May 18, 2023
How to Collect Quality Data for Scope 3 Inventories
Engaging suppliers for the collection of Scope 3 data can be daunting. The value of a Scope 3 inventory is only as good as the data used to create it, which complicates the task. In this article, we outline some useful tools to get you started off on the right foot.
Scope 3 inventories have become an essential tool for organizations that seek to take meaningful action to improve the environmental impact of their business. Their disclosure might even become mandatory in the US – based on proposed requirements from the SEC – for publicly traded companies whose Scope 3 emissions are material, significant to investors, or the subject of targets they’ve set.
The value of an inventory is only as good as the data used to create it, but collecting Scope 3 data can be intimidating. You’ll need to collaborate with many diverse suppliers who may not have experience documenting the type of activity data that you will need or may be skeptical that the benefit will be worth their added effort. It can be tough to keep track of the varied data that you need and where to find it.
Despite these challenges, collecting Scope 3 data is essential for companies that are serious about reducing their value chains’ environmental impact and achieving their sustainability goals. Inaccurate or incomplete data will skew the results of your inventory and won’t point to genuine hotspots of emissions, making it harder to strategically identify the activities with the greatest emission reduction potential.
The aim of this article is to offer some guidance on the supplier engagement and data collection process as you get started on your Scope 3 journey.
Get familiar with your value chain by creating process maps
As you begin to explore your value chain for Scope 3 quantification, you may be surprised by the number of third parties involved.
To help identify potential emissions sources that will need to be captured in your inventory, take some time to develop value chain process maps (like the one shown in the example below) before finalizing your data request list. This exercise can help facilitate communication with stakeholders – they will describe the flow of goods upstream and downstream of your company’s facilities and the third parties that their departments work with as they help you fill out the process map.
The completed process maps can serve as a checklist to the data requests that you will issue to stakeholders:
- Have you requested data from each supplier noted on the map?
- Have you received transport data for each leg of the journey documented on the map?
- Have you considered all the potential end-users of your products, and how they each might treat them at end of life (e.g., recycle, landfill, reuse)?
You will come out of the exercise with a much clearer understanding of the moving parts involved in your business and be confident that you are accounting for all potential emissions sources in your Scope 3 inventory.
Find the right people to ask for data
Once you have a sense of what data you will need, take some time to determine the right people to request it from. This task can be surprisingly time-consuming.
Sometimes the necessary data is available internally within your own company. Consider reaching out to team members who work closely with suppliers and customers, such as customer account representatives for data on consumer transport and use, the procurement team for purchased goods and services, or logistics specialists for transportation data.
However, it is likely that you will need to reach out to suppliers to get additional data behind their operations. Be prepared to be redirected a few times before you can connect with the specific person at the supplier’s company who has the datasets you need. This is especially true if your suppliers have less experience with greenhouse gas inventories or do not have robust data management systems.
Once you have identified the right contacts the first time, keep a log of who is responsible for each specific data point to streamline the data collection process in future years (i.e., Joe at The Fabric Emporium can summarize the quantity of cotton purchased annually, while Laura from the internal Logistics team can quantify the mileage behind the transport of cotton between The Fabric Emporium and the clothing manufacturer.)
It is common for this data collection process to take a long time, so try to initiate these conversations with suppliers early on. Since the previous year (the subject of the inventory being completed in the current year) will need to have ended for complete data to be collected, a good rule of thumb might be to reach out to stakeholders a few months beforehand to initiate the data request, and follow up in January to receive the complete year’s data. Timing can vary depending on how much data is needed from suppliers as opposed to what is already available internally.
Position data requests to your suppliers
Once you have identified the right stakeholders to reach out to, initiate the data request in a way that conveys the importance of the inventory you are developing and the valuable role of their data in this process. Make it clear that sustainability is important to your organization and may impact business decisions going forward.
Remember that your suppliers and colleagues who do not work in a sustainability function may not be as familiar with Scope 3 or the purpose of putting together an inventory. Without understanding the benefit of the exercise, they might not feel motivated to provide the data quickly, or otherwise not fully understand exactly what you are looking for from them.
By emphasizing the impact of the inventory on your company’s sustainability strategy and potential impacts on supplier engagement (e.g., if findings from the inventory will result in sustainability criteria being applied to supplier selection), the stakeholders will not only be more informed and likely to provide higher quality data from the start but will also be motivated to expedite the collection of data and potentially improve their own data management systems. Remind them that you are likely to come back to them with a similar data request every year going forward. If you have the opportunity, offer to collaborate with suppliers to create data management systems that work best for you both.
Assess supplier sustainability maturity
Ask if suppliers have conducted LCAs
If your suppliers seem to have higher sustainability maturity, it is worth inquiring whether they have conducted Life Cycle Assessments (LCAs) for the specific products or services which your organization buys from them. If so, an LCA can provide useful emissions data (including the emission factor) that is more accurate for your situation, since it will quantify emissions associated with the exact supplier’s product you are using as opposed to a more generic industry average. This will also save you the effort of trying to identify an industry average emissions factor through research.
However, note that high quality industry average data (or secondary data) is still better than low quality supplier-specific data (primary data). If suppliers do provide their own LCA, review the findings for reliability and completeness before using it for emissions quantification. Table 7.5 of the GHG Protocol Standard summarizes the advantages and disadvantages of primary and secondary data.
Create an Inventory Management Plan (IMP)
Managing this data – knowing what to ask for and from who, as well as what to do with this data – can be challenging, and you won’t be completing the process just once. It is worthwhile to develop a formal and repeatable data collection process, so that whoever works on compiling next year’s inventory can do so as efficiently as possible.
This is the value of creating an Inventory Management Plan (IMP) – an internal-facing document which describes an organization’s process for completing a GHG inventory. An IMP can serve as your guide to understanding the data that you’ll need for the different Scope 3 categories, the right contacts to reach out to get each piece of data, how to handle limitations you may encounter along the way, and ultimately how to use this data to quantify emissions in your value chain. By following a consistent methodology based on what is included in the plan, you will be able to compare year over year results accurately and be better equipped to meet external reporting requirements.
Be sure to document estimates, assumptions, or exclusions clearly within your IMP, along with a justification for including them. This way, you won’t question your inventory work done in the past and will have an easy reference for what you will need for later years.
While you wait to receive your requested data, start preparing to quantify emissions by determining which calculation methods you will use for each Scope 3 category (GHG Protocol Technical Guidance for Calculating Scope 3 Emissions offers helpful guidance.) Confirm that the data coming in satisfies the calculation methods’ requirements and follow up with stakeholders as needed. Once you have all the data on hand, you will be ready to calculate your Scope 3 inventory.
An organized data collection process will set you up for successful Scope 3 inventory development, even if you are going through the process for the first time. Eventually, your Scope 3 inventory will enable you to identify high-impact reduction activities and set expectations for improved supplier sustainability performance. The annual inventory calculation will allow you to monitor the performance of your established sustainability strategy against any targets you have set.
And then a final word of encouragement. Rest assured that as you continue to build on the process and gain comfort with each iteration, your inventory – as well as your relationship with suppliers and stakeholders – will become more robust.
Want to know more?
Strategic Sustainability Consultant
Head of Strategic Sustainability Consulting US
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