A Quick Guide to Scope 3.1 Emissions

In pursuit of their climate goals, businesses are on a quest to uncover the holy grail of emissions – identifying where emissions are most concentrated. They’ve come to realize that the answer often lies within Scope 3.1 emissions. But what exactly do these emissions comprise? And how can they be precisely calculated, rather than relying solely on average values?

This article gives a basic introduction, explaining what Scope 3.1 emissions are, why they are important, methods for calculating them, and the pivotal role of supplier engagement in reducing them.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data and engagement efforts.

What is Scope 3.1?

Scope 3 emissions encompass all indirect emissions generated throughout an organization’s value chain, from the extraction of raw materials to the disposal of products. Scope 3.1, a subset of these emissions, specifically refers to the carbon emissions associated with the products or services an organization sells. These emissions are attributed to the end-user and are often beyond the organization’s immediate control.

Why is Scope 3.1 Important?

Understanding and addressing Scope 3.1 emissions is crucial for several reasons:

Holistic Climate Impact: Scope 3.1 emissions often constitute the largest portion of an organization’s carbon footprint. By ignoring them, companies fail to address a significant part of their environmental impact.
Stakeholder Expectations: Stakeholders, including investors, customers, and regulatory bodies, increasingly demand transparency and action on Scope 3.1 emissions. Failure to comply can lead to reputational damage and financial consequences.
Regulatory Compliance: As governments worldwide tighten emissions regulations (like the CSDDD of the EU), monitoring and reducing Scope 3.1 emissions can help companies avoid legal and financial penalties.

Calculation Methods for Scope 3.1 Emissions

Calculating Scope 3.1 emissions can be a complex task, but it’s essential for informed decision-making. Companies have four different methods at their disposal. The more effort these methods require, the better the results they produce:

1. Spend-Based Method:
   • Calculation Basis: This method relies on the financial expenditures associated with products or services. It calculates emissions based on the amount of money spent on procurement or outsourcing.
   • Benefits: The spend-based method is relatively simple and cost-effective to implement, making it suitable for organizations with limited resources. It provides a high-level overview of emissions associated with the supply chain.
2. Average-Data Method:
   • Calculation Basis: The average-data method uses industry or sector-specific emission factors to estimate emissions. These factors are based on aggregated data from similar organizations.
   • Benefits: It offers a quick and accessible way to estimate emissions, making it a good starting point for companies new to Scope 3.1 calculations. However, it may not be as accurate as other methods because it relies on generalized data.
3. Hybrid Method:
   • Calculation Basis: The hybrid method combines elements of both the spend-based and average-data methods. It considers financial data along with industry-specific emission factors for a more tailored approach.
   • Benefits: This approach strikes a balance between simplicity and accuracy. It provides a more customized estimate of Scope 3.1 emissions while still being feasible for organizations without extensive data resources.
4. Supplier-Specific Method:
   • Calculation Basis: The supplier-specific method involves collecting detailed data directly from suppliers, including emissions from their operations and transportation. It offers the most granular and precise calculation.
   • Benefits: This method yields the most accurate and specific results, allowing organizations to pinpoint emission hotspots within their supply chain. It also fosters transparency and collaboration with suppliers, encouraging joint efforts to reduce emissions.

Why the Supplier-Specific Method Stands Out

While the supplier-specific method achieves by far the best results compared to the other methods, it is also the most challenging to implement. The supplier-specific method is distinguished by its precision, aiming to provide a granular view of emissions associated with each supplier. However, this precision comes at a cost:

• Data Variability: Suppliers’ emission data can be highly variable, making it challenging to standardize and aggregate across a diverse supplier base.
• Data Availability: Obtaining supplier-specific data requires active engagement and cooperation from numerous suppliers, which can be time-consuming and complex.
• Data Validation: Verifying the accuracy of supplier-reported emissions adds another layer of complexity, as discrepancies can arise.

Kickstart your supplier-specific data collection

The Climate Intelligence Platform, a specialized Supplier Data Collection and Engagement Solution, offers a streamlined approach to tackle these challenges.

Start tracking progress towards your Scope 3 targets by accessing existing data from over 35.000 companies and proceed by gathering streamlined primary emissions data from your suppliers. Utilize the supplier specific data to refine your company’s own greenhouse gas emission calculations and reduction tracking.

The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets. Join them in making a difference!

Contact us today for your individual platform demo.

The Crucial Role of Supplier Engagement to Reach Scope 3 Targets

Supplier engagement plays an essential role in addressing Scope 3 emissions and achieving corporate climate targets. With the urgent need to mitigate climate change rising, businesses are under increasing pressure to reduce their carbon footprint across the entire value chain (Scope 3).

In the following, we explore the reasons why supplier engagement is vital for addressing Scope 3 emissions and showcase best practice that help you implement a successful supplier engagement program for achieving your company’s Scope 3 targets.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data and engagement efforts.

Why Supplier Engagement is Paramount for Scope 3

While Scope 1 (own facilities, vehicles, heat, operations, etc.) and 2 emissions (purchased energy) are generated and controlled a company’s own operations, Scope 3 emissions encompass all indirect emissions generated by a company’s activities along the supply chains.

The 15 Categories of Scope 3 Emissions along the Supply Chain

According to the Greenhouse Gas Protocol (GHG Protocol), the indirect Scope 3 emissions include 15 different categories, ranging from the procurement of product and services (Scope 3.1) and transportation (Scope 3.4) upstream, to End-of-Life (Scope 3.12) and investments (scope 3.15) downstream.

Upstream Emissions

3. 1. Purchased Goods and Services – emissions generated by the raw material extraction and processing of goods and services used by a company for its own activities.

3.2. Capital Goods – emissions resulting from the production of plant, equipment, machinery and other long-term capital goods that a company uses in its operations.

3.3. Energy and Fuel-Related Activities – emissions that arise from upstream and network losses of energy and fuel.

3.4. Upstream Transportation and Distribution – emissions generated by the transportation and distribution of raw materials and products delivered to the company by suppliers.

3.5. Waste – emissions from the disposal and treatment of waste.

3.6. Business Travel – emissions that arise from business trips by a company’s employees.

3.7. Employee Commuting – emissions that arise from the daily commute of a company’s employees.

3.8. Upstream Leased Assets – emissions from buildings or vehicles rented from third parties.

Downstream Emissions

3.9. Downstream Transportation and Distribution – emissions that arise from transportation and distribution to customers or end users – or paid for by third parties.

3.10. Processing of Sold Products – emissions from processing products sold.

3.11. Use of Sold Products – emissions generated during the usage of a product by customers or end users.

3.12. End-of-Life Treatment of Sold Products – emissions generated during the disposal and treatment of products after they have reached the end of their life.

3.13. Downstream Leased Assets – emissions resulting from the use of fixed assets rented or leased by a company to other companies.

3.14. Franchises – emissions generated by franchisees’ business activities.

3.15. Investments – emissions that arise from a company’s investments in other companies or projects.

KEY TAKEAWAY

As indirect upstream Scope 3 emissions are typically 11.4x bigger than the direct Scope 1 and 2 emissions of a company, effectively managing and reducing them is paramount to meet corporate climate goals.

Rising Regulatory Landscape requires transparent Scope 3 Data

SCOPE 3 CHALLENGE

As Scope 3 emissions are generated, managed and controlled directly or indirectly by suppliers and business partners, supplier engagement is a crucial part of holistic climate management to address the Scope 3 challenge. The importance of doing so, is driven by rising international regulation.

Rising Regulatory Pressure

• SEC (U.S. Securities and Exchange Commission): SEC is increasingly focuses on climate-related disclosures. In 2022, they proposed new rules to enhance and standardize climate-related disclosures, including Scope 3. Engaging with suppliers to gather accurate emissions data is key in complying with these regulations.
• ISSB (International Sustainability Standards Board): ISSB is working on global sustainability reporting standards. Supplier engagement assists in aligning with these standards by collecting emissions data consistently across the supply chain.
• EU’s CSRD (Corporate Sustainability Reporting Directive): The EU is tightening its reporting requirements. Under the CSRD, companies must report on supply chain emissions. Even small companies with 1 – 750 employees, can waive Scope 3 emissions only in the first reporting year. Supplier engagement is key to meeting this obligation effectively.

