Circular economy strategies present significant potential for decarbonizing Scope 3 GHG emissions, which encompass greenhouse gas emissions originating from business activities beyond an organization's direct control, such as supply chain operations, transportation, and product usage or disposal.
Despite being the largest contributors to a company's carbon footprint, Scope 3 emissions pose challenges in measurement and reduction due to data limitations and operational complexities. However, mounting regulatory pressures and the demand for science-based reduction targets are compelling businesses to prioritize Scope 3 emissions management.
Unlocking Decarbonization Potential through Circular Economy Strategies
Driven by recent regulations and the push for credible climate transition plans, companies are increasingly focusing on accurately calculating, disclosing, and reducing Scope 3 emissions. The Greenhouse Gas Protocol outlines 15 categories of Scope 3 emissions, with particular attention in this article given to categories 1 (purchased goods and services), 11 (use of sold products), and 12 (end-of-life treatment of sold products), as they offer significant opportunities for emissions reduction through circular economy initiatives.
Circular economy principles, characterized by reimagining social and business interactions to create long-term value while fostering economic growth and positive ecological impacts, hold substantial decarbonization potential, with estimates suggesting up to a 56% reduction compared to baseline scenarios.
Despite the promising opportunities presented by the circular economy, its full decarbonization potential remains largely untapped, especially concerning Scope 3 value chain emissions. However, by leveraging circular strategies, businesses can not only mitigate their environmental impact but also unlock economic opportunities in a low-carbon economy.
Category 1: Purchased Goods and Services
Category 1 emissions, as defined by the GHG Protocol, encompass all upstream emissions associated with the production of products procured or acquired by the reporting company during the reporting year, including both tangible goods and intangible services. A significant challenge and opportunity in managing Category 1 emissions lies in the accessibility and quality of supplier-specific data.
For companies employing spend-based or average-data calculation methodologies, which estimate emissions based on spending or mass purchases with each supplier and secondary emission factors, the primary avenue for decarbonization involves reducing expenditure with high-emitting suppliers. Those with access to supplier-specific calculation methods can directly engage suppliers to reflect emissions reductions across the value chain in their calculations. Circular strategies present meaningful opportunities for decreasing Scope 3 Category 1 emissions across different calculation methodologies.
Circular strategies for reducing Scope 3 Category 1 emissions:
For companies using spend-based or average-data calculation methods: Circular procurement, an extension of sustainable procurement, aims to close energy and material loops in supply chains while minimizing waste and negative environmental impacts. By prioritizing suppliers and products/services demonstrating circularity, such as those employing circular design principles or offering take-back schemes, companies can shift spending toward suppliers with superior circularity performance indicators, thus reducing emissions.
Supplier engagement becomes a pivotal strategy for capturing supplier-specific emissions reductions for companies employing hybrid or supplier-specific calculation methods. Recognized as a critical activity for driving meaningful change across the value chain, supplier engagement strategies can leverage circular approaches through education, capacity building, and collaboration, ultimately leading to emissions reductions and enhanced sustainability across the supply chain.
Category 11: Use of Sold Products
Category 11 emissions, according to the GHG Protocol, comprise emissions resulting from the use of goods and services sold by the reporting company during the reporting year, including Scope 1 and 2 emissions of end users. These emissions can be categorized into direct and indirect use-phase emissions, with direct use-phase emissions primarily contributing to the total. Improving product efficiency, utilizing renewable energy sources, and designing for modularity are key circular strategies for reducing emissions within this category.
Circular Strategies for Decreasing Scope 3 Category 11 emissions:
- Enhance product efficiency by: 1. Substituting materials with lighter-weight alternatives to improve fuel efficiency and decrease operational energy use. 2. Designing products for easy processing and material purity, thereby reducing emissions associated with the product use phase. - Utilize alternate/renewable forms of energy to power products: 1. Support the transition to clean energy sources, directly reducing emissions related to energy use by-products. 2. Facilitate repair and remanufacture, extending the product lifecycle and reducing overall energy consumption.
Category 12: End-of-Life Treatment of Sold Products
Category 12 emissions, defined by the GHG Protocol, encompass emissions from the disposal and treatment of products sold by the reporting company at the end of their life. Circular economy strategies such as reuse and recycling offer viable pathways for reducing emissions within this category.
Circular Strategies for Decreasing Scope 3 Category 12 Emissions:
To implement reuse strategies, companies can experiment with reusable packaging to minimize the amount of packaging material sent to landfills or incinerators. Concurrently, deploying recycling initiatives involves collecting used goods and repurposing them as source material for new products, effectively diverting waste from landfills or incineration and lowering emissions linked to end-of-life treatment.
As the pressure on companies to decarbonize intensifies, circular strategies emerge as practical and effective levers for reducing emissions across Scope 3 categories 1 (purchased goods and services), 11 (use of sold products), and 12 (end-of-life treatment of sold products). These strategies, including reuse, remanufacture, supplier engagement, and enhanced modular design, offer tangible and actionable steps for companies seeking to navigate the challenges posed by the "Scope 3 dilemma." By embracing circularity throughout their value chains, businesses can not only mitigate their environmental impact but also foster innovation, resilience, and sustainability in a rapidly changing world.
About the SBTI
The Science Based Targets Initiative (SBTi) is a collaborative effort between organizations like the CDP, United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF), aimed at driving ambitious climate action in the private sector. Established to enable companies to set science-based emissions reduction targets, the SBTi serves as a crucial platform for businesses committed to sustainable growth, offering a clear pathway to align greenhouse gas (GHG) emissions reductions with the latest climate science.
With over 4,000 participating businesses across various industries and regions, the SBTi has significantly influenced corporate climate action, leading to enhanced profitability, investor confidence, innovation, and brand reputation while mitigating regulatory uncertainty. Notably, the initiative launched the Net-Zero Standard in October 2021, providing guidance and tools for setting credible and effective science-based net-zero targets, marking a significant milestone in corporate climate commitment.