Future of Scope 3: Evolving Regulations

In this webinar, WeSpire CEO & Founder Susan Hunt Stevens hosts Chris Heysel, the Head of Advisory at South Pole to discuss scope 3 regulations, reporting, and best practices.

Meet the Panel

Susan Hunt Stevens

Susan Hunt Stevens is the Founder & CEO of WeSpire, an award-winning employee experience technology platform focused on engaging people in ESG initiatives. She was named an EY Entrepreneur of the Year for New England, a Boston Business Journal Woman of Influence, and to the Environmental Leader 100 list.

Prior to WeSpire, she spent 9 years at The New York Times Company, as a consumer marketing and digital executive. She has an MBA from The Tuck School of Business at Dartmouth, where she was named a Tuck Scholar, and graduated with high honors from Wesleyan University.

Chris Heysel, Head of Advisory, South Pole

Chris Heysel is Head of Advisory, North America, for South Pole. In this capacity, he works to guide our clients toward innovative solutions to both mitigate risk and achieve sustainability goals. Chris is based in Seattle and holds a Masters of Civil Engineering from Queens University, Ontario.

He is an unrelenting optimist, passionate about solving the complex problems of our world. Chris was previously the National Practice Manager of Sustainable Infrastructure for WSP Canada, and the Environmental Impact Lead at Arc’teryx.

Table of Contents

1. What are Scope 3 Emissions and how is the SEC regulating them?
2. Going beyond measurement and engaging employees.
3. The connection between ESG engagement and business outcomes
4. How to start measuring Scope 3 today.
5. A tiered approach to Scope 3 data collection.
6. How smaller companies can have an impact on Scope 3 vendor emissions.
7. Setting Scope 3 targets.
8. 3 common engagement hurdles and how to overcome them.

What are ‘Scope 3 Emissions’ and how is the SEC regulating them?

Scope three emissions are value chain emissions that will be required for reporting depending on a business's size, defined by metrics like public flow and revenue.

While detailed reporting is a significant change for many companies, it is generally believed that businesses declaring a goal around scope three will be held to a higher standard by the SEC. The challenge lies in the data availability and quality, as many companies struggle to collect accurate data for scope three emissions.

A common practice has been to send surveys to employees, receiving a small number of responses and extrapolating from that data. However, this may no longer suffice under the new regulations.

As companies face this "tsunami" of scope three reporting, it is important to focus on driving more granularity in emissions data, especially for the largest emission sources. While starting with spend-based emissions and extrapolations is a good step, businesses must have clear plans to refine their data collection and decarbonization efforts.

Going beyond measurement and engaging employees

Companies who are excelling in their sustainability efforts are moving forward from measurement and planing and are now implementing detailed tactics to see real impact.

Sustainability teams are collaborating with organizational leaders to establish budgets, goals, and timelines to make changes to supply chains, procurement, contracts, and other key business areas that have an impact on emissions.

“You need to engage deeply with those teams. Educate them on the emissions that are associated with their activities, and then brainstorm and work with them to create detailed strategies in order to change your business. It cannot be done at a high level boardroom table or off with consultants. You have to, come together. - Chris Heysel

Often employees are motivated to have an impact but do not have the ability to change their behavior at work.

The connection between ESG engagement and business outcomes

Building an effective ESG program requires alignment with business goals as well as individual KPIs that employees are measured on.

“The first step is to have a target and a detailed strategy, and once you feel confident about that feasible, but ambitious strategy, then you can layer on accountability.” - Chris Heysel

Developing a system of accountability means tying sustainability into measuring performance, incentivizing, and all the way to compensation.

Engaging the entire business in climate action has a measurable effect on bottom line and employee retention.

“We have worked with several clients who not only have been able to show that engaging employees in their climate efforts has a customer retention and loyalty impact, but has a revenue impact.” - Susan Hunt Stevens

How to start measuring Scope 3 today

The first step in measuring anything is focusing on a standard. In Scope 3, thats the Greenhouse Gas Protocol (GHG). The GHG also walks you through actionable steps by Scope 3 categories.

