Collaborating with Small Suppliers on Scope 3 Emissions

Published in

Sustainability Directory

10 min readMay 24, 2024

Scope 3 emissions are all the indirect emissions that happen in your value chain, both upstream and downstream.[1] They are a big part of most businesses’ environmental footprint, and you can’t ignore them if you care about climate change. In many cases, they represent your largest emissions, accounting for up to 80% of your total greenhouse gas (GHG) footprint.

But addressing Scope 3 emissions is tough, though many companies are finding effective ways to do so. The reasons are many. Firstly, it can help your business find new ways to save money, improve efficiency, and innovate in addition to boosting your reputation and competitiveness in the market, as customers and investors prefer greener businesses. Doing so also demonstrates leadership and responsibility in your industry, as you are influencing your suppliers and customers to be more sustainable. Moreover, addressing Scope 3 emissions enables you to meet the expectations and requirements of various stakeholders, such as regulators, NGOs, and the public, who want more transparency and accountability from businesses on their environmental performance across the entire value chain.

Scope 3 emissions are challenging to measure and manage, especially when you have a complex and diverse supply chain that involves many small suppliers. The key to addressing your Scope 3 will depend heavily on how you collaborate with them effectively to reduce their emissions and improve their environmental performance.

So, how can you create value for both parties and foster long-term partnerships that support your sustainability vision? That’ll all depend on how effectively you engage with small suppliers on Scope 3 emissions reduction.

Four ascending green gradient bars symbolizing sustainable growth and progress in reducing Scope 3 emissions. — Sustainable Growth Visual Representation in Green Gradient Bars

What are Scope 3 Emissions and Why are They Important?

Scope 3 emissions are defined by the GHG Protocol as “all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions”.[2] This means that Scope 3 emissions include all the GHG emissions that are associated with the production, processing, transportation, distribution, use, and disposal of the goods and services that you buy or sell, as well as those from your business travel, employee commuting, investments, and other activities.[3]

For comparison, Scope 1 emissions are the direct GHG emissions that come from sources owned or controlled by a company such as fuel combustion in vehicles, boilers, furnaces, or generators These emissions are by far the easiest to measure and reduce, because they depend on the company’s own actions and choices. Scope 2 emissions are the indirect emissions that come from the electricity, steam, heat, or cooling that you buy and use for your business or organization.

Scope 3 emissions are important for several reasons. They represent a major portion of your overall GHG impact and ignoring them would underestimate your contribution to climate change. Second, they offer opportunities for innovation, efficiency, and cost savings along your value chain, as well as enhancing your reputation and competitiveness in the market. Third, they reflect your influence and responsibility over your suppliers and customers, and how you can leverage your relationships to drive positive change. Fourth, stakeholders simply want more transparency and accountability from businesses on their environmental performance.[4]

A visual representation of increasing sustainability efforts, depicted by ascending colored blocks, symbolizing collaboration on Scope 3 emissions. — Sustainable Growth Visualizing Scope 3 Emissions Collaboration

How to Measure and Manage Scope 3 Emissions

Measuring and managing Scope 3 emissions isn’t an easy task — just ask any business. It requires a systematic approach that involves identifying, quantifying, reporting, and reducing the emissions from your value chain activities. The GHG Protocol provides a comprehensive framework and guidance for businesses to follow when accounting for their scope 3 emissions.[5] Some of the key steps include:

Defining the scope: This involves determining which categories of Scope 3 emissions are relevant and material for your business, based on your industry sector, value chain structure, stakeholder expectations, and business objectives. There are 15 categories of Scope 3 emissions defined by the GHG Protocol,[6] ranging from purchased goods and services to end-of-life treatment of sold products. You should prioritize the categories that have the most significant impact and influence on your GHG footprint.
Collecting data: This is probably the hardest part as this is information on the GHG emissions from your value chain activities, either by using primary data from your suppliers and customers or by using secondary data from industry averages or databases. You should aim for data quality, completeness, consistency, accuracy, and transparency when collecting data. However, you’ll need to be realistic and not aim for 100% since some of your suppliers may simply not have anything. Work instead with your most important Tier 1 suppliers first. You should also consider the boundaries, allocation methods, emission factors, and uncertainty levels of your data sources. It’s doubtful you’ll have this expertise inhouse, so you will need to engage an outside consulting team for this.
Calculating emissions: This involves applying the appropriate calculation methods and tools to estimate the GHG emissions from your value chain activities. You should use the GHG Protocol standards and guidance[7] to ensure consistency and comparability of your results. Again, seek out expertise on this if you don’t have it in-house. They’ll also be able to support you on documenting your assumptions, methodologies, sources, and limitations of your calculations.
Reporting emissions: Disclosing your Scope 3 emissions results via reporting to your internal and external stakeholders in a clear and credible manner. Follow the GHG Protocol reporting principles[8] of relevance, completeness, consistency, accuracy, and transparency when reporting your Scope 3 emissions. Third party expertise should be engaged to provide context, analysis, and verification of your results.
Reducing emissions: This means setting targets, implementing actions, and monitoring progress to reduce your Scope 3 emissions over time. Align your targets with your business strategy, stakeholder expectations, and scientific evidence. The harder part will be collaborating with your suppliers and customers to identify and implement emission reduction opportunities along your value chain.

While difficult, especially for small and medium sized businesses, it’s not impossible. You can measure and manage your Scope 3 emissions effectively and efficiently and demonstrate your commitment and leadership on sustainability. It’s a journey and every journey begins with a single step.

A close-up view of various colored sustainable wooden materials showcasing diversity and eco-friendliness, aligning with the theme of collaborating on Scope 3 emissions. — Sustainable Materials in Diverse Shades for Eco Friendly Design

How Unilever Collaborated with Small Suppliers on Scope 3 Emissions

One of the leading examples of how a large corporation can collaborate with small suppliers on Scope 3 emissions reduction is Unilever, the global consumer goods company. Unilever has set ambitious targets to reduce its Scope 3 emissions by 50% by 2030, and to achieve net zero emissions from all its products by 2039.[9] To achieve these targets, Unilever has been working closely with its suppliers, especially the smallholder farmers who produce its raw materials, such as tea, palm oil, soy, and cocoa.[10]

Unilever has adopted a holistic approach to engaging with its small suppliers on Scope 3 emissions reduction. Some of the key elements of this approach include:

Providing training and support: Unilever has been providing training and technical assistance to its small suppliers on sustainable agricultural practices, such as improving soil health, water management, crop diversification, and waste reduction. These practices help the farmers increase their yields, incomes, and resilience, while reducing their GHG emissions and environmental impact.[11]
Offering incentives and rewards: They’ve been offering incentives and rewards to its small suppliers who adopt sustainable agricultural practices and achieve certification standards, such as Rainforest Alliance, Fairtrade, or Organic. These incentives and rewards include premium prices, preferential contracts, access to finance, and recognition programs. Crucially, they help the farmers improve their livelihoods and competitiveness, while enhancing their loyalty and trust with Unilever.[12]
Building partnerships and networks: Includes small suppliers and other stakeholders, such as NGOs, governments, research institutions, and industry peers. These partnerships and networks help Unilever share knowledge, resources, and best practices on Scope 3 emissions reduction, as well as address common challenges and opportunities in the value chain.[13]

By collaborating with its small suppliers on Scope 3 emissions reduction, Unilever has been able to create value for both parties and contribute to its sustainability goals. According to Unilever’s latest report,[14] it has achieved the following results:

