Scope 3 Emissions: Making Sustainability Your Business

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Note: this article has been updated since its original publication on the 11th November 2024 to reflect the topics of COP29 and findings from edenseven's most recent report on the FTSE250, Are businesses ignoring the climate crisis?

As COP29 gets underway Baku, Azerbaijan, the question emerges: is the world on track to prevent a climate catastrophe?

The Paris Agreement calls for a strong global effort to reach net zero by 2050. According to the Intergovernmental Panel on Climate Change (IPCC), global emissions must peak before 2025 and roughly halve by 2030 if we are to limit warming to 1.5°C. However, global emissions continue to increase, requiring immediate action to meet the 1.5°C target. One-fifth of total UK emissions are generated by businesses, so it is essential that they measure their carbon footprint and implement strategies to achieve net zero.

Scoping out the Problem

A company's carbon footprint is made up of different categories, or 'scopes'. Scope 1 covers a company's direct emissions from its owned vehicles and fuel combustion at company facilities (e.g. in furnaces and boilers). Scope 2 covers the emissions from the electricity and heat or steam that a company purchases. Scope 3 covers a company's indirect emissions, such as business travel, employee commuting and product distribution, purchased goods from suppliers, use of sold products, and product end-of-life. For many businesses, Scope 3 is the largest source of emissions, accounting for over 70% of their total footprint.

Scope 3 emissions are particularly difficult to measure because they are not under the direct control or oversight of the reporting company. Measuring Scope 3 emissions often requires collaboration with suppliers and life-cycle assessments (LCAs) of products to determine the full extent of emissions associated with a business. This can be expensive and time-consuming, so many businesses hire external consultants to conduct assessments and develop action plans.

A Business Matter

A new report by edenseven, Cambridge Management Consulting's sustainability sister company, reveals that FTSE 250 companies are far from achieving their net zero goals and have significant gaps in emissions reporting. According to the report, these companies emitted over 206 million tonnes of CO2 equivalent (CO2e) in 2023, which is comparable to the annual emissions of 53 coal-fired power plants. Additionally, the report indicates that emissions from FTSE 250 companies increased by 7% compared to the previous year, demonstrating that business growth has outpaced effective environmental action. This lack of urgency in reducing their carbon footprint is concerning.

The report highlights that 20% of businesses failed to disclose their Scope 3 emissions for 2023. This raises questions about their alignment with the Paris Agreement and suggests that many companies are either unaware or unwilling to disclose their full emissions impact. Consequently, the 206 million tonnes CO2e figure may be an underestimate, meaning the actual problem could be much larger, putting some companies in a position where they cannot make informed and credible decisions to cut emissions. Furthermore, this lack of transparency exposes them to the risk of non-compliance with climate regulations, such as the Task Force on Climate-related Financial Disclosures (TCFD), the EU’s Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2, which require comprehensive Scope 1-3 reporting and other disclosures.

The report also indicates that many FTSE 250 companies are not taking sufficient action to align their net zero goals with the Paris Agreement, which seeks to limit global warming to well below 2°C—preferably 1.5°C—compared to pre-industrial levels. A total of 41% of FTSE 250 companies have not specified a target year for achieving net zero, an increase from the 37% that lacked a net zero target the year prior. Although the number of businesses with an approved Science-Based Targets initiative (SBTi) net zero target rose from 4% to 14% in 2023, when considering both approved targets and those committed to developing SBTi targets, the overall increase was minimal, climbing from 20% in 2022 to just 21% in 2023. Science-based targets are essential, as they ensure that businesses decarbonise at the rate necessary to the meet the climate objectives of the Paris Agreement and achieve net zero.

In 2022, companies within the FTSE 250 that had set net zero targets, aimed for an average date of November 2043. However, in 2023, this average date shifted back by 13 months to December 2044. The slow progress of FTSE 250 companies in establishing SBTi-aligned net zero targets, coupled with the rollback of net zero dates, indicates a lack of momentum and willingness to achieve these critical climate goals.

How Cambridge MC & edenseven Can Help

Cambridge MC’s primary sustainability capabilities are located with our sister-company, edenseven, who strive to optimise the environmental potential for organisations through data driven sustainability strategies.

To simplify the process of measuring and reducing carbon emissions, edenseven has developed cero.earth, a comprehensive management tool that calculates and manages the full scope of emissions sources (scopes 1-3). Using cero.earth, businesses can visualise their emissions, identify areas for improvement, and monitor the impact of their reduction initiatives. By using cero.earth, businesses can make informed and effective decisions to help them reach net zero and comply with upcoming regulations.

There is a small window of time left to meet the Paris Agreement and minimise the worst effects of climate change.

For more information about how edenseven can help decarbonise your business, visit www.edenseven.co.uk, or learn more about cero.earth visit https://www.edenseven.co.uk/cero-earth.

About Cambridge Management Consulting

Cambridge Management Consulting (Cambridge MC) is an international consulting firm that helps companies of all sizes have a better impact on the world. Founded in Cambridge, UK, initially to help the start-up community, Cambridge MC has grown to over 150 consultants working on projects in 20 countries.

Our capabilities focus on supporting the private and public sector with their people, process and digital technology challenges.

For more information visit www.cambridgemc.com or get in touch below.