Last year saw many businesses contending with the challenges of SECR (Streamlined Energy and Carbon Reporting) for the first time. 2021 does not promise any respite however and Scope 3 emissions remain a contentious issue.
What are the scopes?
Reporting on Scope 1 and 2 emissions is mandatory for many organisations. Any ‘large’ company must report if they meet the following criteria:
- 250+ employees
- Turnover more than £36m
- Balance sheets totalling over £18m
As well as reporting the emissions themselves, organisations must show the steps they have taken to reduce emissions over the course of the financial year.
The key distinction between Scope 1, 2 and 3 emissions is how directly they relate to your business operations. Scopes 1 and 2 concern direct emissions made by your organisation. Scope 3 takes a holistic view of business operations, including your supply chain, and how embedded carbon emissions can be reduced throughout it.
Firms have typically avoided reporting on Scope 3 emissions unless required to do so. Yet, they are missing out on a range of benefits afforded by going the extra mile in their carbon reporting.
Conducting a robust analysis of your supply chain’s carbon emissions can provide insights that would otherwise be unavailable. Such as GHG (Greenhouse Gas) emissions and cost reduction opportunities that exist outside of the organisation.
Generally, sources of Scope 3 emissions provide support to your business without existing directly under your control, however, there are a couple of exceptions.
Scope 3 emissions can include:
- Business travel
- Employee commuting
- Leased assets and franchises
- Purchased goods and services
- Transportation and distribution
- Use of sold products
- Waste disposal
While many of these represent elements of a supply chain others can be tackled more immediately. Business travel, commuting, investments, and waste disposal are all subject to the influence of your management team.
Choosing to report means you can engage with sustainability culture across all levels of your organisation. Engagement can include a ride-to-work scheme to encourage greener travel options, divestment from fossil fuels, or taking on a waste disposal contractor that can reduce both your costs and carbon emissions.
After ensuring that your in-house Scope 3 emissions are under control, it is wise to next look to your supply chain and the environmental impact of your business on a global scale.
Despite not being a direct consumer, your firm still possesses the buying power to influence the behaviour of its collaborators and the power to choose who not to collaborate with based on their carbon profile.
In addition, the data you gather in order to report may highlight potential weak points in your supply chain vulnerable to events like pandemics or climate change. Just last year, we saw Brent Crude, the international standard for oil prices, drop to zero. All because of a sudden and unforeseeable fall in demand triggered by the pandemic, and with suppliers losing millions in the process.
Assessing these factors gives you the opportunity to adjust or replace links in the chain to ensure future resilience. Since Rishi Sunak promised that the UK will be a leader in climate risk disclosure, having a strong Scope 3 dataset will help bolster the confidence of future investors.
It is likely that abiding by TCFD (Task Force on Climate-Related Financial Disclosures) regulations will become mandatory for an increasing number of businesses in the future. Securing Scope 3 data now can give you a head start in the process.
Finally, an understanding of your Scope 3 emissions will empower you to choose suppliers whose priorities align with your own brand. Given that 84% of consumers in 2020 stated that being environmentally friendly is important to them, consistency in brand values is becoming more important than ever.
How can EIC help?
EIC offers expert guidance on a range of compliance processes including SECR for all emissions scopes, as well as consultative services for carbon management assisting routes to carbon neutrality, energy management, UK ETS, CCA, and ESOS.
We will provide you with a dedicated carbon consultant, annual and bi-annual energy and carbon reports, and we’ll completely oversee both the compliance process and any energy audits and evidence collection required.
Since we view the goal of sustainability completely, we also offer packages of complimentary services like ESOS and SECR to encourage our clients to do the same.
To find out if one of these packages might suit your organisation, and how our compliance services can work for you, get in touch.