Increasing Stakeholder Expectations

• Investors: Investors focus on ESG (Environmental, Social, Governance) criteria, consider supply chain emissions when evaluating investments. Engaging with suppliers to reduce emissions demonstrates commitments towards sustainability, while reducing risks.
• Customers: The new generation of so-called ‘ethical consumers’ demands transparency. Backed by the new EU ban of ‘green product claims’, supplier engagement is essential for companies to provide detailed information about their products’ environmental impact, enhancing brand reputation and prohibit greenwashing.

Importance of Supplier Engagement to meet Scope 3 Targets

The new market requirements of regulatory authorities and stakeholders result in numerous consequences for the future-oriented business strategy of companies.

The strategic importance of supplier engagement is growing rapidly, driven by:

• Risk Mitigation – Supplier engagement helps decision makers identify high-emission suppliers, allowing companies to assess climate-related risks and diversify their supplier base to reduce exposure to carbon-intensive sources.
• Cost Reduction – Collaborating with suppliers on emission reduction strategies leads to cost savings through improved efficiency and resource use.
• Innovation: Partnering with suppliers to reduce emissions fosters innovation. Suppliers may develop low-emission products and processes, giving the company a competitive edge.
• Market Access – Some markets, like the EU, already restrict imports from companies with high carbon footprints. Supplier engagement aids in meeting these market access requirements.

Best Practices for successful Supplier Engagement Program

GETTING STARTED

The critical role of supplier engagement in managing Scope 3 emissions and meeting Scope 3 Targets is becoming evident. Explore best practices from practice to build up your successful supplier data tracking and engagement program.

8 Best Practices that support you in overcoming the Scope 3 Challenge

1. Assessment and Prioritization – Start by assessing the individual climate maturity of your suppliers. Identify high-impact suppliers to prioritize engagement efforts.

2. Set Clear Expectations – Define Scope 3 climate targets and set expectations for your suppliers. Use contracts, agreements, and codes of conduct to communicate those and get commitment. Clearly communicate the importance of focusing on measures to truly reduce emissions.

3. Collaboration, Capacity Building & Education – Collaborate with your suppliers to develop shared decarbonization goals. Offer trainings and resources to help them understand their own climate performance and implement best practices to reduce emissions.

4. Data Collection & Monitoring – Implement digital systems for tracking and reporting supplier climate targets, risks, emissions and actions. Regularly review progress towards Scope 3 targets, address issues promptly and promote top achievers.

5. Incentives & Recognition – Offer incentives for your suppliers that meet or exceed your expectations. Recognize and celebrate their achievements, fostering motivation for continuous improvement.

6. Transparency – Be transparent about your own climate journey and progress. This encourages your suppliers to follow suit and promotes a culture of shared responsibility.

7. Technology Integration – the Climate Intelligence Platform supports you in streamlining data collection and engaging your suppliers across the supply chain.

8. Continuous Improvement – Encourage continuous innovation and improvements. Regularly reassess your goals and adapt to changing circumstances.

Supplier Engagement indispensable to overcome the Scope 3 Challenge

Supplier engagement is indispensable to gather accurate Scope 3 emissions, align with international regulatory requirements and meet your own Scope 3 targets. Implementing successful best practices in your supplier engagement program allows you to prioritize decarbonization, collaboration, and transparency. As the global focus on Scope 3 intensifies, supplier engagement is not only a compliance necessity but a strategic advantage for future-driven organizations.

Has your company set Scope 3 Targets? Get in touch to learn how the Climate Intelligence Platform accelerates your supplier data and engagement efforts.

Kickstart your supplier climate engagement program

The Climate Intelligence Platform is a climate specialized Supplier Data Collection and Engagement Solution to enable you kickstarting your program in days versus months.

Start tracking progress towards your Scope 3 targets by accessing existing data from over 35.000 companies and proceed by gathering streamlined primary emissions data from your suppliers. Utilize the supplier specific data to refine your company’s own greenhouse gas emission calculations and reduction tracking.

The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets. Join them in making a difference!

Contact us today for your individual platform demo.

AI’s new Potential for Scope 3 Decarbonization

In order to meet climate targets within their supply chain (Scope 3), companies must gather and interpret extensive data on emissions, climate risks, and other factors from their suppliers. Until now, this widely dispersed data could only be acquired through manual processes and individual supplier consultations, demanding significant time and resource investments. However, a transformation is underway. Advanced AI technology now enables the quick and automatic aggregation of climate-related supplier data from public sources, facilitating its analysis for scope 3 decarbonization.

Unlock the Potentials of AI for your Supply Chain Decarbonization! Get Exclusive Access to our AI Supplier Screening Programm, to manage Scope 3 Data and implement Actions.

How exactly can this work? That’s what we shared at CHOICE Event #61 with Yasha Tarani (CEO) and Nikolas Martens (Head of Engineering) from The Climate Choice. Find here their most important insights.

Why is Scope 3 Decarbonization important? 

Deloitte conducts an annual study that delves into the priorities of top executives (CxOs) in large companies across the globe, shedding light on why they choose to address specific issues. Their findings reveal a significant shift in the corporate landscape. Notably, climate change has ascended to a position of paramount importance, second only to economic outlook. This signals a pivotal moment where climate concerns have permeated the highest echelons of corporate leadership. However, it’s imperative to recognize that the impetus to act on climate issues doesn’t merely stem from regulatory pressures. It also emanates from a multitude of stakeholders who demand action.

One crucial aspect that emerges prominently is the role of supply chain emissions (Scope 3). These emissions represent the lion’s share, comprising an average of 85% of a company’s total emissions. Yet, addressing supply chain emissions is a formidable challenge due to their indirect nature, which presents multiple complexities and obstacles.

Why is Scope 3 Decarbonization so hard?

Companies striving to meet their Scope 3 decarbonization targets encounter several significant challenges when it comes to effectively utilizing supplier-specific data. These challenges can impede their ability to take meaningful actions. Here’s a breakdown of these challenges and their implications:

Continuous Tracking:

• Challenge: Managing annual data collection from a vast network of thousands of suppliers can be a daunting and resource-intensive task.
• Implication: This continuous tracking requirement demands a robust system that can efficiently gather data from a multitude of sources without overwhelming the company’s resources. It also necessitates real-time or near-real-time data updates to stay current.

Data Quality:

• Challenge: Supplier data often comes in various formats, documentation styles, and may lack comparability, making it difficult to draw meaningful insights or comparisons.
• Implication: Ensuring data quality is paramount. Implementing standardization protocols, data validation, and normalization processes is crucial to derive accurate and actionable insights from diverse data sources.

Assessment Fatigue:

• Challenge: Suppliers are frequently inundated with data requests from different customers, each with varying data needs, creating a state of assessment fatigue.
• Implication: Companies must adopt a more strategic approach to supplier engagement. This includes minimizing repetitive requests, streamlining communication, and aligning data requests with suppliers’ capabilities and priorities to maintain productive relationships.

Lack of Incentives:

• Challenge: Encouraging suppliers to actively engage in decarbonization efforts can be challenging, as they may lack motivation or a clear understanding of the benefits.
• Implication: To address this, companies must develop a Theory of Change that outlines the incentives and benefits for suppliers to participate in sustainability initiatives. This may include cost savings, improved market access, or enhanced brand reputation.

The solution: the Climate Intelligence Platform

At The Climate Choice, we focus on solving the key challenges of Scope 3 decarbonization. We have therefore built the first climate-specialized platform that unites supplier data & engagement to rapidly reduce emissions. Our approach is designed to help companies kickstart their supplier climate program in days rather than in months.

