Tackling Scope 3: Supplier engagement, technology and building a process that works

Addressing scope 3 emissions has become a crucial aspect of sustainability efforts worldwide. When assessed, these emissions can be many times larger than an organisations direct emission, making them essential to address to achieve meaningful emissions reduction.

One of the key factors in effectively reducing scope 3 emissions is engaging with suppliers. Suppliers play a vital role in the value chain and can have a substantial impact on a company's carbon footprint. Close collaboration and engagement with suppliers have become crucial for effective and accurate data gathering and reporting. Without the buy-in from the supply chain, carbon reports can become reliant on “best guesses”. Incomplete Scope 3 reporting can also leave organisations open to greenwashing accusations if gaps are perceived to be intentional or misleading.

This is a challenge common to any business of significant size in New Zealand. Organisations may feel tremors coming on at the idea of scope 3 reporting; especially if they are affected by recent legislation changes. Climate reporting entities need to assess their full Scope 3, not just choose what items may be convenient.

“Some is better than none” is no longer enough. Demands and pressures are growing. How can your business meet this challenge and ensure accurate, audit-ready scope 3 data?

In a recent SBC webinar, Dan Tomlinson, Head of Market and Partnerships at ESP and Matiu Park, Head of Sustainability at Transpower, revealed how a collaboration between process and technology created a faster, better, more accurate way for one of the country’s largest utility companies to engage with suppliers and master their scope 3 reporting.

Watch it below, or read on for a written summary.


About Transpower and its sustainability journey

Transpower owns and operates the national grid in New Zealand, providing the transmission linkage between electricity generation sites and the local utility networks. As a key player in New Zealand's energy sector, Transpower plays a pivotal role in the nation's transition to a highly electrified economy. Transpower has long been committed to sustainability, recognizing the crucial role they play in New Zealand's decarbonisation efforts.

While Transpower has taken steps to address their direct emissions, they also recognise the need to measure, manage, report and reduce their scope 3 emissions.

The challenge then for Transpower, like many large businesses, has been how to measure, manage, report, and ultimately mitigate, their scope 3 emissions efficiently and effectively. No small order for a business with an enormous number of suppliers.

However, with the right tactics, technology and strategy, Transpower has been able to master their scope 3 reporting with a streamlined, efficient and cost-effective process. Let’s see how they did it.


Challenge 1: Streamlining data collection and analysis

The first challenge that Transpower faced is a familiar one for large businesses: the issue of scale.

As a business with hundreds of staff and thousands of individual assets, including substations, towers and high voltage lines, the scale of operations for Transpower made any carbon accounting process time-consuming and challenging. Beyond reporting, Transpower has set strong emissions reduction targets. In order to achieve they also needed to collect and managed data with sufficient granularity to enable deeper analysis - which further compounded the challenge.

In the early stages of their carbon reporting journey, Transpower relied on manual processes and the assistance of consultants to report their greenhouse gases; a process that was in place since 2006. However, with the increasing expectations, requirements and demands around depth and breadth of carbon data, this system eventually became arduous and time-consuming.

Integrating software and automation to handle substantial data from numerous sources

To overcome the challenges of manual processes and streamline their data management, Transpower recognized the need for software and automation. They made a strategic decision to invest in the BraveGen carbon accounting platform to automate their inventory management.

By integrating software and automation into their data collection and analysis processes, Transpower has been able to handle the substantial amount of data from various sources more efficiently. This includes data from both internal operations and external suppliers. Automation not only saves time but also reduces the risk of human error, ensuring high-quality and reliable data for accurate emissions reporting.

This integration has enabled them to harness the power of automation, ultimately leading to improved data accuracy, enhanced reporting capabilities, and more effective emissions reduction strategies.

Shifting to actual emissions measurement rather than estimated

Not only must data gathering be faster, it must also be more accurate at a foundational level. As they sought external assurance, Transpower decided that they could not longer rely on just estimated emissions for scope 3 carbon.

