Long read
How can we manage and measure scope 3 emissions?
To avoid the worst of climate impacts, our greenhouse gas emissions need to be almost halved by 2030. To address the emissions problem, the UK Government has set out a strategy for decarbonising all sectors across the economy, with the ambition of being Net Zero by 2050.
Emissions are divided into three categories, scope 1, 2 and 3, with the latter usually accounting for more than 70% of an organisation’s emissions.
According to the latest Better Food Index from Tortoise, which ranks the impact of the UK’s 30 biggest food and drink producers on areas across environment, social, nutrition, affordability and financial sustainability, scope 3 emissions were not reported by six companies in the Index. Among those that did, nine were said to underreport.
The difficulty is that scope 3 emissions are notoriously difficult to track and manage.
Whilst scope 1 covers the direct emissions from owned or controlled sources and scope 2 indirect from the purchase and use of energy, scope 3 comprises all the other emissions which occur in the upstream and downstream activities of a business. One example of scope 3 is how we use and discard products from suppliers.
If we’re to achieve Net Zero targets, it’s imperative we not only accurately measure these scope 3 emissions but manage them too. But how do you control something that’s strictly not in your control…?
Untangling these emissions was the topic of our recent roundtable discussion, which saw leaders in sustainability gather to deliberate and discuss under Chatham House rules.
Using data in the right way to make sustainable impacts
Roundtable sponsors Normative kicked the conversation off with a short overview of emission trends. According to the emissions expert, companies are thinking about emissions in three ways, regardless of their size or industry; these include: the environment, regulation, and, perhaps the biggest motivator, “the competitive imperative”. The latter refers to the dawning realisation among ‘non-sustainability-experts’ that emissions are important for profit and loss (P&L).
“Consumers are now demanding lower-carbon food — and these demands are only going to get louder,” said Maggie Buggie, COO of Normative. “To stay competitive and to win business, food manufacturers will need to comprehensively track, report, and reduce their greenhouse gas emissions throughout their operations and supply chains. And they will have to prove to an increasingly skeptical consumer base that this work is effective. To accomplish all this, businesses will need to use comprehensive, scientifically-rigorous carbon accounting.”
We’ve also seen a recent Gen Z study from Deloitte which revealed the importance of sustainability credentials when it comes to employment; with the survey finding that more than half of respondents claim to research a brand’s environmental impact and policies before accepting a job offer. With the on-going labour crisis, this is surely a statistic to be mindful of.
With sustainability hot on everyone’s lips, companies are now shifting to business models in which sustainability is in-built. However, as raised by the roundtable, that brings in new unknowns like: ‘What kind of learning and development is needed within the factory?’ and ‘What support should be offered to various departments inside and outside of sustainability (e.g. finance)?’.
As tempting as it might be to rush into this and snatch at that ‘competitive advantage’ (or rather imperative), sustainability cannot be considered in a hurry. Companies must make informed and careful decisions, as one misstep in environmental claims can result in the damaging label of ‘greenwasher’.
Maggie Buggie explained it this way: “As vital as accurate carbon accounting is for seizing competitive advantages – like improved brand equity – it’s equally important for avoiding negative consequences. Incomplete carbon data means incomplete reporting and reduction. This can put businesses in a position where they believe they’re making meaningful sustainable changes, so they share this progress – but because they aren’t seeing the full picture, their efforts are less effective than they claim. In short, they’re unintentionally greenwashing. And unintentional or not, greenwashing can have devastating effects on a business’s reputation.”
Managing data in the right way
Data will be essential in untangling scope 3 emissions and empowering producers, but this information will need to rely on both humans and technology working together. As one attendee pointed out, “human intervention can be a big problem, particularly in the context of the end-to-end supply chain and the convergence in scope 1,2 and 3”.
Relying on data that is in the public domain and manually assessed won’t be good enough.
“I see many people migrating to ‘human intervention’ but humans will struggle to handle 90 million lines of data – and that’s only one operating line in the process; they need to do that – and want to do that – across the entire organisation.”
Instead, we need to move to a system whereby data is automated and analysed in real-time and then used to make meaningful decisions. It’s all very well and good recognising the importance of data and collating it, but it’s equally important to understand and action against it based on that insight.
We need harmonised data but competition law raises issues
We need to reach a point in which this data is harmonised – based on a single source of truth that is capable of measuring the same metrics in the same way, precisely. Otherwise these metrics will never truly be comparable across brands – and then arguably how does one quantify its relevance and impact accurately?