Next, connect these categories to material business goals by asking “Do I have a lot of emissions associated with this category?”. You can then develop a materiality assessment and understand how relevant each is to your business.

Once you have developed an understanding of these categories and where you want to have an impact you can upskill your team, hire a new resource, or partner with firms like South Pole to help develop an action plan.

A tiered approach to Scope 3 data collection

After you decide what you want to measure, you need to find the correlated data. Depending upon your business this may be more difficult that it sounds.

Chris Heysel recommends a tiered approach:

1. Global estimation: Using databases like EIA, you can estimate your global energy usage based on your business and total square-footage.
2. Localized estimation: Break down your globalized estimates by locale to understand the areas where you may have the most emissions
3. Internal data guidelines: develop business guidelines like contractual vendor obligations around providing data. For rental spaces this may include requiring a submeter at each of your locations.

“That general concept of starting with high level estimations to get a rough idea and then moving in the right direction over time as you can, applies to really all scope three. You just wanna move quicker where you have the largest impact” - Chris Heysel

How smaller companies can have an impact on Scope 3 vendor emissions

Having an impact on Scope 3 emissions is not exclusive to large, multi-national corporations who have the ability to control vendors and supply chain management.

The first step in working with vendors on developing a sustainable supply chain is to ask.

“You are only 0.1% of [the vendor’s] overall output. And so really you don't have much leverage to ask them to change. But you can still ask. And you don't know, maybe if everyone else is asking, if all of all hundred, 1% is asking, then you can have an impact.” - Chris Heysel

Joining an industry group is also a way to have a larger voice and a larger impact. These organizations help businesses find commonalities among suppliers and vendors to pool funds for an outsized impact.

And of course you always have the option to switch suppliers. While not always ideal or easy, this is always worth a consideration as part of your emissions reduction strategy. This will also give you the opportunity to adjust future procurement strategies and guidelines.

Setting Scope 3 targets

Once you have your measurements and know where you would like to have an impact, the next step in your journey to Scope 3 emissions reduction is setting a target or goal.

So where do you start?

Science-based-targets initiative (SBTi). These are set by the Science Based Target Institute. Another, more ambitious target is net-zero. With the ultimate goal of becoming a business that has a neutral effect on carbon emissions.

In tandem with setting targets you need to engage stakeholders to gain buy-in.

“[Stakeholders are] part of the creation of the decarbonization strategy. They have buy-in. So what we would advise is: don't set your target and then do your strategy. Typically you wanna do both at the same time.” - Chris Heysel

Engaging these stakeholders will help you understand the feasibility and other areas for opportunity that they care about.

3 common engagement hurdles and how to overcome them

Aligning action with strategy

A major limiter in action is most often due to lack of buy-in. This can be affected by working with leaders to align strategy and goals with daily business activities. If leadership is involved in setting strategy they are more likely to understand and support it long-term.

Siloed strategies & accountability

By siloing your strategy to only the sustainability you will find it more difficult to engage employees due to a lack of accountability to the goals. Disaggregate the plan and accountability so the sustainability team acts more as a project manager across teams who have clear goals.

Inconsistent engagement

“The grand launch gets the attention and then six months later it was just another initiative. The companies that are successful bake these elements into everything they're doing all day long, all month long, all year long consistently.” - Susan Hunt Stevens

The Conclusion

Addressing Scope 3 emissions is a critical aspect of a comprehensive sustainability strategy.

How are you measuring, reporting, and engaging employees in Scope 3? What will you change as new regulations are released? Let us know here!

WeSpire helps sustainability teams plan, launch, manage, and scale engagement with 100s of campaigns, automated reporting, and support from sustainability experts to help small and large teams alike. Request a demo below to learn more!

Join us on 𝙒𝙚𝙎𝙥𝙞𝙧𝙚: 𝙇𝙞𝙫𝙚! every 4th Wednesday of the month. Register for 𝙒𝙚𝙎𝙥𝙞𝙧𝙚: 𝙇𝙞𝙫𝙚! Monthly Series: https://wespire.zoom.us/webinar/register/6216588429223/WN_Hp9e5z_CQ36sTFn9C01SmA