How to reduce Scope 3 emissions?

In talking with supply chain leaders around the world, I often hear that reducing Scope 3 greenhouse gas emissions (GHGs) is either too confounding or too nebulous to warrant any meaningful investment or effort.



I empathize, but I couldn’t disagree more. We have so many opportunities. To seize them, we need to temper our competitive impulses and act collectively. And with real urgency.



Scope 3 emissions refers to GHGs “that are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain.” Common examples include the emissions produced by a major shipper’s upstream suppliers or its downstream carrier partners or distributors. By contrast, Scope 1 emissions are attributable to assets a company owns or controls; Scope 2 emissions are indirect GHGs associated with buying electricity, steam, or other power sources.



It’s no surprise that most companies’ efforts and resources are focused on reducing Scope 1 and Scope 2 emissions. Those are more easily understood, more easily measured and, by definition, more directly controllable.



Scope 3, to borrow from the classic old Apple ads, requires that we “think different.” More leadership, more influence, more collaboration. The good news is there are plenty of examples of how this is being done. 



Don’t compete—share and collaborate  



Business leaders would do well to reflect on the now decade-old decision by Tesla to share all of its intellectual property (IP) with the world. You can still find the rationale on the company website : “Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.”



It was a bold move then and remains worthy of emulation by company leaders today. As the U.S. Environmental Protection Agency ( EPA ) rightly notes, one company’s Scope 3 emissions are another company’s Scope 1 and 2 emissions. It’s time to restrain the impulse to compete or to hoard company IP in achieving sustainability targets. 



Companies that successfully reduce their Scope 1 emissions should share their techniques and IP for the greater good of the value chain.



Investor leadership



Investors have tremendous influence on company boards and corporate priorities. (Ditto customers, which I’ll address in a moment). The MIT Center for Transportation and Logistics’ 2023 State of Supply Chain Sustainability report found that investors continue to be the fastest-growing source of pressure on company leadership when in demanding progress against sustainability goals.



This is a good thing. As detailed by the World Economic Forum’s Global Future Council on Investing , “empirical research is increasingly indicating the correlation between sustainability and financial performance—for both companies and investors.” Assets managed through a sustainability lens are growing and must continue to do so, along with investor pressure.



More ecosystem initiatives



Scope 3 emissions are value chain emissions, and that means collective action is imperative. Walmart’s Project Gigaton is a prominent example of a business leader rallying its ecosystem to set emissions targets. To date, 5,900 Walmart suppliers have signed on.



Yes, managing upstream and downstream partners can be daunting for companies that may have thousands of supply chain partners. But action can be taken over time, with primary suppliers first and then second-tier and third-tier. Personally, I’m seeing more and more shippers establishing targets with their tier-one carrier partners.



Take advantage of big transitions



Supply chains are transforming at an unprecedented pace as companies nearshore operations and diversify their suppliers to create more agile, predictable, and efficient systems. 



It’s a once-in-a-generation opportunity for company leaders to think proactively and systemically about taking full advantage of these seismic shifts. What sustainability targets can you and your new suppliers set? How can you minimize new shipping routes and deploy the latest technologies to increase visibility and reduce friction during the many handoffs that take place throughout your supply chain?



Capitalize on customer demand



The previously mentioned MIT report found that customers were the third highest-ranking group in pressuring companies to drive sustainable practices. 



And recent Harvard Business Review research suggests not only that consumers’ sustainability demands are rising but also that “we’re fast approaching this tipping point where sustainability will be considered a baseline requirement for purchase, and companies should prepare now.” 



Sustainability can’t be the fourth leg of the stool



Finally, sustainability efforts too often have been the “fourth leg of the stool” in corporate priorities. 2030, 2040, 2050 . . . they feel a long way off. And so most leaders focus a quarter or two out, expecting the chief sustainability officer to figure things out. 



Company boards and leaders need to put their own skin in the game, embedding sustainability in their corporate priorities and—rather than dishing off responsibility—making every department head accountable for hitting defined targets. Leadership, collaboration, and collective action are the way forward.



Matt Elenjickal is founder and CEO of FourKites.