Is AI Incompatible with Net Zero?
Alan Riley, Director at epi Consulting, considers strategies for cutting Scope 3 emissions in an increasingly carbon-intensive technology sector.
Microsoft’s record purchase of carbon removal credits, from 1PointFive, reflects the realisation that with AI data centres driving up its emissions, the company must do something – or risk missing its net zero target. Google, too, has turned its attention to carbon removals. And more will follow: the tech sector on the whole is becoming more carbon-intensive; at the same time, the explosive growth of AI shows no signs of slowing down.
This is a start. But the reality is that companies buying credits can give off the appearance of addressing climate change without making meaningful efforts to reduce their own emissions. The two things are not mutually exclusive (in fact, they can work effectively in tandem). Practically, however, buying credits can stop companies from pursuing the kind of systemic change needed if they’re to truly lower their carbon footprint.
Up to a point, this is justifiable. Lowering your carbon footprint means grappling with Scope 3, and that can be intimidating.
The Scope 3 challenge
Why is this? It’s about control. Scope 3 brings together all the greenhouse gas emissions throughout a company’s value chain, and therefore represents the majority of its emissions. Unlike Scope 2, which can be dealt with by, for example, cutting energy consumption or moving to green energy, and Scope 1, which can be addressed by actions such as adopting electric company vehicles, for instance, Scope 3 mostly lies beyond an organisation’s direct control.
These emissions are influenced by many factors. Supplier production methods, employee travel patterns, the availability of low-carbon materials and renewable energy in the supply chain – all these must be taken into account. If they are, Scope 3 emissions reductions are achievable: analysis, prioritisation, and engagement are the keys.
Identify hot spots
First, companies must identify the biggest sources of Scope 3 emissions. High-level estimations will do. This will vary depending on your industry, but a CDP report revealed that use of sold products (57%) and purchased goods and services (17%) were most commonly said to be companies’ principal emissions hotspots. Screening to identify the main sources should be straightforward.
Rank suppliers
The main Scope 3 categories relate to the supply chain. This is why the important next step for most companies tackling Scope 3 emissions involves engaging with high-emitting suppliers. Work with your procurement or supplier management teams to understand expenditure and put together a supplier inventory. Desk-based analyses of annual purchases, set alongside industry-average emissions factors or supplier-specific emissions information is a good approach. It yields a ranking of top-emitting suppliers, and that can be the foundation of direct collaboration on emissions reduction efforts.
Make an impact
To achieve significant emissions reductions, focus on high-impact areas rather than easy fixes. A small number of suppliers often account for a large portion of your emissions. Collaborating with these key suppliers can substantially lower your overall Scope 3 emissions. Begin by engaging these suppliers in life-cycle assessments for your main products or services. These assessments evaluate the environmental impact from the extraction of raw materials to product disposal, identifying opportunities for sustainability improvements.
Go for quick wins
While some product improvements might necessitate complete redesigns or new generations of products, a faster and effective method is to encourage suppliers to transition their production facilities to green energy. This switch can significantly reduce their contribution to your Scope 3 emissions. Moreover, with upcoming green regulations likely to mandate such changes, it’s prudent to secure early commitments from suppliers and establish long-term contracts that can be cost-effective. Tier 1 suppliers can then propagate these practices throughout the supply chain.
Stay engaged
A robust Scope 3 strategy hinges on sustained communication with your supply chain. Companies need to foster relationships with suppliers to enhance climate awareness, ensure sustainability alignment, and collectively reduce emissions without operational disruptions. The goal is to cultivate a shared understanding that every company in the ecosystem plays a crucial role in lowering Scope 3 emissions.
A final thought
Recent developments highlight the transition towards a low-carbon, sustainable future where managing Scope 3 emissions will become a standard expectation. Companies that resist these changes risk penalties not only in regulatory terms but also in brand reputation. Conversely, those that embrace these changes will be seen as industry leaders and innovators. Although the task may seem challenging, we have outlined practical steps for companies to start addressing Scope 3 emissions through effective engagement and collaboration.
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