Effective Planning for ESG Program Success

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Scope 3

Authors: Mamatha Venkatesh, Georgina Macrae 

Scope 3 emissions take up more than 70% of a business’ total carbon emissions on average.
The GHG protocol corporate standard divides scope 3 emissions into upstream and downstream emissions and then classifies them into 15 distinct categories. These categories rely on getting the right data from suppliers and other parts of the value chain. Disclosing Scope 3 emissions is thereby very complicated. The time to start disclosing Scope 3 emissions is now. 

Scope 3 reporting is becoming mandatory across the world.

Steps to start, and to improve, your scope 3 reporting.

·       Start by complying to scope 3 reporting requirements.

·       Use data of what you spend across your value chain and apply emission factors to it to baseline the scope 3 emissions.

·       Your Purchased Goods and Services are likely to be the biggest portion of your scope 3 emissions.

This ‘Scope 3 Category 1’ may include emissions from hundreds or thousands of suppliers, and where the money is spent likely varies month by month.

The straightforward way of starting to baseline your scope 3 emissions is to find your Enterprise Resource Planning (ERP) system and apply emission factors row-by-row. Emission factors exist that suggest emissions for spend-data. Of these, the Eora global supply chain database is well recognized. 

IBM Envizi uses these emission factors to help businesses to automatically categorize their spend-data, from ERP system data.  Envizi uses emission factors from US EPA Climate Leaders Program, e-GRID USA, Intergovernmental Panel on Climate Change (IPCC), IEA National Electricity Factors, Australian National Greenhouse Accounts, DEFRA (UK), and NZ Ministry for the Environment. Yes, it is indeed tedious.

 Let’s consider a scenario here:

This is a ‘spend-based’ calculation: your system says you spent £850 on paper cups in January 2024, you find the relevant emission factor that says, “for every $1 spent on paper cups, associate x kg of CO2 equivalent” and you multiply the two to baseline your company’s carbon from those cups. The reality of this is that someone filters emission factors row by row through spreadsheets. The spreadsheet will vary month by month, so it could be 1000s of rows of manual processing. This could take days every month and involves human error.

Using IBM Envizi, this painstaking manual process can be avoided and replaced with automation. Envizi uses Natural Language Processing (NLP) to automatically categorize and apply the most appropriate Eora66 emission factors scope 1, Purchased Goods and Services data from ERP systems. NLP is particularly useful for scope 3 spend-based emission calculations because of their scale, and their variability.

This time-saver gives sustainability managers time and space to focus on getting the relevant data for average or other proxy methods of scope 3 calculations, and then getting supplier-specific or site-specific values from those biggest suppliers, to optimize your value chain emissions.

Using Envizi to help to automate your scope 3 base-lining highlights those purchased goods and services which have a higher carbon impact.

This allows the user to focus on getting more accurate data for those areas of spending, or to choose alternatives such as providing ceramic mugs, or washing areas for reusable cups, in offices to reduce the numbers of paper cups that are purchased.

IBM Envizi supports over 100,000 emission factors across scopes 1, 2 and 3 for our clients, to simplify these calculations and to provide better trust and accuracy in sustainability data.

IBM has guidance on how to get started with some of these regulatory standards: Checkout these links for more information on ESG frameworks from IBM .

You can find more details on GRI, SEC, CSRD, ESRS, CDP, BRSR, SASB, SECR, GRESB, TCFD, NGER. 

Refer: ESG reporting framework with IBM Envizi

Ask an IBMer for more information and try Envizi for yourself!

Authors: Mamatha Venkatesh, Georgina Macrae 

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Georgina Macrae

As the world becomes more conscious of environmental and social issues, organisations are facing increased pressure and scrutiny to deliver on sustainability targets such as Net Zero. To achieve these goals, effective planning is crucial. This article will explore the key elements of ESG program planning and how it can help organizations link ESG performance measures to financial performance, optimise procurement decisions, and track program performance.

Materiality & Economic Value Assessment

When planning an ESG program, it is important to conduct a materiality assessment to identify the most significant environmental, social, and governance issues that are relevant to the organization. This assessment helps prioritise actions and allocate resources effectively. Additionally, conducting an economic value assessment can help organizations understand the financial implications of their ESG initiatives. By linking ESG performance measures to financial performance, organizations can demonstrate the economic value of sustainability efforts to stakeholders.

Simulations and Advanced Analytics

Simulations and advanced analytics play a crucial role in ESG program planning. By using predictive analytics, organisations can simulate different scenarios and assess the potential impact of their sustainability initiatives. This allows them to make informed decisions and prioritize actions that will have the greatest positive impact. Advanced analytics can also help organisations identify trends, patterns, and opportunities for improvement in their ESG performance.

ESG Program Performance Tracking

Tracking the performance of an ESG program is essential to ensure that sustainability goals are being met. By establishing key performance indicators (KPIs) and regularly monitoring progress, organisations can identify areas for improvement and make necessary adjustments to their strategies. This tracking also enables organizations to report transparently on their ESG performance to stakeholders, enhancing their credibility and reputation.

Procurement Decision Optimisation

ESG considerations should be integrated into procurement decisions to ensure that suppliers align with the organisation's sustainability goals. By optimising procurement decisions based on ESG criteria, organisations can support the development of a sustainable supply chain. This includes evaluating suppliers' environmental practices, labor standards, and governance policies. By selecting suppliers with strong ESG performance, organisations can reduce their environmental footprint.

In conclusion, effective planning is key part of achieving sustainability targets such as Net Zero. ESG program planning, including materiality and economic value assessment, simulations and advanced analytics, program performance tracking, and procurement decision optimization, is essential for organisations to successfully link ESG performance measures to financial performance. By implementing these planning strategies, organizations can navigate the complexities of sustainability and make informed decisions that contribute to a more sustainable future.

Please reach out if this is an area of interest.