So what does the approach look like? Here are the key steps:

1. Leveraging AI for Scope 3 Analysis: Begin by harnessing the power of artificial intelligence (AI) to analyze suppliers with publicly available data. This automated analysis provides valuable insights into their environmental performance, emissions, and climate-related practices. This initial assessment sets the foundation for informed decision-making.

2. Engaging Suppliers without Public Data: Recognize that not all suppliers may have publicly accessible environmental data. For such suppliers, the approach shifts towards assessing their maturity level in terms of sustainability practices. This assessment serves as a starting point, allowing you to provide constructive feedback and guidance.

3. Focused Benchmarking and Incentives: Identify your top suppliers and those contributing significantly to emissions within your supply chain. These key players warrant a more detailed and granular benchmarking process. Additionally, consider implementing incentive mechanisms to encourage these suppliers to actively reduce their environmental footprint. Incentives can take various forms, such as financial rewards or preferential treatment within your supply network.

The first step: AI Supplier Screening

To speed up the launch of your supplier engagement program while minimizing resource requirements, we present our new AI supplier screening program. This program leverages cutting-edge technology to streamline the process, ensuring efficiency and effectiveness throughout. Here’s a breakdown of how the AI supplier screening program operates:

1. Comprehensive Data Collection: The program incorporates an AI-driven data pipeline that autonomously gathers detailed Scope 3 information from diverse sources. This data pipeline is designed to collect granular data pertinent to your supplier profiles.

2. Robust Data Analysis: Once the data is collected, our system performs a meticulous analysis. It scrutinizes a range of climate data documents and taps into publicly available data sources to create a comprehensive profile of each supplier. This analysis extends beyond surface-level assessments to provide a deeper understanding of their climate-related practices.

How AI Supplier Screening Works:

• List of Suppliers: The process commences with a list of your suppliers, encompassing the entirety of your supply chain network.
• Identify Company: The AI system employs advanced algorithms to identify each supplier as a distinct entity, ensuring accuracy in the subsequent steps.
• Identify Reporting Entity: It further distinguishes the reporting entity within the supplier organization, recognizing the entity responsible for providing climate-related data.
• Identify Data Sources: The program identifies and categorizes the various data sources associated with each supplier, whether internal or external.
• Extract & Verify Data: Leveraging state-of-the-art data extraction techniques, the AI system extracts and verifies the pertinent climate data from these sources, ensuring data accuracy and reliability.

What are the tangible outcomes of the AI supplier screening?

The AI supplier screening program yields a range of tangible outcomes that can significantly benefit your organization in its pursuit of Scope 3 goals. Here are the notable advantages and insights that emerge from this innovative approach:

Automated Analysis of Thousands of Companies: The program’s capabilities extend to the automated analysis of thousands of companies within your supply chain ecosystem. This extensive coverage ensures that you can comprehensively assess and engage with a wide array of suppliers, maximizing the program’s effectiveness.

Inclusion of Meta Data: In addition to climate-specific data, the analysis encompasses meta data that provides valuable context. This includes details such as revenue figures and sectors in which these companies operate. Such comprehensive insights enable more informed decision-making.

Audit-Ready Data: The data generated through the AI screening program is audit-ready, ensuring that it meets the highest standards of accuracy and reliability. This audit readiness is pivotal, especially when it comes to compliance requirements and reporting.

Accessibility via API: The convenience of accessing the data via an Application Programming Interface (API) streamlines its utilization within your organization’s existing systems and workflows. This seamless integration enhances the efficiency of your sustainability initiatives.

Key Insights Uncovered

The program goes beyond data collection to uncover key insights that can inform your sustainability strategy. These insights encompass:

Supplier Maturity Structure: You gain a clear understanding of the maturity levels of your suppliers concerning sustainability practices. This allows you to tailor engagement strategies accordingly.

Trends in Climate-Related Data: The program identifies and highlights trends in climate-related data, providing valuable intelligence for decision-making and future planning.

Scope 3 Emission Breakdowns: Detailed breakdowns of Scope 3 emissions help you pinpoint areas of focus and prioritize decarbonization efforts.

Decarbonization Actions: The program’s analysis identifies potential decarbonization actions that can be taken. It offers actionable pathways to reduce emissions and improve sustainability performance.

Join the Early Access Program today

You can now seize the opportunity as one of the early adopters, accessing the full array of AI benefits for your Scope 3 targets through our exclusive Early Access program. By joining, you’ll experience firsthand the advantages we offer. We anticipate an average savings of 90% in both time and cost for the collection and analysis of supplier data. Don’t miss out on the chance to be at the forefront of this transformative technology.

Request to join the Early Access Program today, it’s limited!

3 Key Steps to Use Competitive Climate Intelligence

In today’s rapidly evolving business landscape, staying ahead of the curve requires more than just traditional market insights. The emergence of the future low-carbon economy has ushered in a new era of competitiveness. Companies now need to start navigating the complexities of climate information and strategies to maintain their edge. This is where the concept of competitive climate intelligence comes into play. In this article, we’ll delve into what competitive climate intelligence entails and outline three essential steps to effectively leverage it for your company’s success.

Understanding Competitive Climate Intelligence

“Competitive climate intelligence” is the systematic gathering and analysis of climate-related data and insights to drive informed decision-making. Stemming from the broader concept of “competitive intelligence,” which focuses on understanding market dynamics and competitors, competitive climate intelligence delves into climate-related aspects of business strategy. This intelligence goes beyond understanding the environmental impact of your operations. It encompasses understanding how your competitors are positioning themselves, identifying emerging opportunities, and assessing potential risks.

Benefits of Competitor Climate Insights

Here’s why incorporating information about your competitors’ climate strategies is crucial for positioning your business at the forefront:

1. Benchmarking: Analyzing your competitors’ climate data allows you to benchmark your performance against industry leaders. This comparison helps identify gaps in your sustainability efforts and set ambitious yet realistic goals to outperform.
2. Innovation Insights: Monitoring competitors’ climate strategies unveils innovative practices that can inspire your company’s approach. By learning from their successes and failures, you can adopt best practices and refine your own initiatives.
3. Market Positioning: Understanding how competitors position themselves in the low-carbon landscape helps you differentiate your brand. Identifying gaps in the market and addressing unmet sustainability needs can accordingly enhance your company’s appeal to conscious consumers.
4. Risk Management: By assessing competitors’ responses to climate risks and regulatory changes, you gain insights into potential challenges and opportunities. This proactive approach ensures your business is prepared for shifts in the regulatory and consumer landscape.
5. Collaboration Opportunities: Collaborative efforts within your industry can amplify impact. Analyzing competitor data highlights potential partners for joint sustainability initiatives, fostering a collective drive towards a greener future.
6. Investor Confidence: As environmental concerns grow, investors increasingly value companies with robust climate strategies. Demonstrating a comprehensive understanding of competitors’ approaches bolsters your credibility and attractiveness to investors.
7. Adaptive Strategies: The low-carbon economy is evolving swiftly. Analyzing competitor climate data aids in fine-tuning your strategies based on real-time insights. This adaptability allows your company to seize emerging opportunities and stay resilient in the face of change.

The key steps for Competitive Climate Intelligence

So how can your company take advantage of this and successfully implement climate competitive intelligence? Here are the three most important steps.

Step 1: Data Gathering and Analysis

The foundation of competitive climate intelligence lies in robust data collection and analysis. The first step is to identify and gather relevant data from both internal and external sources. While internal data might include your company’s carbon footprint and sustainability initiatives, external data encompasses market trends, competitor activities, regulatory changes, and public sentiment around climate issues. This is where AI tools shine, as they can efficiently sift through vast amounts of public data to provide actionable insights. By utilizing these tools, you can uncover hidden patterns, emerging trends, and valuable competitor strategies that inform your decision-making.

