What’s really behind the Scope 3 data dilemma, and how do we solve it?

What’s really behind the Scope 3 data dilemma, and how do we solve it?

Industry can only solve scope 3 data collection by understanding the problems. Insights from German textile-sharing company Mewa reveal key blockers and solutions.

Rebekah Mays
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Rebekah Mays
November 7, 2024
# min de lecture
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An increasing number of companies are reporting their Scopes 1 and 2 emissions, but tackling Scope 3 remains a major challenge. 

Since these emissions can account for over 70% of a company’s carbon footprint, regulatory bodies like the EU are pressing for more accurate data on Scope 3 emissions, or the indirect emissions from the supply chain. 

Understanding Scope 3 emissions is critical for setting science-based targets, reducing greenhouse gas emissions, and accelerating the corporate decarbonization journey. Still, as of June 2024, only 15% of companies reporting to the CDP have set targets for this scope. 

On the surface, the main blocker seems clear: companies need their suppliers to provide emissions data to gain Scope 3 visibility. If suppliers don’t have this data or aren’t willing to hand it over, accurate Scope 3 data collection is impossible.

Organizations like CDP, the GHG Protocol, and SBTi offer frameworks to support companies on their supplier engagement efforts. But before jumping into tactics, companies must dig deeper into the underlying issues. 

Fortunately, this deeper exploration can lead to powerful solutions, as shown by innovators like German textile-sharing company Mewa and other enterprises trying to solve this problem. 

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Challenge 1: Managing supply chains requires a truly data-driven approach

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The first obstacle is that effective Scope 3 data collection demands a truly data-driven approach, which many companies haven’t fully embraced. 

Management consultancy Capgemini has called the Scope 3 dilemma a “big data” challenge, highlighting the need for managing vast amounts of data and integrating these insights into every decision-making level. However, many companies aren’t there yet.

“Everyone talks about being data-driven, but I don’t see many truly data-driven companies when it comes to mobility management,” says Benjamin Federmann, Head of Fleet Strategy & Mobility at Mewa. “Many companies talk about CO2 emissions, but there’s no real proactive data management.” 

Proactive data management, as Benjamin points out, would mean continuing to press for real-time, cradle-to-cradle data, not just knowing that a logistics contractor uses 20 liters of diesel to travel from point A to B.  

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This lack of data sophistication represents a missed opportunity. PwC’s Global Data and Analytics Survey showed that data-driven organizations are 3 times more likely to make significant improvements in decision-making. 

It’s no surprise, then, that regulatory bodies are pushing companies to comply with stricter reporting frameworks. As of Q3 2024, the EU’s Carbon Border Adjustment Mechanism (CBAM) requires 80% of emissions calculations for complex goods covered by CBAM to be based on actual supplier data, not estimates. Meanwhile, the Corporate Sustainability Reporting Directive (CSRD)’s ESRS E1 also requires Scope 3 emissions disclosures.

If companies want to meet these regulatory demands, companies must undergo a digital transformation that goes beyond sustainability.

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Challenge 2: Effective supplier engagement requires investment

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Another major hurdle is that supplier engagement requires investment, particularly in terms of time and human resources. 

The EU’s cost-benefit analysis of the European Sustainability Reporting Standards (ESRS) found that Scope 3 emissions reporting was likely the most time-consuming aspect of compliance. And a 2023 Deloitte report identified the Scope 3 category “Purchased Goods and Services” as especially resource-intensive. 

While more companies are eager to disclose environmental data, as shown by the increasing number of voluntary disclosures, many suppliers still lack the knowledge or tools to provide detailed emissions data. If companies engage suppliers without offering training, clear communication, and technology, collecting accurate data will be difficult. 

Ultimately, supplier engagement is about more than just requesting data. It’s about investing in partnerships. Microsoft’s supplier engagement program, for example, shows the need for well-designed communication processes and educational resources to guide suppliers through the process. 

Challenge 3: Scope 3 data analysis can reveal inefficiencies

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Finally, Scope 3 data collection often uncovers small and large business inefficiencies that can be uncomfortable or challenging to address. 

As Benjamin Federmann shares, these inefficiencies can be at the process level (like delivery route optimization) but can also require reevaluating entire business models. 

