3 Strategies Every Corporate Leader Needs to Know

The Three Most Important Actions to Tackle Scope 3 Emissions

Many companies find straightforward strategies to reduce Scope 1 and 2 emissions.

𝐒𝐜𝐨𝐩𝐞 𝟏: Through focusing on both stationary and mobile combustion, organizations can switch to green alternatives or enhance fuel efficiency to lower fossil fuel consumption.

𝐒𝐜𝐨𝐩𝐞 𝟐: The shift towards purchasing greener energy is facilitated by options like Renewable Energy Certificates (RECs) and Power Purchase Agreements (PPAs).

These steps mark tangible progress in corporate decarbonization efforts.

But then, we hit the complex world of 𝐒𝐜𝐨𝐩𝐞 𝟑 𝐞𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐬. With its wide-ranging indirect emissions spanning the entire value chain, the pathway isn’t as clear.

So, what are the three most effective actions to tackle Scope 3 emissions? Let’s delve into them.

Establishing a Climate-Responsible Board

A climate-responsible board is essential for embedding climate considerations into the highest levels of corporate governance and aligning with global sustainability goals. 🌍

But here’s a startling fact:
According to the CDP, only 1 in 3 companies disclosing through CDP have a climate-responsible board—defined as having oversight on climate issues and at least one climate-competent board member.

Why is this so important? Companies with climate-responsible boards are:

1. 4.8x more likely to have a Scope 3 target
   These companies proactively reduce emissions across their supply chain.

2. 4.8x more likely to have a 1.5°C-aligned transition plan
   They align their strategies with the critical global goal of limiting temperature rise to 1.5°C.

3. 3.4x more likely to include climate requirements in supplier contracts
   Climate-responsible boards extend climate considerations into supplier relationships.

4. 3.8x more likely to collaborate with suppliers
   They foster partnerships to develop low-carbon products and innovate across the supply chain.

Beyond setting targets, climate-responsible boards play a crucial role in steering and tracking progress. They integrate climate KPIs into management performance assessments, ensuring accountability and protecting shareholder value by mitigating financial, regulatory, and reputational risks associated with climate change.

A climate-responsible board is a key driver of effective climate action, especially in managing Scope 3 emissions. By embedding climate oversight at the board level, companies can more effectively navigate sustainability challenges and align their value chain with global climate goals.

Enhancing Supplier Engagement

Supplier engagement is crucial for any meaningful action on Scope 3 emissions. It directly impacts the emissions footprint across a company’s entire value chain. 🌍

According to CDP, companies that engage with their suppliers are 6.6 times more likely to have a target and transition plan aligned with the 1.5°C goal set by the Paris Agreement. Yet, corporate action in this area is alarmingly low:

• Only 4 in 10 corporates engage with suppliers on climate-related issues – This means that a significant majority of companies are missing out on the opportunity to influence their supply chain's emissions.

• Less than 9% of corporates collaborate closely with suppliers – Collaboration is essential for driving innovation and implementing effective emissions reduction strategies across the supply chain, yet it is vastly underutilized.

• Less than 3% of corporates require suppliers to have set Science Based Targets – Setting science-based targets ensures that suppliers are aligned with the broader climate goals, but very few companies are making this a requirement.

Why this matters:
The supply chain often represents the largest portion of a company’s carbon footprint. Without active collaboration and clear expectations, suppliers may not prioritize emissions reductions, putting your climate goals at risk.

Enhancing supplier engagement is not just recommended—it’s essential. By fostering collaboration and setting clear expectations, companies can ensure their entire supply chain works towards a common goal of reducing emissions and mitigating climate risks.