Value chain decarbonization is a crucial aspect of corporate climate action, enabling companies and investors to manage climate risks and opportunities. Scope 3 emissions – those that occur in a company’s value chain but outside its direct operational control – constitute over 80% of the average corporate carbon footprint. This encompasses emissions from everything from purchased goods and services to the use of end-products by customers.
In our latest report, Bias to Action Over Accounting, we discuss how companies can practically approach Scope 3 and leverage measurement to prioritize decarbonization activities.
The primary debate surrounding Scope 3 centers on measurement challenges: data availability, double-counting, and implementation costs. However, perfecting exact measurement should not –and for the sake of our planet, cannot– overshadow the ultimate goal of using Scope 3 as a tool for guiding transition planning and decarbonization activity. While this estimation may never be perfectly accurate, it provides an important starting point for action and can be improved over time with better data collection and technology.
Galvanize’s principles for pragmatically moving from measurement to action include the following:
- Bias to Action Over Accounting: Perfect data is not necessary to begin decarbonization. Measurement should focus on developing a robust understanding of material emissions to prioritize decarbonization efforts.
- Impact of Interventions: Companies should use measurement methodologies that can account for the impact of potential interventions, especially in the most material categories where near-term investments are planned.
- Primary Data Quality: Focus on improving primary data quality through supplier engagement, industry collaboration, and leveraging emerging tools and technologies.
- Avoid False Precision: Ensure data collection emphasizes accuracy over precision to maintain regulatory credibility and effectiveness.
Decarbonizing value chains can generate significant business value, including cost reductions, growth through sustainable products, and strengthened stakeholder relationships. This proactive approach enables companies to stay ahead of emerging regulatory requirements and capitalize on the benefits of supply chain decarbonization. Additionally, companies that participate in sustainability programs report improvements in customer loyalty, operational efficiency, and profitability.
Technology and industry collaboration are also key to efficient Scope 3 measurement. Within our own Innovation + Expansion strategy, we have backed platforms like Worldly, Regrow and Watershed to facilitate data collection, analysis, and integration of sustainability data into supply chain management. Worldly, for example, has built a global network of manufacturers and brand partners to accurately capture and measure primary emissions data in retail and apparel. Regrow’s models combine satellite and other remote sensing inputs to monitor and deploy sustainable practices across agricultural value chains.
We believe value chain measurement should be practical and focused on enabling immediate and effective decarbonization actions. By adopting the above principles, companies can efficiently lower their value chain emissions, creating business value and contributing to global climate goals.