Applying a Systems Approach to Tackling Scope 3 Abatement

Coauthors: Wiktoria Beckmann, Caspar Noach, and Oskar Krabbe

Value chain emissions, also known as Scope 3 emissions, are those linked to a company’s operations but not directly emitted from its facilities or its procured energy. While large companies already commonly estimate and publish at least some of their Scope 3 emissions, much more attention will be paid to Scope 3 reporting this year, as it is set to become a requisite component of regulated nonfinancial disclosures in the US and the European Union.

Scope 3 emissions are, by definition, outside a company’s direct sphere of influence, which makes showing reductions in them difficult. This blog explores how applying a systems approach can help companies make significant inroads into reducing their Scope 3 emissions.

The established approach for calculating and structuring a company’s disclosure of value chain emissions is the Greenhouse Gas Protocol’s Corporate Value Chain (Scope 3) standard. Greenhouse gas (GHG) emissions inventories, an output from applying the GHG Protocol’s standards, are designed to support the linear summation of emissions from a company and its value chain.

Alone, a GHG inventory is not a good framework for planning Scope 3 emissions abatement. GHG inventories do not support the consideration of external factors experienced by value chain stakeholders or interdependencies between these factors—nor do they accommodate the nuances of circular material flows.

However, when a GHG inventory is overlaid with a systems approach, together they can provide valuable strategic insight into how a company should approach tackling its Scope 3 emissions. In practice this involves using GHG emission hotspots to target the analysis while broadening the remit to include non-climate factors. Dependencies and synergies between the different positive and negative factors affecting Scope 3 emissions are then mapped, ranked, and translated into a prioritized list of strategy recommendations. Figure 1 shows an outline of what this process looks like in practice.

Figure 1: A Systems Approach to Scope 3 Emissions Abatement

(Source: Guidehouse)

Moving from linear to systemic insights is essential. Unilever is one example of a company applying a systems approach to shrinking its Scope 3 footprint. Approximately 24% of Unilever’s Scope 3 emissions are packaging related (including packaging materials and product end of life), with plastics being a major contributor. The multiple, interdependent levers Unilever is applying constitute a systems approach:

•  Reducing material intensity: Halving virgin plastic use from 2019-2025 and reducing the total amount of plastic it puts on the market.
•  Driving recycling: Taking physical responsibility for plastic packaging waste and applying eco-design principles to increase recycled content.
• Affecting consumer behavior: Supporting packaging reuse by facilitating refills.
•  Magnifying positive impacts: Implementing sector-wide initiatives and engaging with policymakers to collectively resolve sustainability bottlenecks in the market.

This focus on plastic simultaneously de-risks Unilever’s product offering given the regulatory and social headwinds faced by single-use plastics.

The strategic insight gained from a systems approach is unique in its value chain centricity. It allows companies to appreciate the perspectives of their value chain players and supports a deepening of these relationships. Having a handle on the ecological and political risks facing their value chain allows companies to take meaningful steps to mitigate them, which translates into reduced risk and increased sustainability for their own offerings.

It’s OK for companies to start with a Scope 3 disclosure, but they shouldn’t stop there. The strategic insight that can be unlocked from a systems approach, including the expansion of a company’s sphere of influence into its value chain, is well worth the extra effort.