Despite their significance, a sobering 50% of companies surveyed by SBTi in 2023 reported being “off track” in meeting their Scope 3 targets. Scope 3 is the most significant barrier faced by companies surveyed by SBTi in setting Net Zero targets:

Regulatory landscape: Scope 3 emissions and renewable energy transition

Regulatory pressure on Scope 3 emissions is less stringent compared to Scope 1 and 2, though it's gaining momentum. Earlier this year, the SBTi proposed allowing carbon offsets for up to 50% of a company's Scope 3 emissions. However, they recently clarified that no changes have been made, emphasising their strict approach to Scope 3 and the careful evaluation of any future use of carbon credits. Meanwhile, the EU is tightening carbon pricing policies, with terms like 'climate neutral' or 'climate positive' that rely on offsetting to be banned by 2026, marking a shift away from carbon offsets in corporate environmental claims.

We at Renewabl are seeing more regulatory pressure to disclose Scope 3 emissions and a growing emphasis on traceable, time-stamped renewable energy certificates. The EU’s Renewable Energy Directive (RED III) supports granular renewable energy certificates – GOs in Europe and REGOs in the UK. This granularity ensures that a corporate's energy use aligns closely with renewable energy generation, making your sustainability efforts more transparent and credible.

“Switching to renewable energy is not just about ticking a box. It's about making a real, measurable difference.” – Gabriel Umana at Renewabl

How renewable energy sourcing influences Scope 3 emissions

Opting for clean energy sources can lower the carbon footprint of supply chains, significantly reducing Scope 3 emissions. Here’s some compelling evidence to back this up:

• Supply chains collectively contribute about 60% of global emissions, with significant energy-related emissions. Switching to renewables for upstream suppliers can cut these emissions drastically. (Clearing the Hurdle: Scope 3 Emissions by Accenture, 2023)
  
• Companies can cut Scope 3 emissions by up to 20% by integrating renewable energy, particularly in energy-intensive supply chains. (Value Chain Report by SBTi, 2021)
  
• Renewable electricity plays a crucial role in reducing corporate GHG emissions, particularly in purchased goods and services, thereby decreasing the carbon footprint associated with manufacturing and energy-intensive processes. (Renewable Energy in Corporate Greenhouse Gas Emissions Inventory by EPA)
  
• By 2025, renewables are set to become the largest source of electricity, surpassing coal. This shift is crucial for lowering the carbon intensity of electricity used in supply chains, thus reducing Scope 3 emissions. (IEA, 2023)

The complexity of Scope 3 emissions stems from the need for detailed supply chain data, which remains a challenge. Today, only 6% of emissions factors are based on specific data provided by suppliers, with most relying on activity-based or spend-based methods.

Effective energy procurement decisions can have a big impact here, especially upstream in your value chain — everything related to producing your product. Let’s break down how smart energy procurement can help companies tackle Scope 3 emissions.

1. Mitigating Scope 3 emissions with renewable Energy Attribute Certificates (EACs / GOs / REGOs)

Renewable EACs, also known as RECs and GOs, offer flexible support for renewable energy generation without long-term contracts, making them accessible to companies of all sizes without stringent financial requirements.

To effectively reduce Scope 3 emissions with renewable energy certificates, start by collaborating with suppliers to gather their operational data, especially production schedules aligned with your orders. Some tactics and examples for supply chain engagement are detailed further in this article.

Once you have supplier energy consumption patterns, procure GOs / REGOs accordingly, allocating certificates to suppliers based on local regulations and operational needs. Platforms like Renewabl simplify this process in the UK and Europe, ensuring certified transparency throughout the supply chain.

Strategically influencing suppliers' production schedules can further optimise GOs / REGOs costs and enhance overall production efficiency.

Let’s explore an example of a business case.

Business case

The head Company X (Anchor buyer) collaborates with three key suppliers across France and Italy to mitigate Scope 3 emissions effectively.

Supplier data collection

1. Supplier A (France):
   • Production: Primarily in morning hours.
   • GOs: 400 MWh from wind, supplemented by solar.
     
2. Supplier B (France):
   • Production: Varied hours, requiring diverse energy sources.
   • GOs: 200 MWh of wind and solar mix.
     
3. Supplier C (Italy):
   • Production: Daylight hours.
   • GOs: 600 MWh from solar and hydro.
     

Renewable energy procurement

The Anchor buyer procures GOs and allocates them based on the unique production pattern of each supplier. Renewabl’s platform helps buyers visualise temporal-matched GOs of their suppliers for transparency. Alternatively, suppliers buy direct and tag GOs to the Anchor buyer.

Verification and reporting

Verification is conducted through Powernext in France and GSE in Italy to ensure the accuracy of energy consumption and corresponding GOs. The Anchor buyer consolidates all reports, ensuring that 1,200 MWh of GOs cover CO2 emissions reductions.

Benefits of using renewable EACs (GOs / REGOs) to mitigate Scope 3 emissions

• Simplify transactions without needing long-term contracts like Power Purchase Agreements (PPAs), ideal for those without extensive credit history or financial commitments.
• Aggregate volumes more easily compared to PPAs.
• Adapt procurement strategies flexibly to regulatory, market, and consumption changes.

