Whilst the focus for many businesses has been on Scope 1 and 2 emissions, many large companies also have a strong focus on Scope 3 emissions, although they are at an earlier stage in their action plans. Occurring within the value chain, across both the supply chain and customer logistics, Scope 3 emissions represent a significant challenge.
Understanding Scope 3 emissions
Scope 3 emissions frequently account for a substantial portion of a company’s total Greenhouse Gas (GHG) emissions, and in some cases, can be significantly higher than direct (Scope 1) and indirect (Scope 2) emissions.
For energy-intensive manufacturers, addressing these emissions is essential not only for regulatory compliance, but also for meeting stakeholder expectations and maintaining competitiveness in an increasingly sustainability-focused market.
Scope 3 emissions include, but are not limited to:
- Purchased goods and services: Emissions generated during the production of goods and services acquired by the manufacturing company.
- Transportation and logistics: Emissions resulting from the transportation and distribution of products, including inbound and outbound logistics.
- Waste disposal: Emissions from the disposal and treatment of waste generated in operations.
- Use of sold products: Emissions associated with the energy consumption of products during their use phase.
Tackling Scope 3 emissions
Scope 3 action plans vary in their stage of progression far more than plans for Scope 1 and 2. Several of our large corporate customers have objectives to ensure their supply chain has validated Science Based Target (SBT) plans by 2030, and will work with those suppliers to track their delivery against the plan.
Collaboration is key to effectively tackling Scope 3 emissions. For example, engaging with your supply chain to ensure they have developed plans for reducing their Scope 1 and 2 emissions, and encouraging clear reporting.
Of course, supply chains in the UK and on the island of Ireland face many of the same challenges as the main manufacturer, such as: incomplete plans on how to achieve Net Zero; a need for innovation to develop solutions; and competition for the capital to embrace the measures and steps needed.
In Ireland, the Republic’s climate framework now sets legally binding national targets to cut GHG emissions by 51 per cent by 2030 (relative to 2018) and to achieve climate neutrality (Net Zero) by 2050, under the Climate Action and Low Carbon Development (Amendment) Act 2021. Ireland also publishes annual Climate Action Plans, which align industrial action with legally binding carbon budgets and sectoral emissions ceilings. This places increased pressure on energy-intensive manufacturers to address both Scope 1, 2 and 3 emissions.
Scope 3 and trickle-down goals
Many companies operating within the scope of the EU Corporate Sustainability Reporting Directive (CSRD) must now report detailed Scope 3 emissions in line with European Sustainability Reporting Standards (ESRS), requiring stronger data collection from suppliers and customers. As a result, manufacturers must integrate Scope 3 management into core business strategy well ahead of 2030.
I first saw the principle of trickle-down or cascading sustainability goals more than ten years ago, arguably ahead of the curve. Already in 2016, the pressure was on for us to reduce our energy costs and comply with Zero Carbon electricity goals. But further pressure was building. Our customer began to ask what measures were being taken to reduce consumption and improve energy efficiency. Out of that pressure came our first external energy audits, and initial proposals for action.
Taking action on Scope 3
Of course, the actions that can be taken are very limited if payback is the key driver and is so short. Times have moved on, and the easy, cheap steps have been taken. What is left to do is often more complex and/or has longer paybacks, which presents a major funding challenge.
One approach any manufacturer can take is to have an Energy Service Company (ESCO), such as On-Site Energy, or an energy consultancy, to engage suppliers and other stakeholders in the value chain, to deliver innovation solutions and to provide finance to implement them.
The benefits for energy-intensive manufacturing customers of having their supply chain reduce their emissions and energy costs are enhanced brand reputation, more competitive and sustainable suppliers, and improved loyalty and supply chain relationships.
Many of the strategies recommended by On-Site Energy, such as waste heat recovery, more efficient equipment replacement, on-site generation, process optimisation and waste reduction, can also lead to significant cost savings. Efficient use of resources minimises waste and ensures that capital is spent effectively. It also prepares companies for future tightening of regulation, carbon markets, and the likes of Carbon Border Adjustment Mechanism (CBAM).
Looking to the future
The transition towards sustainability is a critical focus for energy-intensive manufacturing companies, particularly regarding Scope 3 emissions. On-Site Energy offers diverse solutions and collaborative strategies that empower energy-intensive manufacturers to enhance their sustainability profile while achieving cost savings.
By engaging suppliers, optimising processes, and effectively managing transportation and waste, On-Site Energy can help clients navigate the complexities of Scope 3 emissions reduction, positioning them for success in a future where sustainability is paramount. This includes compliance with Ireland’s legally binding 2030 climate targets, with the UK also preparing for Net Zero by 2050.
Embracing this partnership leads not only to immediate environmental benefits across the UK and island of Ireland, but also to long-term financial and reputational advantages in the marketplace.