Step 2: Integration with Business Strategy

Climate intelligence should not exist in isolation; it must be seamlessly integrated into your company’s overarching business strategy. This involves aligning climate-related goals with core business objectives and identifying synergies that drive value. For example, using climate intelligence to optimize supply chain efficiency not only reduces emissions but also enhances cost savings. By weaving climate considerations into product development, marketing, and operations, you not only contribute to sustainability but also bolster your competitive position in the market.

Step 3: Continuous Monitoring and Adaptation

The future low-carbon economy is dynamic, with changes in regulations, technologies, and consumer preferences shaping its trajectory. As such, competitive climate intelligence is not a one-time effort but an ongoing practice. Establish a framework for continuous monitoring and adaptation. Regularly update your data sources, track competitor moves, and stay informed about industry shifts. This adaptive approach enables you to seize emerging opportunities swiftly and mitigate risks effectively.

Conclusion

As the business landscape transforms to embrace the challenges and opportunities of a future low-carbon economy, competitive climate intelligence emerges as a critical tool for success. By systematically gathering, analyzing, and integrating climate-related data, businesses can not only contribute to a sustainable future but also enhance their competitive advantage. With the aid of AI tools, the data collection process becomes more efficient, empowering companies to make informed decisions. Embrace these three key steps and start now to position your company at the forefront of the evolving business paradigm.

Are you ready to harness the power of competitive climate intelligence for your company’s success? Then use our new AI screening tool for your company’s benefit. Find more information here.

Your Cheat Sheet: Climate Regulations to be aware of in 2023

Your Quick Guide through recent Climate Regulation Updates

We all experience it this summer: Climate change poses significant threats to the global economy, to humans and the planet. Time to act, especially also in the financial world. As a consequence, regulators worldwide are addressing climate-related risks. In the last weeks and months, several crucial developments in that area took place across the globe! Let’s delve into what happened in terms of climate regulations in America, Europe, International – and what’s coming up soon.

Quick insight summary: As climate management and disclosure becomes more standardized and mandatory, companies must ensure high-quality data by implementing strong data governance, strategies and control mechanism to maintain audit-ready information throughout the value creation process.

United States of America

The upcoming Securities and Exchange Commission (SEC) climate disclosure rule in the US requires large companies to disclose their carbon footprints alongside financial statements. The SEC’s proposal is aligned with existing recommendations from the Task Force on Climate-related Financial Disclosures (TCFD)and will require organizations to disclose certain climate-related information including greenhouse gas (GHG) emissions, Scopes 1, 2 and 3 and disclosure of climate-related risk, impacts, targets and goals.

The US Commodity Futures Trading Commission announced its second voluntary carbon markets meeting. It aims to discuss private sector efforts in high-quality carbon credits, current market trends, public sector initiatives, and how CFTC can facilitate markets for high-quality carbon credit derivatives.

The International Sustainability Standards Board (ISSB) will assume the role of monitoring companies’ climate-related disclosures. This task was previously handled by the FSB Task Force on Climate-related Financial Disclosures (TCFD). This development comes after the ISSB published global standards for sustainability and climate reporting, which incorporated the TCFD’s recommendations. The move is seen as an attempt to unify sustainability reporting standards, but some may question whether it could pose a threat to independence given the ISSB’s expanded responsibilities. Nonetheless, the decision recognizes the ISSB’s commitment to building upon the TCFD’s legacy and providing more clarity in the realm of climate-related initiatives.

Europe

The European Commission suggests to ease raising Climate and ESG disclosure rules for companies to reduce regulatory burdens. It published the final version of the European Sustainability Reporting Standards (ESRS) on July 31. The climate regulation shifts initially mandatory indicators, including greenhouse gas emissions disclosures, into the scope of materiality assessments, making them reportable if relevant to a company.

But: “If an undertaking concludes that climate change is not a material topic and that therefore it does not report in accordance with that standard, it shall disclose a detailed explanation of the conclusions of its materiality assessment with regard to climate change. This provision is included in recognition of the widespread and systemic effects of climate change on the economy as a whole.”

Under the CSRD, a company needs to implement processes to properly assess and collect climate-relevant information, for their own company and their supply chains. Described as such:

This information must be reported in accordance with European Sustainability Reporting Standards (ESRS). This information shall include information related to short-, medium- and long-term time horizons, as applicable, and it shall contain: The principal actual or potential adverse impacts connected with the undertaking’s own operations and with its value chain.

This obligation is closely related to the due diligence duties to identify adverse impacts, as introduced by the proposed Directive on Corporate Sustainability Due Diligence Directive (CSDDD). The proposed CSDD Directive will thus lead to more complete and effective reporting across global value chains. Part of this proposal is the introduction of a link between variable remuneration of directors and the sustainability targets of the company. Directors of companies that fall within the scope of the proposed directive also need to take into account the consequences of their decisions with respect to sustainability matters, climate change and human rights.

European Financial Reporting Advisory Group (EFRAG) introduced sector-specific Sustainability Reporting. EFRAG announced plans to create three advisory panels for sector-specific sustainability reporting rules for the capital markets, and insurance sectors. These panels will provide tailored reporting guidance for financial institutions starting in September, with applications open until July 31.

International

The Australian Government introduced mandatory Climate-Related Financial Disclosure Requirements for businesses and financial institutions. The climate regulations closely align with the ISSB’s climate standards, focusing on governance, strategy, risk management, and metrics and targets. Regulations have been proposed by the nation to start at the beginning of the 2024/2025 financial year.

Monetary Authority of Singapore (MAS) drives the early phase-out of coal-fired power plants. MAS launched a public consultation on incorporating financing for the early phase-out of coal-fired power plants into the Singapore-Asia Taxonomy, which classifies investments supporting a 1.5°C transition pathway.

The International Sustainability Standards Board (ISSB) has released its first set of sustainability and climate-related disclosure rules, IFRS S1 and IFRS S2, based on voluntary reporting frameworks. These standards aim to present sustainability efforts in a robust and comparable manner, facilitating informed capital allocation decisions by investors. It gets international adoption in countries like Canada, the UK, Japan, Singapore, and Nigeria are considering implementing ISSB standards. The International Organization of Securities Commissions (IOSCO) is now also endorsing them, accelerating their global adoption.

These developments show a growing commitment among regulators worldwide to tackle climate-related risks and enhance reporting. Companies should closely follow the rising need for climate management processes and contribute to a more sustainable and resilient future. Stay tuned for further updates on the global climate transformation.

Start your Climate Journey today!

The global economy is undergoing a fundamental shift, to a world in which climate considerations are a core part of doing business. In this new climate economy, every company needs to factor climate into its business decisions — both to avoid risk and to create new value. Get in touch to learn how our Climate Intelligence Platform empowers you to become a leading climate champion.

Top 5 Questions AI can answer for Scope 3 Decarbonization

Artificial intelligence (AI) has emerged as a powerful tool in addressing complex challenges. Specifically, its potential for tackling climate change has gained significant attention. Today, effective climate actions require us to collect and interpret vast amounts of data on emissions, climate risks, and more. Not only from one’s own company, but also along whole value chains. This is because most of a company’s emissions – even up to 90% – occur in Scope 3. A transparent data basis is therefore needed on which to effectively collaborate with suppliers on joint decarbonization measures. 

This is where AI plays a crucial role. According to a survey by Boston Consulting Group, 87% of 1,000 executives consider AI a helpful catalyst for climate transformation. Through the use of AI, companies can now quickly access data from public sources about their suppliers on a large scale, allowing them to better collaborate with them on decarbonization efforts. On top of that, they can gain essential strategic insights about the climate maturity of their business partners and competitors. In this article, we explore the top five questions that AI can answer for Scope 3 decarbonization, empowering you to make informed and impactful climate decisions.

