Preparing for the Scope 3 Tsunami

The most read article on the Reuters Insights Sustainable Business Platform is a “how to” focused on one of the most vexing areas of emissions reporting:  Scope 3. For those of you who don’t live and breathe the Greenhouse Gas Protocol, emissions measurement and reporting is divided into three areas:

Scope 1 emissions:

are those directly associated with your facilities, vehicles and under your control.

Scope 2 emissions:

are tied to the energy you purchase for heat, cooling, electricity, etc.

Scope 3 emissions:

covers all the indirect emissions associated with your business, from your suppliers to business travel, employee commuting, investments and the usage of your products.

Scope 3 emissions are the hardest to measure, but the estimate is that they represent the majority of a company’s carbon footprint, as high as 95%. One of my favorite explanations for why measuring Scope 3 matters came from Levi’s, who did a full emissions measurement study and found that the vast majority of their emissions came from two areas: the growing of cotton for their jeans and consumers washing their jeans. Thus their sustainability efforts focused on the farms in their supply chain and trying to change how often people washed their Levi’s. Their CEO famously came on stage saying he never washes his jeans, but later tempered that to trying to convince people to only do it every 10 or so wears.

This week, the topic of WeSpire’s live monthly webinar was Scope 3, particularly the often overlooked employee component. Our guest was Chris Heysel, who leads the consulting practice at South Pole, a firm that helps organizations measure emissions. (They also develop carbon reduction projects globally and are a WeSpire partner for our employee carbon management features). It had the highest attendance yet.

Why? Next month it is widely expected that the SEC will issue rules requiring that publicly traded companies disclose climate related risks and report emissions. The current language will require you to include Scope 3, if material or if you have set a related target or goal. We do not know if this will stay in, but it has certainly served as a wake up call that Scope 3 measurement is about to get serious. As one customer said to us, “Scope 3 is the tsunami that no one is prepared for.”

The employee component is not highly material for a large manufacturing firm or a company that owns and operates a lot of real estate. But it can be significant for “knowledge work” firms, whether law firms, consulting, media, tech, education, research, or finance. Anecdotally, the way most companies measure it today is to send out a survey to employees asking about work from home and commuting patterns, get a small response, and extrapolate. Chris agreed that wouldn’t likely cut it in this new world.

In our opinion, that approach also misses a huge opportunity to educate and activate your workforce about carbon reduction in general. Just like the company is going through the process of measuring, setting a reduction target, then taking action to reduce emissions, individuals can as well. WeSpire’s employee carbon management features were designed to make this process simple, educational and impactful.

But the real power is when the company and the employee start to evaluate the systems that drive the behaviors. For example, if everyone is driving to work in single occupancy vehicles, it is first and foremost the outcome of a real estate decision. Given all the upheaval in real estate, now may be a perfect time to include a sustainability lens into future decisions. If you can’t change the real-estate, can you set up ride-sharing or shuttle buses, be more supportive of hybrid work, or catalyze a move to electric vehicles?

I started my career helping organizations with large cost reductions. That process often was a catalyst for rethinking processes and innovation. I believe the same is true for large carbon reduction projects. My hope is that the impending tsunami comes not from the measurement itself, but from the incredible momentum for mitigation.