This is part three of a five-part series on decarbonising the rail industry. You can find part one, two and four here. 

In the global pursuit of sustainability, organisations have increasingly focused on reducing their direct greenhouse gas emissions. While substantial progress has been made in addressing Scope 1 and Scope 2 emissions, those generated directly by an organisation or through the utility it purchases, a significant portion of the carbon footprint remains hidden and often neglected. These are the Scope 3 emissions - the indirect CO2 emissions that occur throughout the value chain. Addressing Scope 3 emissions is crucial for any comprehensive sustainability strategy.

Understanding Scope 3 emissions

Scope 3 emissions encompass all indirect emissions that occur in an organisation's value chain, both upstream and downstream. This includes emissions from sources not owned or directly controlled by the company but related to its activities, such as employee commuting, waste disposal, purchased goods and services, and even the use of sold products.

As Athanasios Grammatikopoulos from Connected Places Catapult described during a recent webinar, "Scope 3 emissions are a big deal hiding in plain sight." They often represent the most significant portion of an organisation's total greenhouse gas emissions. For many industries, Scope 3 emissions account for more than 70% of their carbon footprint.

The magnitude of the hidden emissions

Data shows that only 15% of companies are currently targeting their value chain in climate action plans, leaving a vast area of emissions unaddressed. Ignoring these emissions can undermine sustainability efforts and expose organisations to regulatory, financial, and reputational risks.

For example, a joint study at #NZIIC and #CPC that focused on Bristol Temple Meads station found that Scope 3 emissions of the train station accounted for 60-80% of its total emissions. This significant figure is mainly due to passenger commuting habits, with about 30-50% of people using cars to travel to the station. As Prof Hanak noted, "We need to change that; we need a collective effort with everyone playing a part to save the sustainable future."

Why Scope 3 emissions are often overlooked

Several factors contribute to the oversight of Scope 3 emissions:

1. Complexity in measurement: Tracking Scope 3 emissions is inherently complex. It requires collecting data across various activities and stakeholders, many of whom may not have standardized reporting practices

2. Lack of mandatory reporting: Unlike Scope 1 and Scope 2 emissions, which are often subject to regulatory reporting requirements, Scope 3 emissions are generally not mandatory to report. This regulatory gap leads to less emphasis on measuring and managing these emissions

3. Perceived lack of control: Organisations may feel they have limited influence over emissions generated by suppliers, customers, and other third parties

4. Data availability: Obtaining accurate and comprehensive data for Scope 3 emissions can be challenging, leading some organisations to exclude them from their sustainability assessments

The risks of ignoring Scope 3 emissions

Overlooking Scope 3 emissions can have significant consequences:

• Regulatory risks: As governments worldwide tighten environmental regulations, organisations may face future mandates requiring Scope 3 emissions reporting. Those unprepared may need help to comply

• Financial implications: Ignoring these emissions can lead to missed opportunities for cost savings. According to a report by CDP, companies cutting Scope 3 emissions have saved $13.6 billion in costs

• Reputational damage: Stakeholders are increasingly aware of sustainability issues. Failure to address Scope 3 emissions can harm an organisation's reputation and erode stakeholder trust

• Competitive disadvantage: Companies proactively managing their entire carbon footprint may gain a competitive edge, attracting environmentally conscious consumers and investors

Strategies for addressing Scope 3 emissions

Despite the challenges, several strategies can help organisations effectively tackle Scope 3 emissions.

