As companies across industries face increasing pressure to improve their ESG (environmental, social, and governance) performance, they need ESG software solutions and tools to measure, reduce, and report the impact of their supply chains—specifically carbon emissions. But tracking and reporting supply chain emissions is easier said than done.
Data from the CDP (formerly Carbon Disclosure Project) 2020 Global Supply Chain Report estimates that an average company’s supply chain greenhouse gas (GHG) emissions—that is to say, scope 3 emissions—are about 11.4 times greater than those generated by a company’s direct operations. CDP, which holds the world’s largest environmental database, has also found that companies could face $120 billion in additional costs from environmental risks stemming from their supply chains across the next five years. But a recent BCG study shows that only 10% of companies fully measure emissions. The gap? Scope 3.
So if companies are going to do something meaningful about their emissions, they need to follow the data.
Why don’t companies have a better way to track their scope 3 emissions?
A company’s supply chain scope 3 emissions are technically a portion of their suppliers’ scope 1 and 2 emissions. As if carbon accounting wasn’t complicated enough, getting primary emissions data from suppliers has historically been a complex and lengthy process. And it’s particularly challenging for smaller companies with less power over their supply chain.
With no way to tell which suppliers represent emissions “hotspots,” companies often don’t know where to focus their engagement efforts. And even if they can command their suppliers’ attention, they don’t often have emissions data readily available.
But without a complete picture of your scope 3 emissions, your carbon inventory is drastically underrepresented. So how do you solve for the unknown?
As a category, purchased goods and services (PGS)—which include all the material goods (everything from production-related materials to capital goods to office furniture) and professional services—is often one of the largest emissions sources for organizations, which comprises upwards of 25% of an emissions inventory.
Spend-based emissions tracking can help bring organizations closer to a complete emissions inventory by identifying emissions hotspots in their supply chain. Those hotspots can guide organizations to deepen their interactions with their most critical suppliers. Without spend-based emissions tracking, emissions reduction goals and targets are often incomplete and underreported.
That’s why Sustain.Life is excited to announce brand new emissions calculators for purchased goods and services.
Our new features help organizations calculate the supply chain emissions for the goods and services they purchase, including capital goods, production-related purchases, and non-production-related purchases.
This scope 3 emissions calculator takes transactional spend data and calculates corresponding emissions. To calculate spend-based emissions, Sustain.Life uses data from models that estimate the flow of goods and services throughout the U.S. economy—also known as environmentally-extended input-output (EEIO) models. These models estimate the emissions per revenue for a range of commodities and industries by multiplying spend to calculate emissions (Emissions factor x $ spent = MT CO2e).
Here’s what the Sustain.Life purchased goods and services calculator can do for your business:
- Automates manual work and streamlines data entry: Previously, organizations had to aggregate hundreds of thousands of data points for months and countless spending subcategories. Sustain.Life removes this time-intensive manual step. Users only need to provide a file with raw transaction data and Sustain.Life handles the data aggregation and emissions calculations.
- Includes comprehensive purchases and categories: The purchased goods and services emissions calculator covers a comprehensive set of commodities—66 in total—so organizations can assess their entire transaction histories.
- Fills data gaps: Other tools assign an average emissions factor and group uncommon categories together, which means data becomes less accurate and trustworthy. Sustain.Life changes that and uses an organization’s historical spending patterns to calculate a more representative emission factor for uncategorized transactions.
- Properly categorize spend- and non-spend-based emissions: When your spend data includes, for example, utilities—which belong under scope 1 emissions for Buildings—Sustain.Life reminds you to exclude these from your purchased goods and services. That means you can trust your scope 1, 2, and 3 emissions are correctly categorized.
- Identify emissions-intensive sources: Along with your total emissions, Sustain.Life surfaces emissions hotspots, guiding your engagement efforts for more meaningful reductions.