Credit: Mimi Phan | Shutterstock
Sustainability remains one of the most important factors that affect the way companies operate in industries across the globe. However, organizations are still facing challenges with key sustainability actions such as measuring emissions, according to a new report from the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals.
Scope 3 emissions, which include indirect emissions that occur along a company’s value chain but are not directly controlled by the organization, account for 75% of a company’s overall emissions, on average. Yet organizations struggle to track these emissions due to the intricate web of supplier and customer relationships and their extended business work streams, according to the “State of Supply Chain Sustainability 2024” report. The report is based on a survey of supply chain professionals in different industries and business functions, with more than 7,000 responses from people in 80 countries.
Here are five takeaways from the report about the challenges posed by Scope 3 emissions and steps being taken to address them.
Accurate emissions accounting is paramount
Organizations that want to identify where they can reduce greenhouse gas emissions need to understand and monitor their carbon footprints. This requires that they rethink and update their emissions accounting.
While companies have grown adept at calculating Scope 1 and Scope 2 emissions, calculating Scope 3 emissions remains problematic due to the complex web of supplier relationships and their extended business activities, the researchers found. Current emissions calculations are inflexible and prone to error, rendering them inaccurate.
Changes are needed to the methodology “to make sure that the data that is being provided to regulatory bodies is accurate and can reward corporations for making sustainable choices and not negatively impacting them,” the report states.
Data outliers are common — and difficult to identify
To achieve accurate emissions reporting, organizations need accurate data. Though this sounds simple, companies are contending with two challenges in this area: different sources of data, and incongruent emissions information as a result of different carbon tracking methodologies.
These complexities cause inaccuracies that can drastically skew results and lead to incorrect reporting of emissions data, according to the report. While outlier detection is a critical part of data analysis, it is not currently performed automatically for emissions reporting. A recent MIT study proposed using an outlier detection algorithm, which could enable more precise evaluation of an organization’s Scope 3 emissions data.
Standardization is necessary across sectors
While different sectors require their own methods of tracking emissions and sharing that information with customers, what constitutes Scope 3 emissions must be standardized across sectors to establish a clear baseline. The report suggests setting a global standard that is communicated and agreed upon so when a corporation shares its Scope 3 emissions with the European Union or California, for example, it is the required data that is being shared.
“Without these principles, enterprises lack a clear understanding of what is required for all Scope 3 emissions accounting, which means that for each regulation, they must reevaluate the emissions data to meet and share the requirements of that regulation. This is extremely labor intensive and will only increase over time unless clear guidelines are established for every sector,” the report states.
The MIT Sustainable Supply Chain Lab aims to develop those guidelines to have a global impact on Scope 3 emission standards, the report states.
Life-cycle emissions reporting needs to be simplified
The spend-based method, which estimates emissions by multiplying the economic value data of purchased goods or services with industry-average emission factors related to their monetary value, is often used when direct emissions data from suppliers are not available. More accurate reporting methods exist, but because they require an organization to track information that may pose privacy concerns, they are more difficult for companies to implement.
The report suggests that in order to make the transition toward life-cycle emissions reporting possible, companies need to make advancements in emissions-tracking technologies and devices. “The research agenda of the MIT Sustainable Supply Chain Lab focuses on enhancing the accessibility and accuracy of emissions-tracking devices,” the report states. “The objective is to enhance the accessibility of life cycle emissions methods, enabling enterprises to modify their current data collection practices and utilize real and accurate emissions data.”
Machine learning will transform emissions tracking
Related Articles
Traditional emissions-tracking methods frequently rely on recurring reporting and estimates, which are often out-of-date and inaccurate. Machine learning algorithms can identify pollution sources and patterns in emissions, providing near-real-time updates on emissions levels by analyzing various data streams.
Using machine learning has several other benefits as well. It enhances the accuracy and reliability of emissions inventories and enables timely interventions to mitigate environmental impacts; it facilitates continuous monitoring and adaptive management of greenhouse gas emissions; and it helps organizations make more informed decisions and interventions, according to the report.
“Ultimately, the combination of real data tracker improvements and machine learning represents a powerful tool in the global effort to combat climate change and achieve sustainability goals,” the report states.