1. Establishing clear boundaries and priorities - Begin by mapping out the entire value chain to identify where emissions are occurring. Not all the 15 categories of Scope 3 emissions defined by the Greenhouse Gas Protocol will be relevant to every organisation. Focus on the categories that are most significant to your operations

2. Measuring and tracking emissions - Accurate measurement is essential. Collect data using tools and frameworks like the Greenhouse Gas Protocol's Scope 3 Standard. While data collection can be daunting, starting with estimates and progressively refining them over time is a practical approach

3. Setting ambitious but achievable targets - Incorporate Scope 3 emissions into your organisation's overall sustainability goals. Setting science-based targets ensures that your objectives align with global efforts to limit warming to well below 2 degrees Celsius

4. Engaging with suppliers and partners - Collaboration is key. Work with suppliers to encourage them to measure and reduce their own emissions. This could involve:

• Supplier training programs: Educate suppliers on sustainability practices and the importance of emissions reduction

• Incentives and requirements: Incorporate environmental criteria into procurement policies, favouring suppliers who demonstrate commitment to reducing emissions

5. Innovating in product design and lifecycle management - Consider the emissions associated with the entire lifecycle of your products or services. This includes raw material extraction, manufacturing, distribution, use, and end-of-life disposal. Strategies might involve:

• Designing for sustainability: Create more energy-efficient, durable, and recyclable products

• Encouraging circular economy practices: Implement programs that promote reuse, refurbishment, and recycling of products

6. Leveraging Technology and Data Analytics - Advanced analytics and digital tools can help track and reduce emissions. For instance, blockchain technology can provide transparency in supply chains, while data analytics can identify emission hotspots and opportunities for reduction

Case studies: success in addressing Scope 3 emissions

Network Rail

Network Rail has made significant strides in reducing Scope 3 emissions through sustainable procurement and value chain collaboration. By focusing on innovation and engaging with suppliers, they have achieved a 38% reduction in absolute Scope 3 emissions from the 2019 baseline. Initiatives include investing in research and development of alternative fuels and electrification technologies.

FirstGroup

FirstGroup, a leading transport operator, has implemented strategies such as fleet modernisation and operational efficiency improvements. Introducing electric and hybrid buses, optimising fuel consumption, and promoting public transport as a sustainable alternative to private cars, resulted in a 21.5% reduction in Scope 3 emissions compared to their 2019 baseline.

The roadmap to effective Scope 3 emissions management

According to Athanasios Grammatikopoulos from Connected Places Catapult, a practical roadmap for addressing Scope 3 emissions can be derived in 7 steps:

1. Establish boundaries: Identify relevant Scope 3 emission categories

2. Measure and track: Collect data to understand your emissions baseline

3. Set goals: Define clear, science-based targets for emissions reduction

4. Engage the value chain: Collaborate with suppliers and customers to drive change

5. Innovate: Invest in low-carbon technologies and sustainable product design

6. Monitor and report: Regularly track progress and adjust strategies as needed

7. Communicate: Transparently share your efforts and achievements with stakeholders

Implementing this roadmap requires commitment and resources, but the benefits extend beyond emissions reduction. Organisations can enhance their reputations, meet evolving regulatory requirements, and uncover new business opportunities.

Policy implications and the way forward

Policymakers have a critical role in facilitating the inclusion of Scope 3 emissions in sustainability strategies. By introducing regulations that require or incentivise reporting of Scope 3 emissions, governments can drive broader adoption of comprehensive carbon management practices.

Furthermore, support for innovation and infrastructure development can help organisations overcome some challenges associated with reducing Scope 3 emissions. Notably, Government policies can set the foundation, but it's up to organisations to build upon it through proactive measures.

Conclusion

Scope 3 emissions represent the hidden challenge in sustainability—but they also offer a significant opportunity. By unveiling and addressing these emissions, organisations can make substantial progress toward their sustainability goals, reduce risks, and unlock financial benefits.

The path forward involves collaboration, innovation, and a willingness to look beyond direct operations. As sustainability continues to be a critical concern for stakeholders, those who proactively manage their entire carbon footprint will be better positioned for long-term success.

It's time to bring Scope 3 emissions out of the shadows and into the forefront of sustainability efforts. By doing so, we take a crucial step toward a more sustainable and resilient future.

This article is based on research conducted within a project that has been funded by EPSRC as part of the Innovation Launchpad Network Plus in collaboration with Connected Places Catapult.

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