For instance, what began as Mewa’s management focusing on “green logistics” evolved into a full-scale reassessment of how the company managed logistics altogether. As Federmann recalls, simply replacing diesel vans with electric ones wasn’t enough. The process required deeper questions: Were they using the best routes? Could they consolidate deliveries? Do they need daily deliveries, or could they reduce the frequency? 

In Berlin and Hamburg, Mewa is already relying on logistics concepts of the future. ONOMOTION takes care of the delivery on the last mile.

These insights led to the creation of Mewa’s City-Hubs project in Berlin and Hamburg, where they now use electric vans and cargo bikes to deliver their textiles throughout the city. But this transformation wasn’t easy, as it required continuously asking hard questions and challenging long-standing assumptions about their operations.

While some companies might not be ready to tackle these kinds of projects, those willing to lean into these challenges might find unexpected opportunities for growth.

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Solution 1: Aim to become truly data-driven, using technology as leverage

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Behind every challenge lies an opportunity. And this is certainly true for the Scope 3 data dilemma. 

To start, companies need to embrace a data-driven approach that will power both decarbonization and wider business goals.  

Federmann underscores that having technical infrastructure in place is critical to becoming data-driven. As he shares, this may include having “huge data warehouses with lots of information from different perspectives, both from within your company and your partners.” He also stresses that when acting on data analyses, companies must be clear on what they are optimizing for, whether that’s: finances, sustainability, or other factors. 

For companies still early in their data maturity, the first step to becoming more data-driven might be conducting a data audit. Companies could review frameworks like the one from CDP to prioritize improvements in data quality and visibility. 

Another step could be partnering with software providers like Cozero, which helps companies map supply chains, gather granular emissions data, and automate emissions calculations. This is the approach of companies like Hübner, DMG MORI, and Hapag-Lloyd who are using Cozero’s Climate Action Platform for emissions management.

Once companies establish solid data systems, continuous improvement will help enterprises become increasingly data-driven.

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Solution 2: Incentivize the supplier ecosystem 

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To solve the supplier engagement investment issue, companies need to get creative with finding ways to incentivize their supplier ecosystem. 

This initiative can take multiple forms, for example setting minimum sustainability standards, rewarding transparency, and providing supplier training to help alleviate the compliance burden.

Microsoft, for example, requires suppliers to disclose emissions data across all three scopes and to reduce emissions by 55% compared to a 2019 baseline.

Offering better contract terms for suppliers with science-based targets and using status and recognition to fuel healthy competition can also be a valid solution. Walmart’s Project Gigaton™, for instance, provides recognition to suppliers that meet certain emissions reporting requirements. 

Finally, companies can help alleviate the burden by offering custom training resources or using existing programs like CDP’s Supply Chain Program and EcoVadis Academy. 

While enterprises will still need to invest in supplier engagement, they can use creative incentives to lower costs and keep moving the needle on data collection.

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Solution 3: Use sustainability strategy as a catalyst to solve many challenges at once

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The final solution requires embedding sustainability into the broader business strategy, as innovators like Mewa are doing. 

Mewa’s decision to use electric cargo bikes for textile deliveries didn’t just help reduce emissions. It also addressed a major personnel challenge, since cargo bike drivers don’t need a driver’s license and Mewa could therefore tap into a larger pool of workers.

Benjamin Federmann shares that when looking at Mewa’s City-Hubs project, many people get excited by the electric vans and cargo bikes. “But what they don’t see is the structure behind it,” he says, pointing out the updated routes, staffing strategy, and worker engagement. “Everything changed!” he says. 

For companies willing to take a more holistic approach, sustainability can become a lens through which they solve multiple problems for the enterprise, not just environmental ones.

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Turning Scope 3 challenges into opportunities with Cozero

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With increasing pressure from investors, regulators, and customers, Scope 3 emissions data is no longer a “nice-to-have” but a priority for sustainability teams. 

While solving the Scope 3 data dilemma is no easy task, companies can begin to overcome it by adopting a data-driven approach, finding creative ways to incentivize suppliers, and integrating sustainability into their core business strategies. 

Solutions like Cozero’s end-to-end carbon management platform can help by providing tools to engage with suppliers, act on emissions data, and continuously improve. With the right mindset, technology, and people, scope 3 blockers can become a stepping stone for transformation. 

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References:

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