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In the fight against climate change, companies can achieve some of the largest decarbonization wins by targeting their value chains. Value chain emissions come from activities that add “value” to a company’s products -- activities which a company may influence but (importantly) does not directly control. These emissions, spanning activities from business travel to employee commuting, waste generation, and purchases along a company’s supply chain, are collectively referred to as Scope 3 emissions and on average constitute 90% of a company’s total greenhouse gas emissions. 

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Tackling your company’s Scope 3 emissions is no small feat: these emissions are spread across many separate entities over which you have no decision-making authority. Yet, tackling your company’s Scope 3 emissions is a keystone of reaching Net Zero and staying prepared for ever-expanding climate regulations. 

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One tested lever for decarbonizing Scope 3 emissions is encouraging suppliers and other value chain partners to procure renewable energy. By motivating organizations across your business ecosystem to manage their own Scope 2 emissions down to zero, companies can align climate goals and achieve measurable progress in Scope 3 decarbonization. Many sustainability leaders are pulling this lever: among RE100 participants (the leading global corporate renewable energy procurement initiative), as early as 2019 over 44% of signatories were engaging their suppliers in purchasing renewable electricity. 

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To help your company deploy this strategy, we’ve published this practical guide for engaging your value chain in a renewable energy program. Many suppliers (particularly small-to-mid-sized businesses) lack the resources and expertise to procure high-quality renewable energy, and the following guide outlines recommendations for building a right-sized Scope 3 renewable energy program based on leading regulatory and industry guidance. 

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As a primer, we’ve broadly summarized our downloadable guide. If you’d like to discuss these topics at greater length to understand how renewable energy procurement can be leveraged to meet your organization’s climate ambitions, feel free to reach out to our team.

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Fill out the form below to receive the full eBook straight to your inbox.

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Why Scope 3 Emissions Matter

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Scope 3 emissions are the indirect greenhouse gases that result from a company’s value chain activities, such as the production of purchased goods, supplier operations, and customer use of products. Unlike emissions from a company’s direct operations (Scope 1) or purchased energy (Scope 2), Scope 3 is harder to measure and manage, making it a common blind spot in sustainability strategies.

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Yet, failing to address Scope 3 emissions isn’t an option. Global climate target-setting standards like the Science Based Targets Initiative (SBTI) and regulations such as California SB 219 now require companies to include Scope 3 in their climate disclosures and reduction plans. Without addressing these emissions, businesses leave themselves vulnerable to regulatory penalties, reputational damage, and escalating physical risk from climate hazards. 

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Still, only 37% of major global companies have Net Zero plans encompassing Scope 3 emissions, indicating the challenges many face in committing to transform activities outside their direct control. Fortunately, there are strategies for meaningful value chain engagement, and leading organizations have shown hopeful pathways forward by operationalizing inventive programs, like renewable energy campaigns in their value chains.  

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A Path Forward: Renewable Electricity

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A practical starting point for value chain decarbonization is renewable electricity. Companies can engage their suppliers and other value chain partners to source renewable energy, which reduces their partners’ Scope 2 emissions and, in turn, their company’s Scope 3 emissions.

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Some industry leaders, like IKEA, Microsoft, Apple, and ZF are already taking bold steps by requiring some or all suppliers to use 100% renewable electricity. 

Here’s why renewable energy is such a powerful lever:

• For Suppliers: Purchasing renewable energy is a proven way to cut Scope 2 emissions, immediately helping suppliers meet climate goals.
• For Corporate Buyers: when suppliers to corporate buyers reduce their Scope 2 emissions, those corporate buyers see their Scope 3 emissions decrease, getting closer to their own Net Zero goals. (See our full guide for guidance on proper standards-aligned emissions accounting.) 