David Couldrey, technical director of Wicks Manor puts this into perspective: “We have implemented a number of sustainable farming practices on our farm, but unfortunately there is currently no harmonisation in calculating the carbon footprint for meat production which means the benefits of eating locally produced meat are not generally recognised. With the government now actively working with farmers and other interested parties on a harmonised method, we are hoping that these benefits will be recognised in the future.”
“Once we've got the fundamentals of our data right, then we can start to prioritise [actions],” another roundtable member contended.
The lack of harmonisation has forced the industry to take matters into its own hands in the meantime, with different brands looking to collaborate as they are anchored on the shared threat and opportunity of emissions. However, that leads to another problem, as Nicholas Bevan, Baker & Baker’s director of sustainability pointed out.
“The scale of the challenge in addressing scope 3 emissions is significant, and it’s critical for the industry to work together to devise solutions that span the entire value chain, and ideally, across the wide array of food and drink categories,” he said. “Part of the discussion focused on the CMA and the current inability under competition law for manufacturers and brands to truly collaborate. There must be serious consideration given as to how competition law can be amended to allow for a more joined-up industry approach across material sustainability issues.
“For Baker & Baker, more than 95% of our total emissions fall within scope 3, and so we know it’s where we must focus our efforts. Collaboration with our key suppliers will be important, but industry solutions and new technologies and processes will need to come online, at scale, if we are to achieve the deep emission reductions required.
“There is also a need to address all our material ESG issues in an integrated manner, rather than just focusing solely on carbon emissions. Delivering a positive impact on biodiversity or water usage will produce incremental improvements to our overall carbon footprint.
“The quality of data is also a significant consideration for us. In some areas, although the data quality may be sufficient to meet certain sustainability standards, we need more granular and specific data points throughout our value chain to truly ensure that we are reporting in an accurate manner. This is an industry-wide challenge however, and requires a mindset shift on how data is measured and recorded.”
Stop downcycling and start upcycling
Vincent Walsh founder of RegenfarmCo, Mycoloops and Herblabism agreed collaboration was necessary and urged the need to move to a circular system.
“For me one of the greatest challenges of scope 3 is the need for more collaboration across the whole food sector. It’s not as simple as the quickest firms to ‘clean up their act’ being the winners in a race, it’s about understanding that the entire food supply chain is facing similar challenges.
“Only through strategic collaboration will it be possible to scale sustainable activities which will help reach scope 3 targets, for example redirecting and upcycling food waste and other materials used extensively in food manufacturing, like cardboard.
“There can also be a direct benefit to farmers through this kind of upcycling. To grow food you need nitrogen, carbon and organic matter, all of which can be derived from food manufacturing waste. Increasingly, farmers are also looking for ways to reduce their emissions and save money, so creating sustainable feed stock from food industry waste is a genuine win-win.
“Adopting such circular approaches across the food chain will also drive vital biodiversity gains, which in turn will embed more environmental resilience across our farming landscape. So for me, scope 3 isn’t just about reducing the sector’s carbon footprint, it's about supporting a truly circular and regenerative food chain from farm to fork.”
As was flagged during the conversation by one delegate, there is a tendency for companies to ‘downcycle’ rather than upcycle, wherein the product is recycled but the quality eventually lowers and it inevitably ends up in landfill.
Upcycling is where by-products are used to make something better, for example using side streams (e.g. food waste) and turning it into compost for farms, as Walsh suggested.
“We need to look back at the beginning of the supply chain to develop a more sustainable and ecological and circular infrastructure,” stressed an attendee.
“We have developed monocultures because they’re efficient, but they don’t work in terms of biodiversity. You [the F&B sector] don’t work in terms of biodiversity and culture, you work in terms of economics.”
They added that they understood working in this way would be challenging, as it means upscaling is slower, but also highlighted that we cannot continue on this trajectory with downcycling at the heart of production. “It’s inefficient.”
Read more about novel ways of reducing waste here.
Is recycling and alternative materials affordable?
If you ask Google, ‘do consumers care about sustainability?’ most of the results will show a resounding ‘yes’.
Indeed, the research seems to suggest that not only do consumers wear sustainability hats when shopping, but they’re savvier about the claims they’re presented with. They’re looking for end to end transparency backed by sufficient data which proves a brand is ‘green’.
However, the roundtable guests were uncertain this was the case, with one attendee contending that many consumers say one thing but do another.
“We spend millions on recycled content whereas our competitor does not because of the cost. But there has been no noticeable difference in sales,” they revealed.