Transpower made a conscious shift towards obtaining actual emissions data from their suppliers, rather than relying on estimates. The ability to compare estimated and actual emissions data is of utmost significance, particularly when it comes to companies with complex operations. This comparison not only enhances the accuracy of their carbon accounting but also provides actionable insights for targeted emissions reduction strategies.


Challenge 2: Engaging with suppliers

Effective supplier engagement is crucial for scope 3 data gathering but is often hamstringed by the supplier themselves lacking a robust carbon reporting process for their emissions. Combined with the aforementioned scale of Transpower’s supply chain, this presented a significant challenge for the business.

Focusing on most influential partners

Supplier engagement was an elephant which had to be eaten a single bite at a time. Transpower chose first to engage with their largest suppliers, as covering these influential partners would address the most significant scope 3 sources. Initial estimates determined that up to 50% of Transpower’s scope 3 emissions were sourced from their top 10 suppliers.

By working within these long-term, well-established partnerships, so collaboration could be massaged through existing relationships. These suppliers were also typically the most well-resourced and would be the most likely to a) see the benefit in engaging with the reporting process and b) have the resource to do so effectively.

As a result of this process, Transpower worked with its top 10 suppliers and was able to create a standardised, simplified process that could be rolled out to smaller suppliers over time. One key result of this was the development of a “shared language” among multiple suppliers. This way, the data could be provided in a consistent format.

However, Transpower still relied on software to map data sources, streamline data flows, and ensure auditability for data in a diverse array of formats. The right tools were crucial, even with supplier buy-in.

Introducing Sustainability Clauses in Contracts to Encourage Data Sharing

In the interests of encouraging supplier engagement as well as creating a broad shared expectation across the entirety of their supply chain, Transpower has taken proactive measures in supplier contracts. Suppliers have sustainability clauses built into their contracts with Transpower, which outline their requirements in detail, as well as Transpower’s expectations.

These sustainability clauses serve as a catalyst for enhanced collaboration and data sharing between Transpower and their suppliers. Through these contractual provisions, Transpower encourages suppliers to align their sustainability efforts with Transpower's goals, fostering a collective commitment to reducing carbon footprints throughout the supply chain.

Extending supplier contracts so they could Invest in sustainability.

If sustainability clauses in contracts were the stick, then contract extensions where the carrot. Transpower recognise suppliers we need to invest in the appropriate systems and processes in order to meet these new reporting requirements. These sustainability clauses also extended existing cost performance KPIs with new sustainability and emissions improvement expectations.

Understanding these increasing expectations on suppliers, Transpower offered suppliers longer term contracts. This added incentive provided suppliers with needed certainty offset the new obligations. It also enabled them to think more strategically about how they would invest in their own emissions reporting and ultimately emissions reduction programmes.

In summary, to engage with suppliers, Transpower has used a combination of:

  1. targeting specific suppliers to tackle their largest scope 3 emissions sources,
  2. creating a shared language and simplified supplier carbon reporting process,
  3. clearly stating expectations around data provision directly in supplier contracts.
  4. striving for a balance between increasing expectations and incentives


Challenge 3: Collaborating internally

Scope 3 may be defined by emissions from outside of a business’ direct control, but successful scope 3 management still requires strong internal alignment among different teams within an organization.

Too often, ambitious and well-meaning sustainability projects are stymied by a lack of shared vision, focus or engagement internally. Projects like these are doomed to fizzle out, and with scope 3 reporting being so complex and often challenging, internal collaboration is crucial.

For Transpower, collaboration and coordination between the legal and procurement teams was key to the success of engaging with their suppliers effectively.

Legal teams play a vital role in establishing sustainability clauses in contracts, enabling the collection and sharing of emissions data from suppliers. They help create contractual obligations and compliance requirements that clearly lay out expectations for suppliers.

Procurement teams possess the ‘procurement muscle’ necessary to influence suppliers and drive the collection and sharing of emissions data. While the contract dictates expectations, the procurement teams are the ones that support the suppliers to deliver on those expectations.