“This flexibility is particularly valuable for managing fluctuations in energy demand across a supply chain.” – EPA, 2022

• Make a tangible positive impact by supporting renewable energy growth, including wind, solar, and hydroelectric power.
• Procure time- and location-stamped certificates using advanced ledger technology for transparent verification.
• Complement existing PPAs by filling gaps in renewable energy sourcing, ensuring a balanced portfolio and ongoing support for green energy projects.
• Eliminate the risks of greenwashing compared to carbon offsets.

The downside may include renewable EACs price volatility (manageable with Renewabl’s transparent pricing and forward curves), the challenge of obtaining detailed data in supply chains, and higher costs compared to carbon offsets.

2. Diversified energy sources to mitigate Scope 3 emissions

Long-term impact with Power Purchase Agreements (PPAs)

Anchor tenant model: Large companies acting as anchor tenants can diversify energy mixes and stabilise costs, facilitating smaller businesses' participation in PPAs (World Economic Forum, 2023).

Suppliers can overcome challenges with long-term commitments and financial risks by joining aggregated PPAs. Schneider Electric’s analysis shows that aggregated PPAs can help SMEs secure renewable energy and reduce their Scope 3 emissions by working collectively. Walmart’s Project Gigaton has similarly leveraged aggregated PPAs to significantly cut emissions from its supply chain, achieving a reduction of 574 million metric tonnes by 2022.

On-site renewable energy generation

Installing solar panels or wind turbines onsite reduces reliance on external energy sources, directly lowering Scope 1 and Scope 3 emissions. Examples: Apple’s investment in onsite solar installations exemplifies this strategy, reducing emissions from purchased electricity (McKinsey, 2023), and Unilever’s integration of onsite renewable projects and supplier encouragement further enhances Scope 3 emission reductions (World Economic Forum, 2023).

Technological advancements: Utilising technologies such as battery storage and microgrids enhances onsite renewable system efficiency and reliability.

Hybrid energy procurement models

Combining different procurement strategies ensures a balanced and reliable energy supply, reducing dependence on a single source and enhancing energy security.

“Companies should evaluate the carbon footprint and cost implications of each energy source to optimise their energy mix.” – Deloitte, 2023

3. Leveraging technology and data analytics

• Carbon accounting software can facilitate accurate data collection, analysis, and reporting. Renewabl Track is tailored for energy data, enabling easy visualisation of consumption patterns and consolidation of multiple sites into a single profile.
• Smart meters: While not yet universally adopted, smart meters and APIs represent the most reliable sources for real-time consumption and energy generation data.
• Blockchain: Distributed ledger technology helps track the origin of renewable energy and ensure that the claims of green energy use are credible and verifiable.
• AI and machine learning can predict and optimise emissions reduction strategies, making them more effective and efficient.

4. Engaging suppliers

According for the World Economic Forum, only 16% of organisations could share details on their supply chain engagement strategy in 2023. Obtaining supply chain data is one of the key challenges in mitigating Scope 3 emissions. Below are some tactics and examples of successful collaborations with suppliers to promote renewable energy adoption.

Supplier scorecards: Implementing scorecards with criteria like emissions reporting, reduction targets, and renewable energy usage encourages sustainable practices.

Collaborative supplier programs: Co-developing strategies for Scope 3 emissions reduction is another great move. Collaborative programmes with suppliers, like Toyota's emissions reduction initiative, involve joint sustainability goals and best practice sharing. Unilever is also focused on collaborating with suppliers to promote the adoption of renewables within its supply chain. They utilise a combination of RECs and on-site renewable installations.

Incentivising renewable energy use: Providing financial incentives for suppliers to adopt renewable energy sources accelerates decarbonisation efforts. For instance, semiconductor companies support their suppliers in switching to lower-carbon materials and renewable energy sources (McKinsey, 2023).

Benchmarking and continuous improvement: Benchmarking against industry standards identifies improvement areas in sustainability performance (Deloitte, 2023).

Integrating sustainability metrics: Including sustainability metrics in supplier evaluations ensures accountability for environmental impact. Metrics such as carbon footprint reduction, sustainable packaging, and energy efficiency should be part of the standard procurement criteria (Oboloo, 2023).

Real-time data access and transparency: Maintaining real-time access to data and ensuring transparency across the supply chain are vital. (Energy Magazine, 2023).

5. Collective action and industry collaboration

Last but not least, participating in industry groups like the SBTi and the Climate Group’s RE100 fosters the development and adoption of standardised approaches to emissions reduction.

Reducing Scope 3 emissions through strategic energy procurement is key for corporate sustainability. Understanding these emissions and using innovative procurement strategies can significantly lower carbon footprints.

“Engaging suppliers and leveraging advanced technologies can help corporates enhance these efforts and prepare for the legislation coming up in the following years."
_{‍Gabriel Umana, Head of Commercial @ Renewabl}

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