The role of procurement in reporting Scope 3 Emissions, and how digitized processes will help

A report from Baker & McKenzie found that 70% of an organization’s carbon emissions come from their supply chain, what are known as Scope 3 Emissions. Additionally, according to a recent Gartner Survey, pressure to deliver on sustainable procurement goals has increased or significantly increased for 83% of organizations.

In this blog, we will explore the role of procurement teams in reporting Scope 3 Emissions, and why they need digital tools to ensure that reporting and compliance is succinct.

What are Scope 3 Emissions?

Organizations rely on energy for day-to-day activities, such as heating an office or fueling an employee's car. As well as creating energy, an organization will pay for energy too, and an organization is indirectly responsible for the release of greenhouse gasses as a result.

Scope Emissions are a way to categorize the source of greenhouse gas emissions in an organization, as defined by the Greenhouse Gas Protocol. 

In simple terms, they help governing bodies understand which parts of a business or organization produce greenhouse gas emissions in comparison to others.

• Scope 1 Emissions are those that come from assets and sources directly owned by an organization, such as a production facility, office, company-owned vehicles, etc. 
• Scope 2 Emissions are the indirect sources of emissions in an organization, those that are from purchased energy generation and consumed by the organization. For instance, gas, electricity, heating, steam.
• Scope 3 Emissions are indirect emissions that result from the supply chain or employee, such as business travel, emissions from employee commutes, emissions generated in the production of goods or delivery of services, both upstream and downstream supply chain activities.

With most Scope 3 Emissions coming from the supply chain, the procurement function must collaborate with other key functions, like HR, to ensure they can accurately report on all emissions in this category.

Yet, this process can be fraught with complexity, requiring data from outside the procurement function to ensure reports are comprehensive and complete, as well as requiring procurement to have accurate and holistic visibility of its own data.

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Why does sustainability reporting matter?

Beyond social responsibility, there are many benefits to an organization that can easily and accurately report on Scope 3 emissions, and sustainable practices generally.

Notably, many partners, stakeholders, and even clients, will investigate an organization’s ability to comply with sustainability regulations as a form of reputational and liability risk management. 

It goes without saying organizations and those they partner with both wish to avoid the litigation that comes with poor reporting compliance. However, by succinctly reporting and complying, an organization can find many benefits.

Resultingly, 72% of business leaders now believe that a robust sustainability strategy can be a powerful differentiator in a competitive market. 

Here are some of the key benefits summarized:

• Transparency – Those interested in an organization’s sustainability practices only seek compliance and want transparency from accurate reporting, demonstrating accountability and social responsibility from an organization. Not only is transparency vital to an organization’s reputation but simply being able to report on sustainability accurately and transparently is enough. In other words, it’s not an organization's carbon footprint that will affect its reputation, but its ability to report accurately on its attempts to lessen its environmental impact.
• Environmental Impact – Of course, the main goal of monitoring things like Scope 3 Emissions is to lessen an organization’s environmental impact. By closely monitoring emissions organizations can mitigate risk, safeguard operations from litigation, and boost investment opportunities.
• Cost reduction – High emission processes, while affecting the environment more, will also have a greater fiscal cost. By investing in energy-efficient technologies and methods, long-term utility costs can be reduced, as well as an organization’s carbon footprint. Moreover, litigation for non-compliance will cost a lot itself.
• Improved supplier relations – By reducing Scope 3 Emissions an organization will naturally improve its relationship with its supplier. With succinct compliance with sustainability goals through partnership with suppliers, procurement teams can find several benefits as a result of improved collaboration and communication.
• Partnerships – As mentioned, certain bodies pay close attention to sustainability efforts and carbon emissions, when an organization can report accurately on this can positively affect an organization's ability to attract and retain partnerships, clients, and more.
• Competitive edge – In a dynamic and competitive business environment, sometimes simply having transparent sustainability reporting processes can bring the advantage you need to get ahead of those still struggling to comply and optimize sustainability efforts with legacy systems - only 16% of organizations are actively reducing Scope 3 greenhouse gas (GHG) emissions.

How can Unit4 help procurement report Scope 3 Emissions

Source-to-Contract by Scanmarket is a solution designed for mid-sized organizations, and our Carbon Accounting module provides capabilities to ease the workload reporting Scope 3 Emissions can create.

With our Carbon Accounting modules, you can monitor spending trends by measuring, reporting, and understanding Scope 3 Emissions, helping to advance your decarbonization and sustainability journey, with capabilities such as:

• Categorization – Gain CO2 analysis with drilldowns on both the supplier and category levels, allowing deeper analysis.
• Trusted data – With a single source of truth data collection and accurate reporting are possible, allowing for advanced dashboards to monitor Scope 3 Emissions.
• Automatic refresh – Dynamic data updates eliminate the need for manual extraction and ensure accurate emissions reporting.
• Actionable insight – Utilize advanced analytics and customizable reports to make informed decisions about your emission reduction strategy.
• Supplier Engagement – Enable powerful supplier dialog to reduce and offset Scope 3 Emission in partnership with suppliers, for a better future and to improve relations in the long run.

Our Carbon Accounting reporter is a tool designed to complement our Spend Analytics solution, allowing you to extend the visibility of your supply chain beyond the bottom line and can help you reduce carbon emissions by 50%.

To learn more about Source-to-Contract by Scanmarket and the Carbon Accounting tool, read our factsheet or talk to sales today!