1. Has the company calculated Scope 1, 2, and 3 emissions?

When assessing the climate maturity of your supply chain, one of the fundamental questions in evaluating a company’s commitment to decarbonization is the extent to which they have calculated and disclosed their greenhouse gas (GHG) emissions. AI can help assess whether a company has comprehensive coverage of Scope 1, 2, and 3 emissions. By analyzing public data, AI algorithms can identify relevant information from your supplier’s sustainability reports, public statements, and other disclosures. This allows you to assess your own emissions in more detail and compare them with industry benchmarks along your supply chain, setting a foundation for meaningful decarbonization strategies.

2. Has the company set climate targets?

Setting ambitious climate targets is crucial to driving action and holding companies accountable for their emission reduction efforts. The next important question is therefore to what extent a supplier has set and communicated climate targets and ambitions. To get answers, AI algorithms can extract and aggregate information from public announcements, reports, and social media activity regarding a company’s specific emissions reduction goals. This knowledge enables you to benchmark your company’s own targets against industry peers and business partners in order to identify areas for improvement.

3. Has the company a climate transition plan in place?

To achieve your own climate targets, you need a transition plan that outlines how your company navigates the complex process of decarbonization. And so do your suppliers need such a roadmap to implement reduction measures. AI can help determine whether a supplier has a transition plan in place by analyzing public disclosures and sustainability reports. This allows you to gaining insights into the decarbonization strategies, initiatives, investments and businesses activities of your business partners as well as competitors. Doing so, you can identify potential synergies or areas for collaboration.

4. Is the company engaging their suppliers for climate action?

As seen above, your suppliers play a pivotal role in your Scope 3 strategy and significantly impact your decarbonization journey. Therefore it is crucial to know if a supplier is actively engaging and monitoring its own supply chain with regards to emission reduction. Public supplier reports, sustainability initiatives, and collaboration programs convey the extent of a company’s engagement with its suppliers. This information allows you to assess the effectiveness of your own existing supplier management and identify opportunities to collaborate on decarbonization measures with peers.

5. Has the company communicated concrete decarbonization measures?

Last but not least, communicating concrete decarbonization measures is essential to demonstrate commitment, become accountable and inspire others to follow suit. Leveraging AI’s capabilities, you can assess whether your own organization as well as suppliers have effectively communicated its decarbonization initiatives – and which one in particular. This analysis allows you to gain insights into industry-wide actions, identify leading best practices and improve your own impact.

Conclusion

AI offers a powerful tool for companies seeking to enhance their decarbonization in Scope 3 by leveraging climate-relevant information on a large scale. Employing AI algorithms empowers decision makers to answer critical questions related to emissions data, climate targets, transition plans, supplier engagement and decarbonization measures. This way, businesses gain valuable insights into their own operations and those of their stakeholders. Equipped with this knowledge, organizations can collaborate more effectively with suppliers, benchmark their progress against industry peers and strategically position themselves to drive meaningful change. Through the power of AI, companies can take significant steps towards Scope 3 decarbonization and contributing to a sustainable future.

You are curious how you can benefit from CLIMATE AI? Learn more about our new AI Supplier Screening program!

The Climate Power of Supply Chains – 10 Steps towards Decarbonization in Scope 3.

The pressing issue of climate disclosure are making it clear. CO₂ numbers are not enough to understand the climate performance of a company – as we all know. Instead, companies are establishing holistic climate management approaches in order to drive real change. A market transition that is very much highlighted by rising regulations such as the European Supply Chain Due Diligence Directive (CSDDD), the Corporate Social Responsibility Directive (CSRD) and the de facto standard for climate-relevant information from the Task Force on Climate Related Financial Disclosures (TCFD).

What is holistic climate management in supply chains all about?

However, there is even one step further to take. Sustainability leaders know that climate impacts, risks and necessary decarbonization actions don’t end at the office door. Instead, investors, customers and policymakers urge companies to take responsibility for their entire value chain and purchasing decisions. The growing climate crisis shows that supply chain resilience and the transformation of entire business models are more important than ever.

Challenge of going beyond the basic CO₂ Footprint in Scope 1 & 2

When addressing climate responsibility within and beyond the own company, it becomes tricky. As climate-relevant information in Scope 3 are connected to hundreds and sometimes thousands of suppliers. Meanwhile, your climate data needs to be accurate, granular, and auditable.

Achieving net-zero for Scope 1 and Scope 2 emissions presents a substantial technical and economic challenge for many companies. Addressing Scope 3 emissions adds an additional layer of complexity. Such as, but not limited to:

• Consistent carbon accounting and climate performance tracking practices
• The need to work collaboratively with suppliers and business partners
• Handling multi-tiered supply networks and difficulties of engaging them in the improvement process

So how do sustainability and procurement leaders alike overcome this challenge?

Manage your Decarbonization Journey in Scope 3

Overarching climate goals in the supply chain can only be achieved by treating and involving the supply chain as a crucial aspect of any firm’s holistic climate performance. Therefore, businesses must collaborate with their suppliers to enable them to play a vital role in their climate transformation.

By publicly disclosing climate targets for Scope 3, emissions and decarbonization measures along the supply chain, an organization demonstrates accountability and provides stakeholders with vital information for understanding its climate performance. Beside regulatory pressure, new market mechanisms already show that those companies gain competitive advantages and are ahead of their peers. Undergoing a significant shift, business partners, customers and stakeholders alike increasingly consider climate impact in their decision-making. This presents the opportunity to align business strategies with market expectations and respond to the growing decarbonization demands proactively.

10 Steps towards climate-relevant data in Scope 3 – powered by Supplier Engagement

STEP1 – SET YOUR FOUNDATION

To embark on the path of supply chain decarbonization, you must begin by establishing a solid foundation. Start by making your climate commitment public, setting ambitious targets that include your supply chain. Assess your emissions and clearly define your priorities for implementing actions and solutions in your own transition. Aim high and align your goals with the Paris Agreement’s 1.5°C target.

STEP 2 – ACCEPT THE AMBIGUOUS STATUS QUO

Acknowledging the diversity of targets, strategies, incentives, and requirements within your own company is crucial. Align your sustainability and procurement offices to ensure a successful program outcome. Assemble a dedicated #TeamClimate and ask yourselves the important questions: Why do we need this program? What outcomes do we anticipate? Who needs to be involved? With these answers, you can set the stage for success.

STEP 3 – BE SIMPLE!

Simplicity is key when starting your supply chain decarbonization journey. Avoid overwhelming complexity right from the beginning. Instead, focus on asking your suppliers simple yet essential questions: Have you set climate targets? Have you calculated your emissions? What climate actions are you planning to implement? By keeping it simple, you can prevent frustration and maintain momentum.

STEP 4 -START WITH YOUR HOTSPOTS IN THE SUPPLY CHAIN

Having set your climate targets and aligned your internal team, it’s time to identify the hotspots in your supply chain. Utilize third-party data, databases, screening or a spend-based approach to gain an initial understanding of your value chain’s status quo. Cluster suppliers based on their climate maturity and strategic importance to pinpoint the hotspots that require your attention. The Climate Intelligence Platform offers a swift and straightforward way to screen your supplier base and kick-start your supplier climate engagement program.

STEP 5 – CLARIFY DATA NEEDS FOR TEAM SUSTAINABILITY AND PROCUREMENT

Before engaging with your supply chain, ensure that your internal stakeholders are on the same page. Align your sustainability and procurement teams regarding data, processes, and next steps.
This collaborative effort ensures that everyone is working towards the same goals and expectations. Clear communication is essential.

STEP 6 – SET UP THE PROCESS IN PROCUREMENT AND SUSTAINABILITY TEAM

Establishing the supplier engagement program is often organized by the procurement team. However, the sustainability team’s involvement is crucial in providing insights and publishing a clear message regarding your supply chain climate targets. This collaboration strengthens the credibility of your program and enables effective engagement with suppliers.

STEP 7 – START ENGAGING SUPPLIERS BY STRESSING THE “WHY”

Now it’s time to reach out and communicate with your suppliers. Make it a two-way conversation by inviting collaboration, sharing knowledge and resources, and guiding them through the journey. Highlight the benefits for suppliers supporting your climate initiative and provide incentives to get them on board. Build relationships and emphasize the collective effort needed to make a difference.