Reduced Scope 3 emissions: Unilever has reduced its Scope 3 emissions from purchased goods and services by 8% since 2010,[15] despite increasing its production volume by 29%.[16] It has also reduced its Scope 3 emissions from land use change by 65% since 2008,[17] by sourcing more sustainable palm oil, soy, paper, and board.
Improved supplier performance: This has been across various sustainability indicators, such as productivity, quality, income, and social impact. For example, it has helped over 1.5 million smallholder farmers improve their agricultural practices,[18] increased the average income of tea farmers by 30%,[19] and improved the livelihoods of over 600,000 women in its supply chain.[20]
Enhanced brand reputation: They’ve enhanced this by communicating its Scope 3 emissions reduction efforts and achievements to the market. It has also received recognition and awards for its sustainability leadership from various organizations, such as CDP,[21] Dow Jones Sustainability Index,[22] and Corporate Knights.[23]

While a large, well-resourced company, Unilever’s case study shows how a large corporation can collaborate with small suppliers on Scope 3 emissions reduction effectively and efficiently while creating value for both parties.

Close-up view of diverse sustainable materials for eco-friendly design in Scope 3 emissions context — Sustainable Materials Showcasing Diversity for Scope 3 Emissions

How Blockchain Technology Can Enable Scope 3 Emissions Reduction

A current trend that is linked directly to the topic of Scope 3 emissions reduction is blockchain technology, which is a distributed ledger system that enables secure and transparent transactions among multiple parties. Blockchain technology has the potential to enable Scope 3 emissions reduction by providing the following benefits:[24]

Enhancing data quality and accuracy by creating a ‘single source of truth’ that is verified and validated by all participants in the value chain. This can reduce the errors, inconsistencies, and uncertainties that often plague scope 3 emissions accounting and reporting.[25]
Increasing data availability and accessibility by allowing all stakeholders to access and share the data in real-time, without intermediaries or centralized authorities. This can facilitate data collection, analysis, and disclosure, as well as enable more effective collaboration and communication among value chain partners.[26]
Incentivizing data disclosure and action by enabling a transparent and traceable record of the emissions performance of each value chain partner. Accountability and trust are thus enhanced among stakeholders, as well as reward those who demonstrate good practices and results.[27]

Some examples of how blockchain technology can enable Scope 3 emissions reduction in different industries include:

Fashion: Astarte, a blockchain platform for sustainable fashion, aims to reduce the Scope 3 emissions from the fashion industry by providing a digital identity for each garment that tracks its environmental and social impact throughout its lifecycle. The platform also allows consumers to verify the sustainability credentials of their purchases and rewards them with tokens that can be used for future purchases or donations.[28]
Food: AgriLedger, a blockchain platform for agricultural supply chains provides a transparent and secure record of the provenance, quality, and environmental impact of each product from farm to fork. The platform enables farmers to access fair prices, markets, and financing, as well as consumers to make informed choices about their food consumption.[29]
Energy: Energy Web, a blockchain platform for the energy sector enables a decentralized and decarbonized energy system that integrates renewable energy sources, smart grids, and electric vehicles. This allows energy producers, consumers, and prosumers to trade energy and carbon credits in a peer-to-peer manner.[30]

This is a rapidly evolving space. Blockchain technology is demonstrating that it can enable Scope 3 emissions reduction by enhancing data quality, availability, accessibility, and incentivizing data disclosure and action.

Close-up view of blue and green dominoes representing collaboration in sustainability and emission reduction. — Sustainable Partnership in Reducing Scope 3 Emissions

Conclusion: How to Collaborate with Small Suppliers on Scope 3 Emissions

Scope 3 is challenging, not just for the reasons mentioned, but simply because addressing them requires collaboration with suppliers and customers who lie directly outside of your control. However, because Scope 3 emissions are a significant part of your GHG footprint, addressing them is becoming almost non-negotiable. Measuring and managing these emissions requires a systematic approach that involves defining the scope, collecting data, calculating, reporting, and reducing emissions in that order. Large corporations like Unilever can provide insights on how to do this across geographies and innovative technologies like blockchain are showing how technologies can be leveraged to enable Scope 3 emissions reduction in different industries.

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