Scope 3 Carbon Emissions

The Green House Gas Protocol list three ‘Scopes” that organisations should pay attention to when it comes to their green house gas (GHG) emissions.

GHG emissions include, but go way beyond Carbon Dioxide (CO2). There are many other gases that have an impact on climate warming. Many of these have a much stronger impact than CO2 such as methane (CH4) which is about 25 to 28 times more potent at trapping heat on the planet, and nitric oxide (N2O) which tonne for tonne is about 300 times worse than CO2. (Source epa.gov)

There are many others, such as tongue-twisting Chlorofluorocarbon-12 , Nitrogen Trifluoride and Hydrofluorocarbon-23 to name a few.

In an effort to contain confusion and come to a common focus, the term “carbon dioxide equivalent” (CO2e) has been adopted. Essentially, CO2 becomes the baseline and one tonne of N2O would equal 300 tonnes of CO2e (this is a rough oversimplification for illustration, you can find out more here).

Businesses generate GHG emissions both directly through their business activities, and indirectly by the things they use, buy, sell and invest in.

The GHG Protocol defined these into three Scopes deftly portrayed in their image below.

Scope 1 incorporates emissions from the organisations assets, buildings and fleets.

Scope 2 is still reasonably easy to get your head around, encompassing purchased energy. This includes electricity, gas but also other energy like heat or steam.

Scope 3 is (literally) EVERYTHING ELSE.

To make it easier, Scope 3 is broken down into 15 categories, covering things like how much energy was used to make and ship each of the components in products the company buys, what happens to those once they are used, and what the business’s investments are used to fund.

So if you are a pencil maker, you need to ask you wood, pencil-led and printing ink suppliers how much CO2e they generated producing those things, storing them and shipping them to you. Oh, don’t forget the packaging that wraps them too.

If you’re Apple you have a bigger challenge than the pencil manufacturer. According to TheAnswersWeb there are 34 components in an iPhone. But that’s not the full picture. A camera module, for example, might be considered one of the thirty-four components, but it is made of many sub-components.

With this in mind, it is no surprise that Apple declares that even though their Scope 1 is minimal and Scope 2 is zero (due to their renewable energy investment), Scope 3 accounts for a little over 99% of all of their CO2e.

Of the 99% of Apple’s Scope 3, almost 80% of that comes from one category Product Manufacturing.

Speaking with Lyn Duncan, CEO of Co2Analysis.com, apparently that’s not uncommon. In most of the businesses her company has worked with, it is fairly typical to see a vast proportion of Scope 3 attributed to what’s known as ‘Scope 3: Category 1 – Purchased Goods and Services.’

Lyn said that when working with local government and healthcare providers, it was typical to see that more than 93% of their Scope 3 came from the things they purchased. Even more interesting is that in her experience, it is common that more than 98% of the organisations’ budget is allocated to these items.

Meaning, most of an organisation’s budget is being spent on generating carbon.

Searching for Needles in Haystacks

While the distribution of Scope 3 seems to be biased towards Category 1 (Purchase of Products and Services), the distribution of CO2e contributions across the products and services is very often skewered towards specific suppliers and products.

The first thing an organisations needs to do is to identify which suppliers and which products are responsible for the largest chunks, and prioritise these.

Lynn described how many methodologies use predefined and published ‘carbon intensity’ values for specific company types, then multiply those by the amount spent with that company to determine their CO2e contribution to the supply chain. The industry spend is then estimated by mapping the organisations spend to the industries and/or the suppliers to industries.

There are multiple issues with this approach. Perhaps the most notable challenges are that organisational spends do not always map directly to industry classifications, and suppliers supply different goods in multiple categories, with no information on country of origin.

Using publicly available information from the UK’s Office of National Statistics, lets assume we are buying £330,000 worth of computer equipment from a business classified with the industry ‘SIC’ code 26, “Computer, electronic, communication and optical products”.

This SIC code has a carbon intensity of 0.05, meaning £330K’s worth of product would account for 16,500 metric tones of CO2e.

