Moving Towards A Green Supply Chain

Businesses produce emissions both in those that fall directly under it and also those that come as an indirect effect of the organisation’s value chain. These emissions are categorised into three types of emissions which fall under the greenhouse gas (GHG) protocol, a widely used accounting tool used to measure and manage GHG emissions. These are Scope One, Scope Two and Scope Three.

Scope three emissions, an essential component of greenhouse gas accounting, encompass the indirect emissions generated by an organisation's value chain. While scope one and scope two cover direct emissions from an organisation's activities and purchased energy consumption, scope three delves into the complex web of emissions produced by suppliers, customers, and other external factors beyond the organisation's immediate control. 

As the most significant and challenging category to measure and manage, scope three emissions play a crucial role in evaluating a company's overall environmental impact. At BW Businessworld's Sustainable World Conclave 2023, experts shed light on the scope three emissions in the Indian context.

Speaking on the current scenario of scope three emissions in India, along with the benefits and challenges ahead, Thakur Pherwani, Chief Sustainability Officer, TVS Motor spoke on the importance of this aspect when talking about “business greenness.” However, he noted how only 22 per cent of 200 companies report scope three data, while 50 per cent are not even reporting the entire spectrum of scope three. 

Nitin Singh, Vice President and Head of ESG and Internal Audit, Havells commented on how most companies in India currently only focus on scopes one and two and that scope three has taken a backseat. While highlighting the massive loss this leads to in terms of GHG accounting, he said, "Except companies [which] are in steel, cement, or aluminium manufacturing, scope three constitutes almost 65 to 90 per cent of the emissions being generated in Indian companies.” 

Singh further noted that one of the challenges in India is the lack of data on scope three. 

Sivala Ravi Kiran of Biocon also pointed out this problem, saying that the main challenge currently is the lack of awareness for suppliers. It is important to note that pharmaceuticals is responsible for five per cent of global scope three emissions.

When asked about how companies can effectively measure and reduce their scope three emissions, Aditya Gurudanti, Head of Sustainability Operations, Dr Reddy's Laboratories noted, "There are 15 different categories. The first step is to actually understand what kind of categories will be applicable for the company [as] different categories are not applicable for different companies [for] different reasons.” 

Singh also noted the weaknesses of the current system and said, "Unfortunately the regulations which have come right now is not sector focused and that is one of the challenges which most of the suppliers are facing right now.” He further stressed that this should be addressed sooner rather than later. 

Abhishek Verma, Vice President - Business Development, SunSource Energy spoke on how collaboration is a very important part of effectively monitoring a company’s supply chain. While describing ways such as incentivising suppliers or mandating it, he added, "Second way is telling them that if they don't step up, they might lose this business to somebody else.”  

Pradeep Panigrahi, Head - Corporate Sustainability, Larsen & Toubro (L&T) spoke about the lack of India-centric policies on scope three emissions when asked about the role of government. While he admitted that the business responsibility and sustainability reporting (BRSR) framework has helped in deploying ideas and plants, some clear-cut policies and guidelines are necessary from the government.