STEP 8 – DON’T OVERWHELM, STAY SIMPLE!

Understand that managing climate issues can be overwhelming for both you and your suppliers. Be open to feedback and improvement. Remember that we are all on this climate journey together, transitioning toward a low-carbon economy will take time. Motivate and engage your business partners, support them along the way.

STEP 9 – DARE TO TAKE DECISIONS

With information, feedback, and data in hand, it’s time to make decisions. Data should be utilized to gain insights and inform decision-making processes. Define a baseline from which you started and plan the next steps that bring you and your suppliers closer to achieving Net Zero. Address crucial questions such as how to provide climate knowledge to suppliers, share best practices, define quirements, and collaborate on taking action.

STEP 10-REPORT AND REPEAT

You took the first 9 steps, talk about it and share your learnings. This leads to your final step: report and repeat. You will repeat the process next year, so it’s the best time to get into the improvements and actions – together with your suppliers.

Let’s take action together!

This is why at THE CLIMATE CHOICE we empower every single company to become a climate champion in order to implement its climate targets and reduce emissions.

How? We start with the most impactful part: the supply chain. Which typically consists of hundreds and thousands of small and medium sized suppliers. They have the power to drive climate actions at scale. To do so, they need to understand where they stand in terms of climate transformation and work transparently together with their business partners to implement meaningful measures.

Our software-based Climate Intelligence Platform collects climate-focused data from companies, represents them in CLIMATE Scorecards and provides business insides into risks, potentials and best practices to reduce emissions.

Get more information in the Climate Playbook 2023, which provides a comprehensive overview of key insights from the CLIMATE TRANSFORMATION Summit 2023 (#CTS2023) and serves as a guide for companies to transition from incremental internal to exponential climate action across the supply chain.

Interview with Huawei Technologies on Climate Transformation

Interview partner: Xiang Ao is the Sustainable Development Officer at Huawei Technologies Deutschland GmbH. The multinational technology corporation has set climate targets within its own organization and along the supply chain to address the global threat of climate change.

Climate Significance of the Telco Industry

Today, the telco industry accounts for about 3% of global CO2 emissions, which is about twice that of civil aviation.

With global data traffic expected to increase around 60% each year, the ICT industry could be responsible for up to 14% of global carbon emissions by 2040.

This means that the telco industry is a huge lever for decarbonization and an opportunity for real change within the economy.

So how does a major global telco company still on the path of climate transformation, like Huawei, go about reaching its climate goals? This is what we will find out in this interview:

We are pleased to have partnered with Huawei Technologies Deutschland on the Climate Performance Assessment. Can you briefly introduce yourself?

Huawei Technologies is one of the world’s leading providers of information technology and telecommunications solutions. More than a third of the world’s population and more than half of the German population use Huawei technology directly or indirectly. With the headquarter in Shenzhen, the company has 207,000 employees worldwide and operates in 170 countries through its three business units Carrier Network, Enterprise Business and Consumer Business.

Huawei has been operating in Germany since 2001 and employs more than 1,700 people in 17 locations. Huawei’s largest European research center is located in Munich. As one of the world’s leading providers of digital information and communication technologies, we are a long-standing and reliable partner of German mobile operators and many fixed network providers. In its role as an infrastructure provider, Huawei has played an important role in the digitalization of Germany for many years. We are a service provider for our customers, and thus not only the starting point for every form of digitization, but also the catalyst for social developments.

Sustainable development is an important part of Huawei’s overall strategy. To address the global challenge of climate change, we believe that technology is a key enabler of sustainable development, to create a more inclusive and environmentally friendly world. Huawei hopes to work with global customers, suppliers, and partners to promote green and sustainable development in various industries and build a low-carbon society.

How are you positioning yourself in terms of climate transformation? What climate targets have you defined for yourselves?

Green and low-carbon development is rapidly becoming a global priority. Huawei believes that digital technology will be a key enabler of nature conservation, green development, and response to environmental challenges like climate change. Digitalization and decarbonization build upon each other and can together promote green development. For years, we have followed our pledge of “Tech for a Better Planet” to proactively address climate and environmental challenges. We use innovative ICT solutions to protect our shared home by focusing on three areas: advancing energy conservation and emissions reduction, promoting renewable energy, and contributing to a circular economy.

More specifically, we are striving to achieve the following goals by 2025:

1. Reduce the carbon emissions (Scope 1 and Scope 2 GHG emissions) per unit of sales revenue by 16% by 2025 compared with 2019
2. Increase the average energy efficiency of our main products by 2.7 times by 2025 compared with 2019
3. Ensure all of Huawei’s top 100 suppliers (by procurement spending) will have set carbon emissions reduction targets by 2025

How did the Climate Performance Assessment help you? What are the most important lessons you have learned?

We are very impressed with the well-organized structure and detailed questions of the Climate Performance Assessment, which will help us not only to internally assess our maturity in climate performance management, but also to benchmark where we stand in the industry. From this perspective, our current status is quite positive. To have such professional and easy-to-use scoring system is a big Win for the companies who wants to recognize its management status.

The structure of the assessment plays a very important role: the current 5 dimensions methodology, which ranges from climate strategy, governance & leadership, stakeholder management, carbon footprint to decarbonization measures, is quite efficient during this program.

What are the next steps you want to address as part of your climate transformation?

Huawei will continue to contribute to climate protection by integrating more emission reduction technologies and measures, and cooperating with other stakeholders to build supply chain responsibility. Huawei is currently in the process of managing its sustainability development together with climate protection to reach a higher level.

How do you deal with your supply chain and the emissions generated here?

Huawei manages sustainability in line with industry best practices and globally recognized standards. Sustainability plays a vital role in our procurement strategy and is a key part of our supplier management process, from supplier qualification and selection to performance appraisals and portfolio management. We regularly appraise suppliers’ sustainability performance and facilitate their continuous improvement by working closely with customers, suppliers, industry organizations, and other stakeholders.

Huawei has established its procurement CSR management system based on the OECD’s Due Diligence Guidance for Responsible Business Conduct and the IPC-1401 Corporate Social Responsibility Management System Standard, and incorporated CSR requirements into our procurement strategy and business processes. Our Supplier CSR Agreement is prepared according to the Responsible Business Alliance (RBA) Code of Conduct and the Joint Audit Cooperation (JAC) Supply Chain Sustainability Guidelines.

What tips and best practices would you like to share with other companies?

Environmental protection and decarbonization require the participation and contribution of all of us. Huawei has already made efforts in various fields and areas by promoting product improvement and technologies development, such as the industry’s first MetaAAU to support 384 antenna elements to reduce energy use by 30%, and industry’s first smart optical modem to reduce power consumption by 30% etc.. It would be great to see our suppliers, customers and business partners move forward, and we are happy to share more details and experiences with all interested parties.

Thank you for the honest and insightful interview, Xiang Ao. We are very pleased about the cooperation with Huawei Technologies Deutschland GmbH and look forward to driving forward the climate transformation of the economy together.

The Domino Effect of Scope 3 Emissions

Today, many companies are already regularly calculating their direct corporate CO₂ emissions. But it is not yet known that there is a big potential behind these emissions. Emissions from the value chain in Scope 3 can have a big leverage effect on a company’s reduction potential. However, according to recent insights about the carbon maturity of companies only 10% of large companies have reduction targets for their Scope 3 emissions and only 2% of medium-sized companies. Let’s have a look at this hidden leverage effect! 

Find out here how our AI Supplier Screening supports companies to set up Supplier Engagement Programs for Decarbonization!

WHAT ARE SCOPE 3 EMISSIONS?

