The recent update to the guidelines into how chemical companies can lower their Scope 3 carbon emissions has got many in the industry asking questions.

Scope 3 emissions are the total of all carbon released into the atmosphere from a business’s upstream and downstream activities. While the very nature of these emissions means that they are out of the company’s direct control, it was hoped that by establishing standards in these areas that chemical companies and their suppliers and customers, would recognize their importance and act accordingly to meet the targets.

However, for now the targets largely remain a hope more than a standard to adhere to, as recent research into specific parts of the Scope 3 range shows that only 15% of all businesses have made a public commitment to reducing carbon emissions in their supply chains.

The news comes from research conducted through CDP (an environmental non-profit organisation) in collaboration with Boston Consulting Group (BCG). The study analyzed the responses of more than 23,000 companies finding that 85% of those businesses have no commitment to cut scope 3 emissions. This is despite the fact that for an average-sized company, supply chain emissions are typically twenty-six times higher than the emissions generated in operations.

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This is even more surprising given the potential financial damage that a chemical company could receive for not meeting targets. As the report states, “Without quality data or a top-level imperative, most businesses (79%) are not assessing supply chain risks relating to the low-carbon transition. These could include increased carbon taxes, reporting non-compliance fines and stranded assets.” Adding that, “Only half of corporates disclosing through CDP evaluate the financial risks from upstream emissions; however, of those that do, a third acknowledge the risk to profit.”

For chemical companies who have not yet committed to reducing (or even quantifying) their scope 3 emissions the report outlines three steps for beginning the process.

1.      Ensure that top management and board members are aware of the issue of climate change, what is at stake for both the company and the planet, and what we as citizens and employees can do to reduce environmental damage.

2.       Address climate-related issues and targets with raw material suppliers. Begin with high-level talks before progressing to disclosures, risk assessments, and management.

3.       Set an internal carbon price.

According to the report’s authors, chemical companies which follow these steps are seven, five, and four times more likely (respectively) to set a supply chain emissions target – the first part of meeting Scope 3 goals.

“The responsibilities and incentives to act on Scope 3 emissions for corporates and investors converge on risk management,” explains Diana Dimitrova, a managing director and partner at BCG who co-authored the report. “Their oversight bodies must push for risk quantification and management.”

This advice supports that already given by the Together for Sustainability group – an industrial body of companies representing more than $800 billion of annual turnover with chemical industry members including Henkel, Dow, AkzoNobel, Solvay, Syngenta, UPM, and Symrise. Working collaboratively, the group has issued Product Carbon Footprint (PCF) Guidelines which outline ways that chemical companies can achieve Scope 3 emissions targets. Meeting these goals would be a significant achievement, as “it accounts for an estimated 77% of the sector’s overall greenhouse gas emissions footprint.”

A key update to the guidelines has been ensuring their coordination with other bodies, such as the World Business Council for Sustainable Development’s Partnership for Carbon Transparency (PACT) and Catena-X.

“Aligning the Guideline with international frameworks ensures that chemical companies can seamlessly integrate it into their global operations,” explains Dr Peter Saling, a co-chair at the Together for Sustainability’s Guideline Work Package. Adding that, “These changes will make it easier for corporations and their suppliers to generate and report reliable carbon footprint data, enabling more effective emission reduction efforts across supply chains.”

Whatever one’s opinion may be about humankind’s impact on climate change, the political will to enforce change is strong, resulting in significant compliance and data reporting responsibilities for companies of all sizes.

For example, the EU’s Corporate Sustainability Reporting Directive (CSRD) is expected to include more than 50,000 businesses across the continent, as well as major importers to Europe. While the legislation is likely to begin with ensuring only data collection and reporting, the financial penalties for non-compliance will set the tone for how the chemical industry will transition to NetZero and circularity.

To effectively reduce emissions, the process must start with comprehensive data collection, enabling companies to measure and understand their environmental impact. Collaboration with raw material suppliers and transparent reporting will also be vital in achieving these goals; goals that will ensure a sustainable future for both the chemical industry and the planet.

Either that or it will drown the chemical industry in paperwork.

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