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The key components of a supply chain renewable energy program include:

• Setting ambitious targets informed by a Scope 3 emissions screening (e.g., identify which suppliers comprise 80% of supply chain electricity usage, per Greenhouse Gas Protocol Supplier Engagement Guidance)
• Establishing a supplier engagement plan that prioritizes supplier outreach in tranches, beginning with high-capacity suppliers (as first-movers to set an example) in geographies where renewable energy options exist
• Exploring procurement tools, including:some text
  • Energy supplier partnerships
  • Renewable energy procurement software, e.g., Green Project’s Decarbonization Platform - more on procurement types in the next section
• Conducting internal Procurement staff training or presenting awards to upskill staff directly engaged in supplier relationships and reinforce your program
• Setting clear guidance and requirements, e.g., IKEA’s Supplier Code of Conduct
• Supporting value chain partner capacity-building, e.g., workshops/webinars, peer education, regional policies,and regular updates.
• Creating enforcement or incentive mechanisms, e.g., financial resources, public recognition, preferred supplier status, fines, and/or preferential sourcing decisions. 
• Implementing Inventory Management Plan updates to explicitly define accounting and quality assurance procedures
• Collaborating with peer organizations to drive collective industry improvement, e.g., Supplier LOCT
• Publishing public progress updates to share lessons and learnings with your customers

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See these steps in action by downloading our in-depth guide below. 

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How Renewable Electricity Reduces Scope 3 Emissions

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Renewable electricity procurement comes in various forms, such as:

• On-site generation (e.g., solar panels)
• Power Purchase Agreements (PPAs), or contracts for physical power and associated Energy Attribute Certificates (EACs, such as Renewable Energy Certificates [RECs]) enacted directly with energy producers
• Virtual or Financial PPAs, a variation on the above that excludes physical power delivery
• Green tariffs from utilities
• Unbundled Energy Attribute Certificates (EACs), like RECs in North America

Unfortunately, the highest quality (i.e. most additional, traceable, and local) procurement types are operationally impossible for many companies. For example, tenants in leased spaces cannot install on-site renewables or directly transform their energy source in an unowned space. PPAs and vPPAs are not available to smaller energy consumers given high contracting costs and complexity. 

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As such, most companies must rely on green tariffs or procurement of unbundled EACs (tradable financial instruments representing 1 MWh of renewable electricity generation). Green tariffs require specific engagement on a utility provider-by-provider basis (which could number in the dozens or hundreds based on a company’s site count, not to mention the unavailability of green tariff products from many utilities). Purchasing unbundled EACs can be a more accessible mechanism to source renewable electricity for globally dispersed operations, and particularly for companies with constrained resources and limited control over their electricity supply.

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When suppliers use EACs to make renewable electricity claims, they should adhere to key quality criteria required by GHG Scope 2 Standard and RE100, considering market- and vintage-matching of EACs to their usage, documentation of EAC retirement, and third-party EAC certifications (e.g., Green-e). Further, corporate buyers should look for such evidence of quality before incorporating their suppliers’ data in their Scope 3 GHG inventories.

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Green Project’s Decarbonization Platform: A Helping Hand

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Green Project’s Decarbonization Platform brings accessibility, education, and scale to the pursuit of value chain decarbonization by enabling businesses to: 

• Launch renewable energy campaigns tailored to corporate goals
• Simplify EAC purchases for suppliers, even in the small MWh quantities typically unsupported by traditional marketplaces, with instant trading of pre-screened RE100-eligible products
• Track and certify supplier progress in real-time
• Immediately reflect suppliers’ renewable energy procurement in suppliers’ market-based Scope 2 and corporate buyers’ Scope 3 GHG inventories

Suppliers can also easily access the full breadth of digital tools in the Green Project suite, from carbon accounting and ESG reporting features to science-based target-setting advisory services, creating a win-win for all parties involved.

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Decarbonizing value chains isn’t just about meeting regulations — it’s about creating long-term value, mitigating climate risks, and unlocking a more sustainable future. By leveraging renewable energy and fostering collaboration with suppliers, companies can make significant progress in reducing Scope 3 emissions.

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To take a deeper look at the concepts discussed in this brief, download our in-depth guide on renewable energy for Scope 3 decarbonization below. 

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Download our in-depth guide

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