The SIC + carbon intensity process is certainly a good place to start, but it leaves so much room for inaccuracies. For example, I could purchase networking equipment that was manufactured in Germany and laptop computers manufactured in China from the same supplier, each would have the same carbon intensity.

Product Level CO2 Analysis

This is where Lyn says CO2Analysis differs from other solutions – they go down to the product level. This means that networking equipment manufactured in Germany would have a different CO2e calculation compared to laptops from China, even if supplied and purchased form the same company.

Lyn said the reason this hasn’t been done before is related to the challenges of how big organisations record their purchasing information.

To understand what products are actually purchased, you need to rely on what is entered into their purchasing systems, and while you might think modern day systems are designed to ensure consistency, Lyn says many are far away from that, leaving databases full of unstructured data.

In one of the UK’s National Health Service (NHS) Trusts, Lyn said there were more than one hundred descriptions for the same type of nitrile glove.

“We found the same type of nitrile gloves described in more than 100 ways, in just one NHS trust.

– Lyn Duncan, CEO, Co2Analysis.com

Lyn and her husband Ronald started CO2Analysis as a spin out from a procurement business they previously floated on London’s AIM market.

Ronald was a professional downhill skier, and during family holidays, he would wince in anguish at the the peaty valleys that ceased to be covered in glaciers in just his lifetime. This is where their joint passion for sustainability and the environment came from.

The solution for turning messy, unstructured procurement data into harmonised product lists comes from a piece of my past.

To develop the artificial intelligence system used to collate and categorise hundreds of different product desertions into one came from a joint knowledge transfer partnership (KTP) with two UK universities, The University of Reading and Goldsmiths University.

They worked with Slawomir Nasuto, Richard Mitchell, Virginie Ruiz and Victor Bacerra from the Cybernetics Department at the University of Reading, and Mark Bishop who moved from Reading to Goldsmiths University.

(Serendipitously, I studied under Richard and Mark when completing my Cybernetics and Control Engineering degree at Reading University. Small world, indeed.)

These AI models were carefully trained on millions of much cleaner more structured procurement data sets before being set loose on more messy data from local councils and NHS Trusts.

Now their AI algorithms are able to find commonality across 100s, 1,000s of previously unprocessed, unstructured data to help create carbon intensity calculations on an individual product level.

These calculations are then shared across the platform, enabling different end users to use those CO2e figures in their own calculations.

Behavioural Effects, Multiplied.

With a detailed product-level analysis of the organisations’ Scope 3 emissions, carbon hotspots can be more easily identified and mitigated.

At a product level, it is also much easier to engage more people in the business because it becomes less about procurement supplier decisions and more about how the actual items are used and consumed.

Lyn shared that in some companies they have worked with, the procurement systems are so complicated that the office manager simply hits the ‘reorder’ button on the office supplies order each month, without taking the time to create a new order for what is actually required. She said this resulted in a filling cabinet full of Tippex that no one has used for years.

In a healthcare example, Lyn mentioned that ‘best practice’ was for nurses to always open two of everything, in case a sterile piece of equipment was dropped or contaminated during use.

These behaviours have been difficult to change with traditional “help us save money by thinking about what you use” kinds of statements, because employees didn’t really have an emotional connection to the money that as being saved.

However, when it comes to the environment and sustainability, Lyn says there is a much greater willingness to recognise and improve on wasteful habits.

Saving Thousands and Millions.

Once the carbon hotspots are identified, sensible choices can be made about where and how specific products are purchased.

In one example Lyn gave, the company discovered that one particular product from a trusted supplier had a significantly higher CO2e contribution to their Scope 3. This was a result of that product’s country of origin and the shipping overhead.

By swapping that one product to a supplier that used a local producer, they cut emissions significantly, without impacting quality or the availability of products to the employees.

Lyn also shared that in one organisation with a billion pound annual budget, the combined “protect the environment + save money” approach helped their employees reduce consumption and save nearly £9 million in one year.