How businesses can solve the big carbon conundrum

Not long ago, unscrupulous claims about carbon footprints were pretty commonplace. Marketing teams unceremoniously jumped on the sustainability bandwagon by slapping ‘carbon neutral’ or ‘climate-friendly’ on various products. The only thing to back up these claims was usually akin to a tree-planting project in the Outer Hebrides.

A lack of regulatory oversight, scrutiny or shopper understanding allowed them to get away with it. But in 2024, that’s all changed.

Not only have the likes of the Competition & Markets Authority stepped up surveillance, threatening to punish unsubstantiated or inaccurate claims with hefty fines, but the legal onus on both brands and retailers to measure and report accurate figures on their greenhouse gas emissions has ramped up significantly.

Companies may soon be forced to report their Scope 3 emissions – essentially those in their value chain – in an extension of existing requirements. The complexities involved have provoked behind-the-scenes wrangling on a standardised method for measurement.

So, what is it about Scope 3 that makes it so complex? What can’t everyone agree on? And how might the issue be solved?

Since 2022, more than 1,300 large UK businesses have faced mandatory disclosure requirements on any carbon classed as Scope 1 or 2. These include direct emissions owned or controlled by the company and indirect emissions that are a direct consequence of their activities, such as electricity used to power their factories.

”For small businesses to have the ability to provide corporates with the same calibre of data is challenging at best, near impossible at worst”

Dave Carter, owner of carbon footprint consultants Auditel

Now there’s talk of extending those requirements to encompass Scope 3. These emissions aren’t produced by them, but they do occur in their value chain. For brands and retailers, that’s largely the carbon footprint of the products they sell, be it through raw materials, manufacturing or transport.

These activities tend to produce a high level of emissions, proportionally speaking. At both The Co-op and Tesco, for example, around 90% of their total carbon footprint is made up of these indirect emissions, according to the retailers’ own sustainability reports.

“It’s not an area you can skim over,” says Sarah Laidler, a senior consultant at the Carbon Trust. “It’s the largest part of your emissions, and understanding that and taking it forward to understand how you can decarbonise is really important.”

Many brands and retailers have already been working to measure this category of carbon for years. Those signed up to voluntary schemes such as the Science Based Targets initiative (SBTi), for example, are required to disclose Scope 3 data in order to track their progress toward net zero.

But the nature of Scope 3 makes measurement tricky. And it’s particularly tricky in a sector like consumer goods, where many retailers and suppliers are navigating a vast and complex value chain spanning multiple partners and countries.

“In order to have effective access to the data to report on Scope 3, companies will need strong supplier relationships across their value chain, and those suppliers in turn need to have strong levels of rigour when it comes to collecting the data themselves,” says Dave Carter, owner of carbon footprint consultants Auditel.

“This becomes increasingly challenging when big corporates have subcontractors or suppliers who are on the micro-scale of business. For small businesses to have the ability to provide corporates with the same calibre of data is challenging at best, near impossible at worst.

“In tandem, the back and forth between businesses can lead to huge inefficiencies,” Carter adds. “Between communication delays, data validation, questioning, resubmission etc, Scope 3 can take significant amounts of time and effort.”

Those complexities are reiterated by Jason Barrett, founder and CEO of data platform Mondra. “You’ve literally got to send a consultant out into the field, go knocking on doors to ask for data, and where it doesn’t exist, then you end up modelling it based on secondary databases that might be 20 years old,” he explains.

”“Businesses get caught up in ‘analysis paralysis’ Scope 3 is seen as expensive and challenging to process the high volume of data”

Tracey Banks, climate action programme manager at the BRC

Tesco is a prime example of just how monumental the task can be. It set out to map the Scope 3 emissions associated with 70,000 of its own-brand products in 2009. It took roughly a year to acquire data for just 500 (less than 1%), with each SKU involving “many months” of work, according to the retailer.

At that pace, it would have taken more than a century to complete the job and – in 2012 – the supermarket ditched its carbon labelling plan due to the amount of work involved.

Suppliers can face a similar struggle. At Global Brands, owner of VK, Hooch and Franklin & Sons, it’s been an uphill battle getting some suppliers and customers to engage in the process, says head of marketing projects Zehra Gezer. “Although we always submit information when requested by them, we don’t often get the same back in return,” she says.

“We work with some excellent partners who are keen to share their progress and plans and do have very robust practices in place,” she adds. “There are a lot, however, that are not as keen to share their progress, which leaves us with the question of whether to persevere with existing suppliers because they may offer the best value in financial terms or look to others who might be better aligned with our own sustainability ambitions but cost more to work with.”

