How to reduce manufacturers’ Scope 3 emissions
Manufacturers face increasing pressure from governments, investors, employees and customers to lower their carbon emissions. In a recent Optera survey, more than half of manufacturing respondents named emissions reduction project implementation as the most pressing task this year.
Reducing emissions from a company’s own operations (Scope 1 and 2) alone will not be sufficient. For companies to exist in the low-carbon future, leaders must make an ongoing and dedicated investment to address emissions generated by their value chain (Scope 3), which accounts for an average of 75% of an organization’s greenhouse gas output. A third of Optera survey respondents ranked Scope 3 analysis and management as one of their top reduction program priorities.
To begin the journey to Scope 3 decarbonization, start simple — leverage the data you already have.
Measuring Scope 3
Scope 3 emissions encompass 15 categories across a product’s lifecycle. These emissions come from activities like raw material extraction, transportation of goods, suppliers’ manufacturing processes, energy consumption during product operation and byproducts associated with product maintenance, repair and disposal.
While measuring and influencing Scope 3 emissions may feel overwhelming, it’s imperative and attainable. Just like any ambitious goal, you start where you are. If you’re a novice skier, you don’t attempt a black diamond slope; instead, you tackle a simpler, more realistic hill that aligns with your current skill level and thoughtfully build from there.
Similarly, when measuring Scope 3 emissions, you don’t need to capture every single data point right from the start. Instead, begin with the data you already have and gradually progress. This incremental approach allows for a more manageable and sustainable measurement process.
Scope 3 is more challenging to measure because much of the data lives outside of your organization. But you can start by evaluating the primary data already available to you, whether directly from partners and suppliers or from internal teams like procurement, accounting, HR and facilities. This data is specific to your organization and its suppliers and informs a more concrete decarbonization strategy.
Depending on the size of your value chain, you may not be able to easily collect data on each entity. Data gathering can be particularly challenging with large supply chains. To prioritize your collection efforts, start with your top suppliers by spend. These entities offer the greatest potential for impact — focus on gathering their emissions information first.
Where you lack primary data, you can model figures based on industry or product averages to understand where potential risks might exist. Modeled data falls short of identifying specific reduction levers but helps identify where to focus future primary data-gathering efforts.
Combining primary and modeled data in your carbon accounting identifies emissions hotspots to uncover your most significant opportunities to revamp supplier relationships and business processes.
Ways to reduce Scope 3
Once you’ve analyzed the data, you can develop your plans for reduction. To pinpoint priority areas, you’ll need to quantify data actionability, relative carbon impact and mitigation opportunities. From there, select appropriate strategies, such as:
- Vertical integration
Companies can vertically integrate parts of their supply chain to gain more control over related emissions. For example, an electronics manufacturer might acquire a semiconductor fabrication plant, giving the company more influence over materials used, energy sources and production processes.
Moving operations closer to the target market or company headquarters reduces transportation emissions. Companies can also choose locations with more advanced energy infrastructure or access to sustainable suppliers.
- Establishing a supplier engagement program
A supplier engagement program allows companies to collaborate with suppliers to track and reduce emissions. Manufacturers can support partners by providing education, technical assistance, incentives, or even help with renewable energy procurement. Companies may also work together to redesign or create new, more efficient methods and processes.
When establishing these programs, manufacturers should prioritize mission-critical entities or those that produce the highest emissions. Semiconductor manufacturers, for example, are ideal candidates for electronics companies, as chips play an integral part in electronics, and their creation involves significant chemical processes.
- Prioritizing more sustainable suppliers
Manufacturers may be able to contract with new suppliers that generate fewer emissions, or develop procurement best practices to require more environmentally sustainable operations moving forward.
- Optimizing supply chain efficiency
Evaluating the supply chain may uncover inefficiencies, allowing manufacturers to phase out unnecessary processes or suppliers.
- Adjusting business models
Some current practices will not be sustainable in a low-carbon economy, so manufacturers should evaluate their business models and begin to pivot. Adjustments may take the form of building products with more sustainable materials or designing them to be more energy efficient. For example, some electronics hardware companies now sell services instead of physical goods, allowing them to manage how their products are used, reclaimed and recycled.
When working to reduce carbon emissions, don’t wait until you have all the answers — because you never will. Achieving net zero demands deliberate and gradual actions that may not appear significant at first glance but produce a substantial impact over time. Act now on the data you have and build from there — each small step adds up.
About the Author
Tim Weiss is co-founder & CEO of Optera. Tim has spearheaded thought-leading work on corporate climate action with the World Economic Forum and Fortune 500 companies across many industries. Prior to Optera, Tim worked for AES Distributed Energy and Uncharted.