emissions. For example, RoadRunner’s Waste Metering™ technology uses AI to help track and reduce emissions.
However, many companies are not on track to meet their Scope 3 emissions goals. Only 22% of businesses are expected to reach their targets, according to PwC. So, setting achievable goals and regularly checking progress is essential.
Collaborating with waste management companies like RoadRunner can also help. By improving recycling and increasing recycling rates, businesses can cut down on waste and emissions. Reducing waste is a powerful way to lower Scope 3 emissions.
| Strategy | Impact on Scope 3 Emission Reduction |
|---|---|
| Supplier Engagement | Improves data accuracy and promotes sustainable practices across the supply chain. |
| Technological Innovations | Optimizes transportation and logistics, reducing fuel consumption and emissions. |
| Green Procurement | Reduces environmental impacts by selecting low-emission suppliers. |
| Internal Process Optimization | Lowers emissions through improved transportation, resource use, and smart tech tools. |
| Waste Management Partnerships | Boosts recycling rates and lowers emissions associated with waste generation. |
How Businesses Are Tackling Scope 3 Emissions in 2025
Businesses are finding new ways to cut Scope 3 emissions by 2025. They look at what others have done to learn and improve. This helps them find the best ways to reduce emissions.
The chemical industry is a big emitter, with Scope 3 emissions making up 75% of its total. Despite a 6% rise in emissions since 2013, it released 186 million metric tonnes of CO2e in 2022. With a huge revenue and many chemicals, it has a big role in reducing emissions.
One big problem is the lack of clear guidelines for reporting emissions. But, there’s growing pressure to show detailed carbon footprints, including Scope 3. The EU’s rules and the Carbon Border Adjustment Mechanism are key for European companies.
Top chemical companies are focusing on green procurement and working better with suppliers. The TfS Scope 3 GHG Emissions Programme and its Product Carbon Footprint Guideline are key tools. They help companies track and report their carbon footprint accurately. The PCF Exchange platform also helps share data, making things clearer and more effective.
A survey found that 69% of procurement officers want to improve risk management and build strong supply chains. Also, 61% see working closer with suppliers as a top goal. These strategies are crucial for the industry to cut emissions by 15% by 2030.
Even though only 30% of chemical companies report Scope 3 emissions, and only 20% did in 2020, things are changing. Using new tech and forming partnerships are key to reducing emissions well.
By following these new methods and learning from others, businesses can make a big difference. This will help create a greener future for all.
Regulatory and External Pressures Driving Change
Businesses face a changing world where regulatory pressure and investor demands are key. The European Union’s Corporate Sustainability Reporting Directive (CSRD) is a big example. It makes companies reveal and cut Scope 3 emissions, fitting into bigger sustainability goals.
Scope 3 emissions make up 65–95% of a company’s carbon footprint. This is a big challenge for businesses. About 80% of these emissions come from just 20 suppliers. The Greenhouse Gas Protocol helps by allowing the use of averages and third-party data to figure out these emissions.
There’s a growing push for Scope 3 reporting, led by groups like the International Sustainability Standards Board (ISSB) and the US Securities and Exchange Commission. This shows the strong regulatory pressure on companies. Investors are also stepping up, with a PwC survey showing over one-third of them want to see Scope 3 emissions cut. They manage $14 trillion in assets, showing their big influence.
Investor demands are more than just following rules; they’re shaping business plans. Investors want clear Scope 3 emissions data from companies. This is pushing firms to improve their data collection and openness. Companies like Schneider Electric are leading the way, working closely with suppliers to lower emissions. They had 130+ decarbonization sessions in 2022.
In summary, while cutting Scope 3 emissions is tough, regulatory pressure and investor demands are pushing companies towards greener practices.
Conclusion
As we move towards 2025, cutting Scope 3 emissions becomes more important. Companies like Cisco, Unilever, and IKEA are leading the way. They use strong strategies to meet these goals.
These efforts help them follow rules, win over investors, and stay ahead of rivals. Tackling Scope 3 emissions, which make up 80-90% of a company’s emissions, is a big task. It involves working with suppliers and using green strategies.
Scope 3 emissions are indirect emissions in a company’s value chain. Working with suppliers is key to reducing them. By setting clear goals and targets, companies can cut emissions from goods and services.
This teamwork between companies and suppliers is essential. It helps speed up emission cuts and reach climate goals.
By focusing on Scope 3 emissions, companies can meet decarbonization goals. This also gives them a competitive edge by making the supply chain more sustainable. Companies that focus on these emissions can save money, improve their image, and spark innovation.
This leads to better brand loyalty and more customer involvement. In short, the future looks bright for companies tackling Scope 3 emissions. They will play a big role in making our future sustainable.
Source Links
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- What you really need to know about Scope 3 emissions and your business
- Scope 3 Emissions
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- 4 biggest challenges when measuring Scope 3 emissions
- Effective Strategies for Reducing Scope 3 Emissions for Businesses
- Reducing Scope 3 Emissions: A Comprehensive Guide
- How To Reduce Scope 3 Emissions: Key Strategies That Work
- Tackling Scope 3 emissions in chemicals industry crucial to net zero by 2050
- 5 Strategies to Tackle the Scope 3 Emissions Challenge
- Tackling the Scope 3 challenge
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- How corporates are tackling the Scope 3 push
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- Opportunities and challenges of tackling Scope 3 “Indirect” emissions from residential hot water
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