Providing strategic advice and market insights for optimizing manufacturing relationships and achieving profitable environmental strategies to clients in the Americas, EMEA, and Asia since 1987.By Kim Allen, PhD, TFI Environment Consultant
Even though most large electronics companies now routinely measure and report carbon emissions for power generation and purchases (referred to as “Scopes 1 and 2” by the Greenhouse Gas Protocol), they’ve had difficulty reporting the most emitting and costliest “Scope 3” activities. This has been frustrating, because Scope 3 activities – supply-chain and corporate purchases, product transportation, customer use and disposal of products, air travel, and employee commutes — represent the largest opportunity for both reducing greenhouse gas emissions and enhancing profitability at the same time.
The good news is that the GHG Protocol creators WBCSD/WRI (World Business Council for Sustainable Development and the World Resources Institute) are now bringing standards to the previously elusive “Scope 3” category. So now Lean and Green success stories such as the following recent example will be more numerous: One of TFI Environment’s tech-industry clients added a logistics hub in Europe to reduce transit distance, time, and cost when shipping products to customers in EMEA. This singular “Scope 3” move reduced the company’s supply-chain emissions by more than 500 metric tons of CO2, and saved customers collectively $2 million in shipping costs.
We recommend that executives looking to reduce emissions and costs from Scope 3 activities begin by identifying the biggest hitters environmentally and financially. Here are some key ones, especially for the electronics industry:
• Corporate air travel often comes out near the top. It is best addressed through a combination of technology (such as videoconferencing and virtual tradeshows), better planning, and policy changes. Depending on company size, savings range from a few million to tens of millions of dollars annually.
• Employee commutes are emissions-heavy. Employee-engagement programs to reduce single-car commutes and enable productive telecommuting also increase employee loyalty.
• Emissions from contract manufacturers and logistics. Reducing these emissions requires collaboration with manufacturing and other partners and can significantly reduce cost of goods sold.
• The use phase of products can represent as much as 90% of a product’s emissions. Invest in design-for-environment programs and work with both manufacturing partners and the users themselves to limit these emissions—benefiting customers as well with lower cost of operations and lower CO2 emissions to report!
TFI Environment has helped several of our tech-industry clients to measure and reduce Scope 3 emissions. We’ve discovered the “secret sauce” to influencing employees and suppliers to change their practices for Scope 3 reductions, using best practices, practical measurements, inspiring messages, contests, incentives, and other education and reinforcements.
We hope that the increased clarity of a Scope 3 standard will encourage more companies to delve in and start accounting for and reducing these emissions, profitably. The WBCSD/WRI draft standard is in the stakeholder review phase and is intended to be published during 2011.
How is your company measuring Scope 3 emissions? What success have you had in reducing them? Are you interested in using the new Scope 3 standard? We’d love to hear from you; please reply below.
Our company has been reporting on Scope 3 emissions from business travel, product logistics, emissions from the manufacture of our products and leased assets and marine vessels for the past several years, and will soon add commuting and end-of-life emissions. The product use phase is a large component for us, since we manufacture telecommunications equipment that is often in service 24/7 for 10+ years. The Global eSustainability Initiative, along with the International Telecommunications Union and the WRI are working on industry guidance for the ICT industry to follow the new Scope 3 guidance. This is important since Scope 3 emissions for, say, Apple Computer with iPods is very different than emissions from our products which have hundreds of thousands of possible configurations, not to mention inventory that was purchased but is not actually in service yet since its part of “spares” inventory. We look forward to this guidance as it will help level the playing field with one, consistent methodology that the ICT industry can point to when publishing our emissions.
–Richard Goode
Head of Sustainability
Alcatel-Lucent
Kim Allen’s article is right on point. Scope 3 GHG emmissions are the base of the iceberg, huge and unseen and for many companies are orders of magnitude larger than their Scope 1 or Scope 2 emmissions. Understanding the carbon cost, not just for your operations, but of your supply chain is critical for accurate business decissions. This carbon information will becoming increasingly important as major purchasers (Walmart, US Federal Agencies) look for this information in their vendor contracts.
Stephen Greene, Howland Greene
Thanks to both of you for your helpful comments. They dig more deeply into the theme.
Rich, your comment highlights the need for industry-specific guidance to follow on the general Scope 3 guidance appearing now. Indeed, it is incumbent on each industry to “translate” the WRI standards into meaningful business practices. Companies are encouraged to participate in this process, to make sure it works for all.
Stephen, you highlight the need to understand Scope 3 emissions in order to satisfy customers. This kind of exchange all along the supply chain is likely to become more important.
We can all look forward to having some candid discussions and forming new relationships as more and more companies around the globe delve into Scope 3 emissions. Keep us posted!