Resilience Dispatch #26: All Things Carbon, Mitigation’s Dark Matter: Scope 3 and the Supply Chain

Sep 21, 2022

This is part of a special Resilience Dispatch series, exploring all things carbon. We’ll start with the demand side – where can new climate ambition come from?

In future Dispatches we’ll talk about designing better climate finance, and then delivering it efficiently, effectively, and equitably.

In this edition: Why Scope 3 emissions are the dark matter of the climate mitigation universe, and why you’re about to hear a lot more about them.

INTRODUCING OUR NEW SPECIAL SERIES

The Resilience Dispatch takes on “All Things Carbon”

Greetings from New York City and NYC Climate Week! The UN General Assembly is in town for its high-level meeting this week, along with CEOs, artists, heads of state, investors, indigenous leaders, entrepreneurs, conservationists, Silicon Valley leaders, and just about everyone else you can imagine for what’s being called “Davos on the Hudson.” All here to work on the enormous project of a decarbonized global economy.

Carbon is fast becoming a new global currency. Every economic decision going forward will have to consider not just financial value, but climate value: is this action compatible with a stable climate, or does it add to the problem?

Nations’ commitments under the Paris Agreement bring us close to climate stability, but not all the way there. But there are other pieces of the puzzle: actions taken by companies, by cities, and by citizens all help to close the gap.

This special series of the Resilience Dispatch will explore all of these pieces through a single question: How do we put more money in the carbon “bank”? That is, how do we build up our natural carbon sinks? We’ll look at where demand comes from, how we design investments to be more effective, fair, and durable, and how we deliver real results.

We start on the edges of the system: the far reaches of a company’s value chain.

Although from a climate point of view, this is dead center: as much as 90% of a company’s carbon footprint comes from its “Scope 3” emissions. (Scope 3 emissions are from activities or assets a company doesn’t have direct control over in its value chain, like upstream sourcing and downstream consumption. Scope 1 emissions are direct emissions; Scope 2 are from emissions from energy use.)

Scope 3 emissions have long been the “dark matter” of climate disclosure. We just released analysis showing that though they make up the vast majority of emissions, less than half of companies report data on Scope 3, leaving a major gap in understanding and reporting climate impacts associated with land-use change.

Historically Scope 3 emissions have been overlooked – until now. Expect to hear a lot more about Scope 3 in the coming months. Investors are starting to focus on them and ask companies for more data. The International Sustainability Standards Board and the US Securities and Exchange Commission have recently drafted disclosure requirements for Scope 3. (Though Republicans are pushing to scrap the SEC disclosure requirements on the grounds that reporting on Scope 3 is too complex.)

Action on Scope 3 would have enormous impact for climate and ripple across the global economy. (One company’s Scope 3 emissions are another’s Scope 1 emissions after all.)

Since deforestation upstream in the value chain is behind such a large share of Scope 3 emissions for everyday consumer goods, action on Scope 3 is also a very, very big deal in the fight to protect forests and other carbon sinks.

I was in New York in September 2014 for Climate Week, when the New York Declaration on Forests was launched with great excitement. The NYDF pledged signatories to halving deforestation in supply chains by 2020, and eliminating it by 2030. Virtually no one achieved the 2020 goal. We all underestimated how difficult it would be.

Now we are realizing that climate safety and protecting our planet’s forests are a package deal. We’ll achieve both, or neither.

– Michael Jenkins

GOOD READS

Some recommended resources on Scope 3 emissions and making supply chains deforestation-free.

FROM THE FOREST TRENDS BLOG

TEN THINGS COMPANIES AND INVESTORS CAN DO TO MEET NO-DEFORESTATION COMMITMENTS

There is growing corporate ambition to address commodity-driven deforestation and human rights abuses in global supply chains. Still, gaps remain between commitments and results for the “big five” forest-risk commodities: cattle, soy, timber and pulp, palm oil, and cocoa. Full findings and trends in corporate no-deforestation and nature-positive commitments post 2020 can be found in our Supply Change team’s new report, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020.   

Here are 10 things companies and investors can do to close these gaps and reduce financial and reputational risks associated with these commodities: 

1. Utilize Available Resources 

The Accountability Framework, Science Based Targets Initiative, and GHG Protocol all provide guidance, definitions, and best practices for addressing deforestation, climate change, and human rights risks in forest-risk supply chains…[Keep reading at the Forest Trends blog.]