The Greenhouse Gas (GHG) Protocol divides GHG emissions into Scope 1, 2 and 3. Scope 1 emissions come from sources that are owned or controlled by a company and include direct emissions generated e.g. by buildings and its own mobility. Emissions from Scope 2 are indirect and include purchased energy, steam, and heating/cooling. Scope 3 includes only indirect emissions that are generated in 15 distinct reporting categories along the supply chain. The 15 categories provide companies with a systematic framework to measure, manage, and reduce emissions across the entire corporate value chain. 

This is why the consideration of Scope 3 emissions proves to be particularly important, as they typically account for up to 90% or more of a company’s total emissions. 

WHERE DO SCOPE 3 EMISSIONS OCCUR

The GHG Protocol identified 15 categories of Scope 3 emissions, from upstream to downstream activities:

3.1 Purchased goods and services

3.2 Capital goods

3.3 Fuel- and energy related activities (not included in scope 1 or scope 2)

3.4 Upstream transportation and distribution

3.5 Waste generated in operations

3.6 Business travel

3.7 Employee commuting

3.8 Upstream leased assets

3.9 Downstream transportation and distribution

3.10 Processing of sold products

3.11 Use of sold products

3.12 End-of-life treatment of sold products

3.13 Downstream leased assets

3.14 Franchises

3.15 Investments

For many companies, the first category (Scope 3.1) contributes a major part to their GHG inventory. It covers upstream emissions from the production of purchased goods and services, which includes emissions generated from processing and transporting them along the supply chain – up to tier 1 (direct) suppliers. 

BUILDING SCOPE 3 INVENTORY FOR THE ENTIRE SUPPLY CHAIN

Scope 3 data is often missing as suppliers are often not yet climate ready and cannot provide the necessary data. Primary data from the supply chain is therefore missing and companies work with average data. This data does not help to identify issues in the supply chain or to improve the efforts of existing suppliers. Moreover, the sole focus on CO₂ as leading KPI is misleading, as it is a so-called lagging KPI, which is backwards oriented.

In order to make assumptions about future risks and opportunities, it is necessary to use leading KPIs that allow to manage upcoming challenges. Therefore a holistic climate management is needed in the supply chain. This includes using a set of indicators in the areas: climate governance, strategy, risks, metrics and decarbonization actions.

GETTING SUPPLIERS ON BOARD

Collecting this climate-relevant data from suppliers can be a major undertaking, and often presents the biggest challenges to conducting a Scope 3 Decarbonization Strategy.

Especially small and medium sized enterprises are not  “climate ready” yet, i.e. they cannot provide the needed climate-relevant data to business partners and third parties. Software solutions such as our Climate Intelligence Platform help companies to get their suppliers on board, align around their climate strategy and gain the necessary primary data in a structured and comparable way. 

Discover how our customers work towards Supply Chain Deacrbonization!

5 STEPS FOR SUCCESSFUL SUPPLIER ENGAGEMENT

There are five key steps that support companies in working with suppliers along the supply chain on a joined decarbonization strategy. Those are:

1. Announce the program to the supply chain before sending any survey forms
2. Provide a training or information session on the data collection methodology
3. Check-in periodically with suppliers regarding their progress on completing the survey
4. Provide benefits such as shared data, benchmarks and incentives for all participating suppliers
5. Assess data quality and share the results, best practices and next steps with all participating parties to allows for a joint decarbonisation strategy and improvements

DRIVING DECARBONIZATION

90% of a company’s emissions originate in the supply chain. Getting your suppliers on board of your climate transformation therefore has a major leverage effect of your decarbonization measures. To access climate relevant data from your suppliers, frequent and clear communication with suppliers, reciprocal feedback on the process and structured, comparable data management is key. 

Our AI Supplier Screening can help you with getting your suppliers on board. Through the use of AI, you can now quickly access data from public sources about your suppliers on a large scale, allowing you to better collaborate on decarbonization efforts. On top of that, you gain essential strategic insights about the climate maturity of your business partners and competitors.

Embark on your Scope 3 climate journey today! Together, we’ll pave the way for informed climate choices and a sustainable transformation that makes a real difference.

Get more information about our AI Supplier Screening.

Interview with CTDI on their Climate Transformation

We are excited to work together with CTDI to advance climate transformation. Can you please introduce yourselves?

The technologies we handle include access and transmission network equipment, all mobile technologies, set-top boxes, gateways, mobile devices, entertainment electronics, money and payment systems, industrial scanners, and printers.

How do you address climate in your business model?

Repair instead of throwing away – through our sustainable services, we help our customers reduce their own and global CO2e footprint. With “CTDI Planet Protect,” we aim to take this to the next level. We optimize our business processes to better support the circular economy. We also ensure that everyone takes responsibility for environmental protection within their daily work processes.

What are your climate goals?

We want to contribute to reducing CO2e emissions and conserving natural resources both as a company and through our services and technical developments. Therefore, we have aligned our climate goals with the Science Based Targets and aim to achieve a 100% reduction of Scope 1+2 emissions at all of our European locations by 2028. By 2030, we aim to reduce our Scope 3 CO2e emissions by 50%.

We conducted the Climate Performance Assessment together. What was your motivation for this?

What are the most important learnings you have gained? What are the next steps?

An important learning is that our “Planet Protect” strategy still has potential for improvement. One of the most important findings is the need for third-party auditing. We want to focus on this aspect in the coming years and possibly acquire a certified CO2e accounting software.

How do you deal with your supply chain and the resulting emissions?

We are in the process of demanding emissions from all of our logistics service providers. New contract partners will only be accepted if they support our “CTDI Planet Protect” goals. In the area of shipping, we already use CO2e-neutral logistics service providers in almost all areas.

What are best practices you want to share with other organizations?

Communication with all employees is the key to success for a successful implementation of environmental goals.

Thanks for the interview Jochen Bolzhauser, we are happy to drive climate transformation together!

Do you want to make your company a Climate Champion? Register now within 5 minutes on our Climate Intelligence Platform and complete your free Climate Readiness Check.

10 Steps to put Supplier Engagement into Climate Action for 1.5°C target

To achieve the 1.5°C ambition of the Paris Climate Agreement, business action across the full value chain is crucial. More and more leading brands are joining forces in action groups to tackle this challenge, such as the “1.5 Supply Chain Leaders” founded by the Exponential Roadmap Initiative.

The NGO brings together innovators, transformers and disruptors taking action in line with the 1.5°C ambition. Their common mission is to halve global greenhouse gas emissions before 2030 through exponential climate action and solutions.

In CHOICE Event #56 we learned from Laure Pérez Casado, Project Lead at Exponential Roadmap Initiative, how to engage suppliers for climate actions. Find here the most important 10 steps.

1. Set your foundation

It all starts with a strong foundation. Starting a supplier engagement program for decarbonization, needs to have a clear set up first. Therefore, companies need to start with their own journey before they can reach out to their business partners. As first step: Make your climate commitment public, set a target and include your supply chain, assess your emissions and be clear about your priorities about actions and solutions you want to implement in your own transition. Aim high: Cutting emissions halve until 2023 is inline with the Paris-1,5°-target.

2. Accept the ambiguous status quo

Even within the own company, targets, strategies, incentives and requirements can differ quite a lot. Typically, sustainability and procurement office need to align first to assure a successful program outcome. Form your #TeamClimate and ask yourself: Why do we need a program – for reporting, buying decisions or actions? What can be done? Which outcome is anticipated? Who needs to be involved? When can we start?

3. Be simple!

Often company leaders want to get everything done in one step. That is us humans, we like simple solutions. But honestly, simplicity needs to stay simple. If you start with a too complex system right from the beginning, frustration levels can be very high – on all sides. Do yourself a favour by asking simple questions first. Such as: Have you set climate targets? Did you calculate your emissions and which kind of climate actions are you planning to implement?

4. Focus on your hotspots in the supply chain

Great! You have set climate targets, aligned with your company internal action team – and know which data points you want to collect and how you want to roll out the program. Now is the time to find a simple way, to pre-screen your supply chain. Many companies work with third party data, databases and / or a spend-based approach to have a first understanding of the status quo of their value chain. This way, you can cluster suppliers into areas of strategic importance and find hotspot, on which you can should focus. The Climate Intelligence Platform offers a fast and simple way to start screening your supplier base and kick-off your Supplier Climate Engagement Program – start today and create a free account.