“I’m not sure enough people are that bothered that they’ll spend an extra ten pence.”
“I would extend that to some retailers,” another added. The delegate explained that in bakery, for example, people taste with their eyes and therefore need to see the product – often the way this is done is with plastic packaging.
“We’ve had conversations with customers about moving away from plastic and about alternative forms of packaging that might be more sustainable and are hitting a brick wall,” they continued. “A lot of them are only thinking about it in terms of how removing plastic will affect sales. I don’t think there’s been enough research on whether moving to different forms of packaging will affect sales.”
“One of the biggest things we can do to improve our scope 3 is improve recycle rates,” another member suggested. “We’re not going to do that on our own necessarily because you have to work through local authorities and waste managers and government, etc.”
They added that “the best thing would be a deposit return scheme” (DRS) whilst they expressed frustration over the delays to the upcoming Scottish initiative.
Speaking from an SME point of view, Couldrey added: “With food prices and business costs as high as they are, it’s difficult for SMEs to move over to more expensive recyclable packaging materials, where at the same time we all have an ethical duty to reduce plastic wastage further down the supply chain and reduce our scope 3 emissions. With the added challenges of the consumer trying to keep their costs down and limited recycling options in the UK, something needs to change to help the industry. For example, government intervention on specific materials or better recycling facilities.”
Are we overly obsessed with packaging and palm oil?
A few members of the roundtable also raised the interesting point that packaging has dominated the sustainability conversation, but it’s not always where the most impact can be made.
“A key learning from our scope 3 work has been that packaging is less than 10% of the impact, with the main area for potential reduction being ingredient selection since the agricultural element is on average over 70%,” stated Martin Baker, head of environmental social governance at FSC Direct Ltd.
“Put something in a paper bag and everyone thinks you’re great,” another delegate argued, as they pointed out that shipping that paper from somewhere like Indonesia is going to have a much bigger influence on emissions than plastic.
“If we’re going to get scope three to zero, the whole world has got to change,” they said. “I think we’re going to come across a paper wall where we all want to do the right thing, and there’s going to be market pressure in the opposite direction which means we do the right thing but no one will buy it. It’s going to be interesting, there’s going to be dichotomy in the market.”
Another delegate mentioned that positive changes their company has made have been ignored by consumers whilst the fixation on packaging and palm oil continues. They added that if there were to resort to alternatives which they have in the past, it doesn’t always mean the product is more sustainable.
As another attendee flagged, the reason behind this focus on areas such as plastic and palm oil is most likely a result of ‘seeing action’. Whereas, the impacts of a low-carbon sandwich might be harder to grasp.
“The subtlety of what’s happening to biodiversity loss is very difficult to comprehend,” another attendee added. “Asides from the more extreme examples like palm oil where you can see the impact on orangutangs and deforestation.”
Government intervention is needed
The delegate added that legislation coming down the track will be “totally transformative” but it will also bring new challenges, such as managing against thousands of data points and building frameworks and structures that allow for this. Moreover, the industry needs to be clear about what it requires.
They offered the example of chemical recycling as a particular pain point. Currently under the plastics tax, chemical recycling cannot be claimed against. So therefore, there's a lack of investment by chemical manufacturers in new facilities to create that infrastructure in the UK. However, they argued that this could solve a lot of issues around the use of film and the creation of a circular economy for packaging.
“We need to get better at talking to governments about the structural interventions that we need,” they urged.
“We could have an absolutely transformative impact on agriculture, in particular, but we need to convince not just our government, but governments globally, around the need to come together to drive systemic changes.”
Meaningful actions to tackling scope 3 emissions
Concluding the panel, the members each gave one action that could be taken to begin untangling scope 3, with several flagging ‘collaboration’ and even ‘action’ itself.
“We need to work with farmers to help them measure their interventions,” suggested one delegate.
“Action is action,” said another attendee. “It’s a journey – we do need to improve our data and measurements but the fact it’s not perfect shouldn’t stop us. Even if we’re calculating five now and next year it’s six, it doesn’t matter. It’s still a number and we still need to reduce it.”
For Baker, the first step in reducing scope 3 impactis for all members of the supply chain to clearly understand their contribution.
“As we help more companies to get clarity, our own calculations of scope 3 will become more accurate and rely less on scientific data tables,” he noted.
After all, one company’s scope 1 and 2 is another’s scope 3.
Whilst you're here, why not give our latest podcast episode a listen, as we hear from energy expert Rauri Cairns on how to keep energy costs in the factory low.