This struggle applies regardless of the size of the business. “Getting hold of credible, reliable information has taken many years,” says Sam Jones, head of sustainability at Coca-Cola Europacific Partners (CCEP) GB. “Creating a perfect picture at first time of asking is impossible – we’ve been calculating, disclosing and assuring Scope 3 emissions since 2016 – and we continue to rely on a variety of approaches.”

This complexity has led to a highly fragmented picture when measuring Scope 3 in food and drink, in the absence of a single, standardised model.

Some, like dairy supplier Wyke Farms, will use primary product-specific data in calculating Scope 3. “We work with the Carbon Trust to cradle-to-grave-footprint the whole process,” says managing director Rich Clothier. “This identifies the key areas of emission and allows us to focus on the big wins. It’s not simple, particularly when we’re working on many farms, but farmers are willing and supportive of the mission.”

‘A lack of comparability’

For others, supplier-specific data must be supplemented with secondary data to plug the gap. At CCEP, for example, the team uses “primary data related to our packaging, global and regional emission factors, and spend-based estimates,” says Jones.

Spend-based methods take the financial value of a product or service and multiply them by an emissions factor (EF) to create an estimate for the environmental impact.

This lack of a standardised approach creates problems, believes Tracey Banks, climate action programme manager at the BRC. The industry suffers from a lack of comparability with which to evaluate baselines, targets or progress, a lack of consistency for suppliers “who are either being asked the same questions by all the businesses they supply using different tools or for a different data” and “a lack of credibility of sourced data in terms of quality and accuracy”, she says.

Though progress toward decarbonisation has continued – most businesses are aware of their Scope 3 hotspots even without a full set of data – “you can only manage what you measure, you can’t ask a supplier to sign up to reduction targets based on data that isn’t theirs,” she adds.

Courtney Holm, VP of sustainable futures at Capgemini Invent UK, points to another problem. “It also distracts the economy from investing in solutions to mitigate impacts, transition and adapt,” she says. “Without a clear understanding of the impact organisations are contributing, they will struggle to maximise decarbonisation opportunities.”

Without mandatory reporting, of course, businesses currently have the option to bury their head in the sand. “Businesses get caught up in ‘analysis paralysis’,” says Banks. “Scope 3 is seen as an expensive exercise, with many finding it challenging to process the high volume of data involved, which is typically done manually and time intensive. As Scope 3 emissions reporting is not yet mandated, it can easily be deferred.”

But that may not be an option for much longer. Though there are currently no concrete plans to introduce mandatory Scope 3 reporting, last October the Department for Energy, Security & Net Zero launched a call for evidence on the costs and practicalities of adding Scope 3 reporting to the list of requirements for businesses in the UK.

It followed a decision by the International Sustainability Standards Board to include the category in its own standards as of last year.

Disagreements in approach

If the mandatory measures go ahead, the industry will have to turn its mix of approaches into a single, shared protocol. But that’s already proving tricky.

The Eco-Group, established by the Food Data Transparency Partnership, was set up in 2022 to improve the sustainability and healthiness of food through better data. It is yet to unveil a standard methodology for Scope 3 reporting amid reports of ongoing disagreements between its 20 members, which include a mix of major retailers, suppliers and specialists.

There’s plenty to debate, explains Banks: agreeing a method for lifecycle assessment; exactly what should be included in Scope 3; thresholds for data quality; inclusion of farm data; a future roadmap; and how such a scheme should be managed.

However, she believes “progress is being made and these issues can be resolved”. Banks points to the launch of the “breakthrough” system led by AI data company Mondra and in partnership with the BRC, already signed up to by the likes of Tesco, Asda, and Ocado, as well as suppliers including Greencore, Cranswick and Samworth Brothers. It offers a common carbon footprinting model powered by artificial intelligence.

Made mandatory or not, the industry can’t hang around for a resolution on the technicalities before getting to grips with Scope 3 emissions. Not least because many are signed up to voluntary schemes that already require a measure of the thorniest category of carbon.

“It’s important not to let the fact that the data isn’t perfect stop businesses from taking the next step, which is to reduce carbon,” says Laidler. “If we’re waiting for a perfect set of data, it’s not going to happen.”

Mark Chapman, founder and CEO of Zero Carbon Forum, adds: “People can feel a bit like a victim of Scope 3, in that it’s too complicated, or there’s too many suppliers.

“One of the things we’re really clear with our operators on is: Look, your suppliers are driven by what you sell. Scope 3 is within your control because it’s driven by the building you run, the menu you’re running. Don’t say ‘I can’t do anything about it because it’s too complicated and it’s not in my control’. Own it.”