Sustainable procurement: how can the shipping industry prepare for Scope 3 emissions reporting?

Despite the fact that, from 2025, EU companies will be required to track and report their Scope 3 emissions, there seems to be a general lack of understanding and preparedness for the huge effort this will involve. 

Bharat Nayar, Stolt Tanker’s Business Partner, Sustainability and Decarbonisation, explains the current status and a possible way forward.

A Scope 3 emission is any indirect emission of greenhouse gases (GHGs) into the air that is the result of activities related to a company’s core operations, general running costs and employee activities. These emissions can come from a variety of sources, such as the production and transportation of materials, waste disposal, employee commutes and business travel.  

Earlier this year, Stolt Tankers decided to get on the front foot with the impending Scope 3 reporting requirements. So, three years ahead of them coming into effect, its sustainability team launched a research project to gain insight into the business's Scope 3s, where they come from, how much and how best to report them when that becomes mandated.  

Overview of GHG Protocol scopes and emissions across the value chain, courtesy of the GHG Protocol's Corporate Value Chain (Scope 3) Accounting and Reporting Standard

According to the GHG Protocol, which sets the standards to measure and manage emissions, there are 15 Scope 3 categories. Stolt Tankers generates emissions in eight of them: purchased goods and services; capital goods; fuel and energy-related activities; upstream transportation and distribution; waste generated in operations; business travel; employee commuting; and downstream transportation and distribution.

“To collect our emissions data in all of these categories, we contacted our vendors and suppliers,” explains Nayar. “In each category, we focused on the vendors with whom we have the highest spend and we found that in most of the eight categories, we could not get enough – or, in some cases, any – data to obtain reasonable measurements of our emissions.  

“This was surprising, firstly because the reporting requirements are imminent and will involve a lot of work, but there is very little information available for vendors about how they can and should be starting to lay the groundwork now. And secondly, because that lack of preparedness may affect our ability to accurately track and report our own Scope 3s. 

“EU companies need to submit reports from 2025 onwards, not just collect the data from then. To be prepared, we all need to start the process today, mapping and measuring the carbon footprint of our entire supply chain. If we don’t all set the right foundations now, we will all come up against roadblocks in a year’s time.” 

But is this at least partly the case of another emissions-reduction regulation being brought into force without due consideration for what is required of companies for them to comply? Nayar believes so.  

“In doing our research, we found that some companies have an appetite to be proactive but very few are aware of what is involved, and the resources needed to do the work. And it’s not just small vendors – a lot of large operators also seem unaware and unprepared.  

“Ultimately, the responsibility sits with us, as the company contracting the services, to audit our suppliers on price, service and now on Scope 3 emissions. But the regulators have given minimal consideration to how the requirements apply to different vendors.  

"If this regulation is going to genuinely help us all measure and reduce Scope 3 emissions...we need centralised EU guidance and processes." – Bharat Nayar, Stolt Tanker’s Business Partner, Sustainability and Decarbonisation

“Being a large ship-operator, Stolt Tankers is capable of managing this reporting requirement, but we need to scale up significantly to meet it. That's simply not possible for everyone. For example, if every company is expected to audit every significant vendor, a small operator might have tens or even hundreds of requests to handle.  

“It’s a huge financial and administrative burden to place upon companies, many of which are still struggling with the effects of high inflation and energy prices. Wouldn’t it be more efficient to have a single, centralised EU audit report per vendor that everyone can access? 

“Another issue is that many EU companies use non-EU vendors which will naturally have even less awareness of this requirement. If it is up to every company to educate their vendors, the consistency, accuracy and ultimate benefits of this regulation will be quickly lost.  

“With the information we have collected so far, we plan to look at the areas where we can make a positive impact and introduce measures and actions to reduce our emissions. For example, this might involve using more sea freight instead of air freight where possible, choosing airlines that use low-carbon fuels for business travel and, as we are already doing, holding seafarer events, training and conferences closer to our crews' homes to reduce the need for them to travel. 

“But, looking more broadly across our industry, it seems that a significant new carbon-reduction regulation has been brought in and companies have been left to figure it out and fend for themselves. If this regulation is going to genuinely help us all measure and reduce Scope 3 emissions and operate more sustainably, we need centralised EU guidance and processes, tailored to different-size operators and including advice for non-EU-parties that are part of the supply chain but do not fall under reporting requirements. 

“As well intended as these reporting requirements may be, ultimately, what's really needed is an accepted global solution with tailored applications that make sense for the many different businesses and regions affected, and which therefore give everyone the best chance of achieving the goal we're all striving for: a more sustainable future.”