Life Sciences Companies Need Accurate Carbon Emissions Tracking

As the global focus on sustainability intensifies, life sciences companies are recognizing the importance of measuring greenhouse gas emissions, specifically, those falling under Scope 3. A staggering 78% of emissions across all industries are attributable to Scope 3 activities. But several hurdles stand in the way of accurately measuring those emissions. This article explores the complexities faced by life sciences companies, examines the current limitations of spend-based measurement methods, and presents a solution to overcoming these hurdles.

The Corporate Sustainability Reporting Directive, implemented by the European Union on Jan. 5, intensifies the pressure for accurate reporting of Scope 3 baselines, targets, and emission reduction efforts. It imposes detailed sustainability reporting requirements on EU companies, non-EU companies meeting certain thresholds, and regulated EU market-listed companies. CSRD mandates disclosure of data points including greenhouse gas emissions across scopes 1, 2, and 3, climate-related targets, energy consumption, resilience to climate change, financial effects from climate risks and opportunities, and transition plans for climate change mitigation, all of which require an auditable trail.

Part of our ongoing series on net zero transformation in life sciences, the article focuses on Scope 3

Difficulties in Measuring Scope 3 Emissions

Life sciences companies predominantly rely on spend-based accounting to measure their Scope 3 carbon emissions. Spend-based accounting allocates emissions based on the financial value of purchased goods and services. While this approach provides a broad understanding of emissions, it falls short of capturing the dynamic nature of emissions reduction efforts because it only offers a static assessment of emissions.

To effectively measure Scope 3 emissions, life sciences companies need accurate data from their suppliers. Gaining access to this data requires trust-based relationships. Suppliers may be hesitant to share detailed emissions information due to various factors such as proprietary concerns or inconsistent reporting practices. This lack of transparency undermines the accuracy of emissions calculations and impedes the assessment of progress toward reduction goals.

Shifting to Activity-Based Emissions

To address the challenges posed by spend-based accounting, life sciences companies are progressively transitioning to activity-based emissions accounting. This approach considers various activities and processes within the company's operations, offering a more granular and accurate assessment of emissions.

By embracing activity-based accounting, companies can capture the true impact of emission reduction efforts. It lets companies identify emission sources such as manufacturing operations, research and development processes, and transportation and logistics. Success in activity-based emissions accounting relies on enhanced collaboration with suppliers.

Activity-based Emissions Accounting in a Life Sciences company (anonymized client example)

5 Keys to Succeed in Tracking Scope 3 Emissions

Building a strong, transparent, and collaborative relationship with suppliers will not happen overnight. Life sciences companies need to embrace a new strategic imperative, including:

1. Establishing clear communication channels: Regular and open communication enables the exchange of emissions data and facilitates alignment on reduction initiatives.

2. Encouraging supplier participation: Actively involving suppliers in emissions reduction initiatives, such as joint sustainability projects, fosters a shared commitment to achieving carbon reduction goals.

3. Building long-term partnerships: Developing long-term partnerships based on shared sustainability objectives allows for deeper integration and mutual accountability in driving emission reductions.

4. Supply chain transparency: Promoting transparency throughout the supply chain by encouraging suppliers to disclose their emissions data and sustainability practices enhances accountability and facilitates collective efforts in reducing emissions.

5. Collaborative innovation: Encouraging collaboration with suppliers to identify and implement innovative solutions and technologies that can reduce emissions throughout the supply chain, fostering a culture of continuous improvement and sustainability.

To learn more contact Matthew Weinstock, Senior Editor, Health and Life Sciences.