Reducing value chain emissions is becoming imperative for companies. This is as expectations grow for businesses to take responsibility for their full climate impact. While many organizations have made progress measuring and reducing scope 1 and 2 emissions from their operations, scope 3 emissions that occur across the broader value chain remain a blind spot for many. So, companies that fail to understand and take ownership of scope 3 risks and opportunities will lose their social license to operate. For effective scope 3 management, companies need to rethink their organizational structures and capabilities.
Simply adding scope 3 to the sustainability team’s responsibilities is insufficient. Leading organizations are taking an enterprise-wide approach that integrates scope 3 into core business functions. It includes procurement, operations, innovation, and strategy. Moreover, they are providing training and incentives. This is to empower employees throughout the business. It identifies and acts on value chain decarbonization opportunities.
Internal realignment is just the start. Companies must also engage suppliers and customers to catalyze change across industries. Furthermore, creative partnerships, detailed supplier screening processes, and product transparency initiatives can drive collective action. So, the transition to low-carbon operations and circular business models will touch every part of an organization. Additionally, with robust internal coordination and cross-industry collaboration, scope 3 provides an excellent opportunity. This is to create value and impact at scale. So, let us get deeper into the internal organizational setup for scope 3 management.
Scope 3 Management: The Pivotal Role of Procurement
Procurement sits at the frontline of supplier engagement. It is the single biggest arena of Scope 3 for most companies. Procurement teams can significantly shrink upstream emissions. This is by setting sustainability expectations and building supplier capabilities. It also includes incorporating carbon impact into contracts.
Leading organizations are creating dedicated sustainability procurement teams. This is to bring a strategic focus on enacting ethical sourcing frameworks. Furthermore, developing comprehensive supplier scorecards and codes of conduct brings structure. This is for engagement across environmental, social, and governance dimensions. Moreover, collaborating with suppliers on science-based target setting builds momentum for transformational reduction.
However, procurement cannot tackle the supplier footprint alone. Furthermore, partnership with sustainability teams is essential for lifecycle and hotspot analysis. This is to identify the highest impact spend categories and geographies to focus engagement. Operations, finance, and business units must also align on sustainable sourcing roadmaps. These are the ones targeting major commodities and raw materials.
Mainstreaming sustainability criteria into strategic sourcing processes and category management will enable procurement. This is to drive change with the backing of the whole organization.
Scope 3 Management: Expanding the Authority of Sustainability Teams
While sustainability groups traditionally focus on minimizing operational environmental impacts, Scope 3 requires their expertise across the entire value chain. As a result, this demands increased organizational influence. This is for Chief Sustainability Officers and their teams.
Elevating heads of sustainability in the organizational chart and C-suite establishes clear accountability. This is for steering value chain decarbonization. Moreover, integrating sustainability leads into executive meetings, strategic planning forums, and business reviews embeds holistic thinking throughout operations. This is one of the main areas to focus on for people wondering how can companies effectively manage scope 3 emissions with an internal organizational setup.
Providing teams with resources for comprehensive lifecycle analysis creates formal responsibilities. This is for quantifying and disclosing total carbon impacts. Furthermore, growth in data management capabilities will enhance emissions mapping. Moreover, external networking builds stakeholder connections. This is to enable transformational collaboration.
However, sustainability teams cannot simply mandate decarbonization from the outside for scope 3 management. Cross-functional alignment ensures embedded sustainability practices, not just delegated requirements. So, internal sustainability networks help teams share best practices.
Scope 3 Management: Cascading Accountability Through Business Units
Make sure each part of the business takes responsibility for managing carbon emissions related to what they do. While big plans from the top guide us, giving leaders goals to reduce carbon, training, and support from colleagues helps everyone be responsible.
Connect bonuses and performance evaluations to goals about reducing carbon and being sustainable. Also, shows how making products in an eco-friendly way can save money and make customers happy. Encourage creativity through contests and events focused on sustainability.
Make space for teams to talk about how they’re doing and share good ideas. Celebrate small successes to keep everyone excited for the big goals. Use quick and focused efforts to speed up the process of reducing carbon emissions. This is one of the best ways when talk about how can companies effectively manage scope 3 emissions.
Scope 3 Management: Central Coordination Through a Cross-Functional Body
With carbon mitigation initiatives happening across functions, centralized oversight maintains clarity and strategic alignment. A dedicated cross-functional Scope 3 steering committee allows holistic orchestration of efforts organization-wide.
This group will guide target-setting, roadmaps, and accountability across units. They can govern central data management systems. It consistently tracks emissions. Furthermore, scenario analysis and risk assessment will inform strategic decision-making.
Ideally, the committee should include the CEO and C-suite to demonstrate prioritization. However, diversity of membership ensures representative perspectives. This is from procurement, sustainability, operations, finance, business groups, and regional affiliates. Moreover, regular meetings and working groups foster ongoing collaboration.
Scope 3 Management: Integrating Finance Systems and Leadership
Finance oversees budgeting, accounting, and data ecosystems. It is integral for tracking emissions and funding reduction initiatives. Elevating the CFO or head of finance to the Chief Sustainability Officer or committee chair underscores financial integration.
Finance partners provide essential support through carbon costing models. It is also through internal carbon pricing mechanisms and clean tech investment evaluation. This is to guide decisions. They lead the development of GHG accounting protocols across fragmented enterprise systems. Partnering with IT and data teams also optimizes monitoring.
However, solely relying on finance leadership is insufficient. The CEO must set the vision and mandate to ensure comprehensive buy-in. Moreover, personal dedication from all the C-suite is required to enact step-change.
Scope 3 Management: Structuring for Agility to Enable Evolution
It’s important to regularly check and update how organizations are set up because things are changing quickly outside. This includes changes in climate science, rules, technology, and what people expect. Checking and getting feedback helps make sure the organization is meeting current needs and not getting stuck.
Rules and what investors care about are changing, so organizations need to be able to adjust quickly. They might need to collect more data about their impact on the environment from different parts of their business. They might also need to create new teams to work with new partners. In the future, new rules might make things simpler.
Even though having a solid plan is good, it’s also important to be able to change things as needed. This helps the organization stay on the right path, especially during times when a lot is changing, like when we’re trying to use less carbon.
Scope 3’s immensity seems overwhelming. However, clear governance, empowered leaders, cross-functional coordination, and structural fluidity transform fragmentation. It is into actionable focus. Accountability throughout organizations, from procurement and sustainability teams to business units and the C-Suite, enables progress in scope 3 management.
Regular exchange with peers provides guidance. However, companies must take ownership of their unique footprint challenges. At the Global Summit on Scope 3 Emissions Reduction on 18-19 April 2024, sustainability leaders across industries will gather to share strategies and forge new partnerships. So, join us in advancing collective understanding of how to coordinate Scope 3 decarbonization from the inside out.