5. Clarify data needs for sustainability and procurement

Last, but not least, before you reach out to your supply chain: Get on the same page. Make sure (again) that your internal stakeholders are all aligned. Is everyone onboarded in your #TeamClimate? Your sustainability and procurement team will mostly likely work with the collected data and have certain expectations of the results you are aiming for. As you very likely have already iterated the process, align on the data, processes and next steps. Just to be sure.

6. Set up the process: procurement or sustainability team?

Now, it is time to get started. Most companies have the supplier engagement program organized by the procurement team, but need the sustainability team to provide insights and a clear message that is published regarding your supply chain climate target. This allows procurement to address suppliers in collaboration with your #TeamClimate and supports the credibility of the program.

7. Start engaging supplier by stressing the “why”!

Your moment to shine! You go out and communicate with your suppliers. This is not a one-way conversation. Invite for collaboration, share knowledge and resources and provide guidance through your anticipated journey. Most important: Provide incentives to get suppliers on board. Take away the fear of being rated top-down and instead share benefits for suppliers that are supporting your climate initiative. Find out more in the CHOICE Event “How to Qualify, Assess and Develop Suppliers for Scope 3 Decarbonization“.

8. Don’t overwhelm, stay simple!

Be aware that climate management can be frustrating. You might have suffered along the way, too. Just because you are now further ahead, does not mean your suppliers are there yet. Get them onboard and be open for feedback, together you can improve. We are all in this journey together and face a transition to a low carbon economy that will take until at least 2050. Many opportunities will come along the way. Get your business partners engaged and motivated.

9. Dare to take decisions

Nevertheless, the goal is clear. Cutting emissions, building up skills for a structured transformation and gaining insights on the climate maturity of your suppliers. This means, the moment you have gathered information, received feedback and have finalised your data integration, you have to take decisions. Data is there to be used! Not to be gathered only. Make sure you gain insights for decision making from it. You need to define a baseline from which you started and plan next steps that bring you and your suppliers closer towards Net Zero. Decisions that need to be taken: How do you provide climate knowledge to suppliers? How do you share best practices and benchmarks? How do you define supplier requirements and collaborate on taking action? Find out “How to generate Value from Supplier Climate Data” in this CHOICE Event.

10. Report and repeat

Finally, you also need to celebrate your success! It is great that you tackle the biggest challenge of the corporate world today: the climate transformation and decrabonization of your supply chain. Acknowledge that this is the only valid way to decrease emissions in a meaningful way – in Scope 3, where up to 90% and more of the total corporate emissions come from. Companies cannot reach Net Zero emissions over night. And focusing only on Scope 1 and 2 emissions, does not at all support the full requirements and climate targets. You and your #TeamClimate started an awesome journey that is highly influencing the financial, social and environmental impact of your company. Now, be transparent about what you achieved (and what not). Share within your company and externally. You took the first step, talk about it and share your learnings. You will repeat the process next year, so it’s the best time to get into the improvements and actions with suppliers.

You want to start you simple and scalable supply chain deacarbonization journey?

You can now start your own supplier screening and evaluation process by creating a free account on the Climate Intelligence Platform, which streamlines and automates the workflows to save your company time and money. Within the free basic account you can invite an unlimited number of your suppliers and start your supply chain transformation journey towards Net Zero. Get started today with a free account!

Measuring and Understanding your Scope 3 Emissions

For most companies, the majority of their greenhouse gas emissions (up to 90 %) lie in their supply chains – so-called Scope 3. Reducing those Scope 3 emissions provides the biggest lever for corporate climate transformation, but it is also by far the most difficult. The first step and basic requirement is to measure and holistically understand the company’s Scope 3 emissions.

That’s what we learned at the CHOICE Event #55 from Richard Scholz from the WifOR Institute and Yasha Tarani from The Climate Choice. Here you will find the most important insights from their joint presentation.

Scope 3 Reporting Becomes Mandatory under CSRD

Companies worldwide are facing increasing pressure from stakeholders and regulations to meet their climate targets. Of particular importance is Scope 3, as defined by the GHG Protocol, which, in contrast to Scopes 1 and 2, includes all upstream and downstream emissions along a company’s supply chain. This new importance of Scope 3 is, among other things, becoming apparent in the fact that Scope 3 reporting becomes mandatory under the upcoming EU wide Corporate Sustainability Reporting Directive (CSRD).

From 2025 onwards, companies in Europe meeting two of the following three conditions will have to comply with the CSRD and thus report scope 3 emissions:

• €40 million in net turnover
• €20 million in assets
• 250 or more employees

In addition, non-EU companies that have a turnover of above €150 million in the EU will also have to comply. 

Different methods of measuring Scope 3 emissions

With this in mind, we are going to have a look at how exactly companies can go about to tackle their Scope 3 emissions. The first step is definitely to measure the emissions from their supply chain. For this, the GHG Protocol suggests to use different calculation methods, depending on the availability of data. 

As shown in this graphic, you can use either supplier-specific data or secondary data (i.e., industry average data). The different methods are sorted according to their specificity. The best calculation method is by far the supplier specific method on top. However, if you have not done a calculation yet, starting at the bottom of the method sorting is the recommended approach. The so-called spend-based method uses average data points.

The spend-based method of measuring Scope 3 emissions 

The starting point of a spend-based method is the purchase list, also referred to as your spend file or order placements. It should include all goods and services purchased by your company. Three information are of particular importance here:

• Which kind of products/services are bought?
• Where are those products/services produced?
• How much of those products is bought?

To understand this better, let’s have a look at a concrete example. We assume that our chemical products purchased from the USA are worth 300,000 €. So we know the type of product, the country of origin and the amount of products purchased. After those basic observations, we now look at model data. In the model data, we find out how much revenue the chemical industry in the USA has and also how much CO2 emissions the chemical industry in the USA is emitting. With this information, we can now attribute a certain certain of CO2 emissions to the revenue of the chemical products that our company bought.

Adding Tier 2 and 3 emissions of suppliers of suppliers

However, with this first step, the process of measuring Scope 3 emissions is not concluded yet, as the results only represent the Scope 1 emissions of the suppliers. In order to also calculate the tier 2 and 3 emissions of suppliers of your suppliers and so on, you will need an additional purchase list from the chemical industry of the US – so-called model data.

Now we look at each and every purchase item that the chemical industrie of the US is buying. And we attribute a certain amount of CO2 emissions from those other industries across the whole world that the US chemical industry is buying from. That for example also includes the Scope 2 emissions of the US chemical industry, because they are buying electricity. You need to repeat this process with a list of the tier 3 suppliers, so the emissions caused by suppliers of tier 2 suppliers.

Moving the ladder all the way up to the supplier-specific method

The spend-based method is a good starting point to get a first impression of the emissions of your supply chain. However, the goal should always be to move up the ladder as quickly as possible from average data to deeper and more specific climate information of your suppliers. This is where specialized software tools like the Climate Intelligence Platform come into play.

The Climate Intelligence Platform provides a way to efficiently automate the various steps of the supplier-specific method for Scope 3 decarbonization. Companies receive everything they need to set up, test, manage and achieve their supplier climate engagement targets – from data acquisition to tracking and engagement. Via the platform they can access and acquire a wide range of audit-ready company risk as well as emission data and support their suppliers in their decarbonization journey.

Start with the AI Supplier Screening

Through the use of AI, you can now quickly access data from public sources about your suppliers on a large scale, allowing you to better collaborate on decarbonization efforts. On top of that, you gain essential strategic insights about the climate maturity of your business partners and competitors.

Embark on your Scope 3 climate journey today! Together, we’ll pave the way for informed climate choices and a sustainable transformation that makes a real difference.

Get more information about our AI Supplier Screening.