In the race to net zero, Scope 3 emissions are coming into focus as the next essential target for reduction. With hard data and benchmarks in short supply, Roland Berger joined with Swissmem to survey 167 of the latter’s members and find out where industrial companies currently stand on this crucial subject: What importance do they attach to reducing Scope 3 emissions? What is driving their actions? How do they plan to achieve what reductions? By when? Roland Berger has summarized the findings of this hitherto unique survey in a short Infoflyer which clearly outlines the state of play today and the hurdles yet to be overcome. It also spells out the conditions needed if Scope 3 emission reductions are to be measurably reduced on a large scale.
"Some customers expect suppliers to present concrete Scope 3 reduction plans within a year at most if they want to continue doing business with them."
The Greenhouse Gas (GHG) Protocol distinguishes between three categories or “Scopes” of GHG emissions.
Scope 1 emissions are given off directly by the (re)sources a company owns and controls. Examples include direct fuel combustion in its manufacturing processes, emissions from company vehicles and fugitive emissions.
Scope 2 emissions are indirect emissions from the generation of purchased electricity, steam, heating and cooling for use by the given company.
Scope 3 emissions are all other indirect emissions given off elsewhere in the company’s value chain. Examples including emissions generated when delivering a product to a customer, emissions generated by parts suppliers, and emissions generated by energy consumption when the company’s product is in use for the customer.
Much progress has álready been made in reducing Scope 1 and 2 emissions. But Scope 3 emissions can account for well over 90 percent of the total emissions generated in a given value chain, and their potential is only now being tackled seriously. Customers wishing to reduce their Scope 1 and 2 emissions essentially cascade this demand down to other links in the overall value chain, which are the Scope 3 emissions in focus in this survey.
The 167 Swissmem member companies that made up the survey group represent companies of all sizes across a wide range of sectors and serving an extensive array of customer industries. The strongest focus was on Swiss-based firms in engineering and industrial production . A selection of relevant US and European players served as a benchmark.
Beyond an intrinsic commitment to mitigating climate change , one clear finding of the survey is that pressure from investors and customers is a major factor compelling companies to address the topic of reducing Scope 3 emissions. With employees and public opinion largely pushing in the same direction and competitors too taking action of their own, the feeling among many respondents is that they have no alternative but to prioritize these emissions.
Companies that took part in the survey naturally expect lower Scope 3 emissions to help slow down global warming. At the same time, given the identified drivers, they look forward to benefits both in their employer branding and in customer satisfaction as a result of these measures. A good 20% also anticipate tangible top and bottom-line gains.
"“While most conditions are essentially already in place, an internationally aligned framework would make it much easier to measure – and compare – progress in cutting Scope 3 emissions."
After defining what Scope 3 emissions do and do not include, the survey finds evidence of ambitious targets in terms of both volume reductions (up to 50%) and timelines (by 2030, though other horizons are also discussed). However, this euphoria is dampened somewhat by the realization that almost every second respondent still puts other priorities first.
There are practical reasons why these theoretical targets are difficult to implement. One is the perceived absence of clearly defined and universally applicable KPIs with which to reliably measure progress in reducing Scope 3 emissions. Nor are coherent methodologies yet in place to capture the requisite data. The survey participants see these two issues as major obstacles that must be overcome on a collaborative basis.
Procuring ecofriendly goods and services and developing energy-efficient machinery are seen as two concrete ways to take action in reducing Scope 3 emissions. Both demand the development of greater innovative skills. However, the survey unequivocally highlights the need for a coordinated central framework – including legislative aspects – if companies are to cooperate with both suppliers and competitors in a meaningful (and comparable) way, translating lofty theoretical goals into tangible advances.
Perhaps the key finding is therefore that the entire Scope 3 reduction space is still very much a work in progress. Collaboration, coordination and close consultation will be much in demand going forward. Both Roland Berger and Swissmem welcome companies of all sizes to actively join the discussion and help shape a more climate-friendly industrial future .
A Roland Berger and Swissmem study explores drivers, ambitions and concrete plans.