By creating a cross-functional vision and process between these teams – and many others – Transpower was able to successfully state the needs around and provide support for supplier carbon reporting.

The role of sustainability KPIs and aligning expectations with financial performance

Transpower recognised that sustainability goals cannot exist in isolation. By integrating sustainability expectations into financial performance metrics, Transpower created a unified vision where financial success and environmental responsibility go hand in hand.

This alignment ensures that sustainability becomes an integral part of the company's overall strategic objectives, and drives accountability, a culture of sustainability, and ensures that emission reduction efforts and baked into the everyday operations of the business.

By aligning sustainability KPIs with financial performance metrics, Transpower drives accountability, fosters a culture of sustainability, and ensures that emission reduction efforts are tracked and reported effectively.


Challenge 4: Investing in the right technology

Scope 3 reporting on the scale that Transpower required necessitated investment into dedicated carbon accounting software. While many businesses, including Transpower suppliers, used spreadsheet software, this type of programme was not fit for purpose and would inevitably become bloated, slow, and possible inaccurate.

To meet their reporting requirements, Transpower required technology that could scale with their needs, offer advanced, audit-ready data management, and automation that would relieve the struggle that would come with manual data entry from hundreds of different suppliers and thousands of different emissions sources – not just scope 3, but for direct emissions as well.

Utilising Software to Map Data Sources, Streamline Flows, and Ensure Auditability

While scope 3 emissions are likely the most complex sources for any business, carbon reporting at scale for scope 1 and 2 still requires technology solutions that can keep up.

For Transpower, their adoption of BraveGen CSR software was instrumental in their ability to map out individual data sources across their vast network of direct assets, including substations, towers, high voltage lines, and so on. By streamlining these data flows, Transpower was able to gain comprehensive visibility into their emissions profile across all scopes.

Moreover, this decision prepared them well for audit, as it provided a transparent and traceable system for managing all greenhouse gas emissions data from a single platform. Transpower can now effectively track emissions, identify areas of improvement, and demonstrate accountability in their sustainability reporting.

By leveraging ESP's software, Transpower can establish a seamless connection with their suppliers, facilitating the direct exchange of emissions data. This direct data capture eliminates manual processes, reduces the risk of errors, and ensures the availability of real-time, up-to-date information. Such a streamlined approach allows Transpower to have a comprehensive and accurate overview of their scope 3 emissions, empowering them to make informed decisions and take effective action.

How Technology Facilitates Compliance Obligations and Supplier Data Management

With the renewed focus on scope 3 reporting, Transpower invited an enormous amount of additional data – data that must be ingested, processed, managed and verified, all without also demanding additional resource.

BraveGen CSR was chosen as their solution due to its ability to collect, validate and analyse emissions data from suppliers, using automated processes that reduce the workhours previously required through manual methods.

Further, the use of a single software platform for all emissions sources ensured a standardised approach for internal and external stakeholders. Everybody saw the same data, the same analysis, and could draw the same conclusions.

In turn, this allowed Transpower to monitor supplier performance and compliance, allowing them to quickly identify areas for improvement and collaborate more effectively with the suppliers in question.


Future Outlook and Conclusion

A significant shift is taking place across all business sectors, driven by the increasing importance of sustainability and an increased need to report emissions accurately and effectively across all scopes, including scope 3.

For larger businesses with a broad range of suppliers, scope 3 reporting makes demands that take significant strategy and resource to address. Engaging with suppliers, collecting accurate, actual-use data, developing tactics for collaborating both internally and externally, and ensuring that you invest in the right technology, are just some of the most significant challenges that modern businesses face.

As a crucial part of New Zealand infrastructure, Transpower recognised the need to proactively address these challenges, developing a process that works for their team as well as their suppliers. Collaboration is at the heart of all scope 3 reporting efforts, and by combining strategy, process and technology, they have successfully developed a foundation for future reporting success.

To learn more about how ESP can help your business better meet its carbon reporting obligations with our carbon accounting suite, please get in touch with our team to book a demo.