As a finance professional, I understand how tricky it can sometimes be to gather and report on data and KPIs from my own organisation. As a human, I feel deeply the need and urgency to report on, and ultimately lower, GHG (greenhouse gas) emissions. But, doing accurate reporting on Scope 3 (emissions from the Corporate Value Chain), from upstream and downstream activities, from things that are indirect to my company, things I can’t see and may be two or 3 steps removed from, that feels really hard.
The below diagram does a good job of explaining what Scope 3 emissions are and the different activities they can emanate from.
The good news is that, once you delve deeper into how to report Scope 3 emissions, the principles aren’t that different to the accountancy ones that are metaphorically tattooed in my brain (thank you years of accountancy exams for that!). GHG accounting and reporting of Scope 3 inventory should be based on Relevance, Completeness, Consistency, Transparency and Accuracy. Sound familiar?!
Let me unpack these a little:
- Relevance: Report appropriately. Report on emissions relevant to your Focus on activities that help you to make decisions.
- Completeness: Account for and report on all GHG emissions sources and activities and disclose and justify any exclusions.
- Consistency: Use consistent methodologies so that there can be meaningful tracking of emissions over time.
- Transparency: Be factual. Provide a clear audit trail and disclose assumptions.
- Accuracy: Achieve sufficient accuracy to enable users of the information provided to make decisions with reasonable confidence.
So, we’re ok with the principles, what about the how?
According to McKinsey, the typical consumer company’s supply chain creates much greater social and environmental costs than its own operations. Supply chain impacts account for more than 80% of greenhouse gas emissions and more than 90% of the impact on air, land, water, biodiversity and geological resources.
This is gives us a big clue as to how. We absolutely need to focus efforts on our supply chain. But this doesn’t just apply to Scope 3. Whether we’re trying to measure our Scope 3 emissions or deliver our commitment under Race to Net Zero, our suppliers are one of our most important stakeholders in this project. To be successful, we need a comprehensive supplier engagement plan.
Back to the data… Two main types of supply chain data can be used for reporting Scope 3: Primary Data and Secondary Data.
Primary data includes data provided by suppliers or other value chain partners.
Secondary data includes industry average data, financial data, proxy data and other generic data.
The approach that you choose will be dictated by the accuracy you’re looking for and the change you’re trying to drive, but an important part of it will be collecting Primary data from your suppliers. At Supply Pilot we have a proven track record of collecting large volumes of product level supplier data through our Collect product.
It’s a relief to know that sustainability accounting and reporting applies principles familiar to me, and that there are tangible steps we can take to assist the accuracy of what we report. But the reporting shouldn’t be the end goal, the reporting should serve to drive real CHANGE. And to do that we need our suppliers, and indeed our entire corporate value chain, as co-pilots on that journey.