Why Businesses Should Calculate Scope 3 Emissions
As the global push for sustainability intensifies, small businesses find themselves at the crossroads of a significant transformation. The Corporate Sustainability Reporting Directive (CSRD) is setting new precedents by requiring businesses to report on sustainability according to a harmonized framework. This shift is not just about compliance; it’s about positioning your business for long-term resilience and success. One crucial aspect of this transition is understanding and calculating Scope 3 emissions.
Understanding Scope 1, 2, and 3 Emissions
Before delving into the importance of Scope 3 emissions, it’s essential to understand the different types of greenhouse gas (GHG) emissions:
Scope 1 Emissions: Direct emissions from owned or controlled sources. This includes emissions from company vehicles or on-site fuel combustion.
Scope 2 Emissions: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
Scope 3 Emissions: All other indirect emissions that occur in a company’s value chain. This includes emissions from purchased goods and services, business travel, employee commuting, waste disposal, and more.
The Significance of Scope 3 Emissions
Scope 3 emissions often constitute the largest portion of a company’s total GHG emissions. For small businesses, this is both a challenge and an opportunity. Understanding Scope 3 emissions can uncover inefficiencies and highlight areas for significant sustainability improvements.
Regulatory and Market Pressures
The CSRD mandates that businesses report their sustainability performance, and this includes setting and meeting reduction goals. External investors and stakeholders are increasingly prioritizing sustainability in their decision-making processes. This means that businesses, regardless of size, need to demonstrate a commitment to reducing their environmental impact.
Large corporations are driving this shift by demanding GHG emission data and sustainability goals from their partners and suppliers. This trend is cascading down to smaller businesses, creating a ripple effect throughout the supply chain. For small businesses, failing to align with these requirements could mean losing valuable partnerships and market opportunities.
Overcoming Challenges and Seizing Opportunities
Calculating Scope 3 emissions can be daunting, especially for small businesses where sustainability might not be top of mind. However, viewing this as a burden is a missed opportunity. Here’s why:
Enhanced Resilience: Investing in sustainability makes businesses more resilient to geopolitical influences and market volatility. Companies that proactively manage their environmental impact are better equipped to navigate regulatory changes and shifts in consumer preferences.
Innovation and Efficiency: Understanding your Scope 3 emissions can reveal inefficiencies and drive innovation. Sustainable practices often lead to cost savings through improved resource management and operational efficiencies.
Market Differentiation: Employees and customers increasingly see sustainability as a value add. Demonstrating a genuine commitment to sustainability can enhance your brand reputation, attract top talent, and build customer loyalty.
Meeting Stakeholder Expectations: Responding positively to sustainability assessments and questionnaires from large companies and investors not only strengthens business relationships but also opens up new business opportunities.
Setting Goals with SBTi
Setting ambitious yet achievable sustainability goals is crucial. The Science Based Targets initiative (SBTi) provides a clear framework for companies to set targets aligned with climate science. By adopting SBTi goals, small businesses can ensure their efforts contribute meaningfully to global climate objectives.
Taking Action: The Next Steps
To begin your journey, consider reaching out for a quick sustainability scan. This can help you understand your current impact and identify key areas for improvement. Tools and consultancy services are available to guide small businesses through the process of calculating Scope 3 emissions and setting effective reduction targets.
Conclusion
Calculating Scope 3 emissions is no longer a nice-to-have; it’s a critical component of modern business strategy. By embracing sustainability, small businesses can not only comply with regulatory requirements but also unlock new opportunities for growth and resilience. It’s time to take action and position your business for a sustainable future.
