The pressure for legal firms to report on their Scope 3 emissions accurately is mounting, with investors, regulators and clients all expecting greater transparency.
Firms will use Scope 3 data to inform major decisions and investments, such as which suppliers to work with, what products to buy and how much to spend on offsets. This means that the accuracy of your firm’s footprint will have a direct financial cost.
Your clients will be doing the same – they will want accurate carbon data from you, and they will want to know how you have arrived at that number; you don’t want to be found guilty of greenwashing.
What are Scope 3 emissions?
Scope 3 emissions refer to all the indirect greenhouse gas (GHG) emissions which occur in an organisation’s value chain. Scope 3 emissions typically occur in both upstream and downstream of your organisation’s operations.
The Greenhouse Gas Protocol, the global standard for GHG accounting, defines three scopes of emissions:
Scope 1: Direct emissions from sources that are owned or controlled by the reporting company. This would include emissions from a company car or natural gas that is used to heat an office.
Scope 2: Emissions others create to generate the energy a company purchases – so typically Scope 2 emissions come from electricity use.
Scope 3: Emissions that occur both upstream and downstream in its value chain that are generated as a result of the company’s activities.
Scope 3 captures the supply chain of a company – all the emissions that have been generated to provide a good or service. This will include physical products, like IT equipment or food, but also professional and advisory services. It also covers the direct and indirect emissions from the use of sold products – so that could be energy used by a phone, or the energy used by a kettle when making a coffee.
Why Scope 3 emissions are important
Many companies have been reporting Scope 1 and 2 emissions for years, and have good data on activities like business travel and waste. However, because Scope 3 emissions are a result of the activities of others, it presents a greater challenge to measure and manage. As a result, most companies are much more immature in addressing Scope 3 emissions.
Scope 3 emissions typically represent the largest source of emissions for a firm. On average, over 90% of a law firm’s total emissions sit within Scope 3. This presents an environmental risk, but also an opportunity for a firm to influence significant emission reductions by promoting climate action across its value chain.
Why should law firms address Scope 3 emissions?
- Boost reputation with clients and employees:
- Increasingly, firms are coming under pressure from clients and employees to make credible climate commitments.
- Stay ahead of rapidly evolving regulation:
- Regulation, such as the UK Streamlined Energy Carbon Reporting Regulations (SECR), is requiring law firms to report on emissions publicly for the first time. As governments bring in new policies to meet net zero commitments we expect increased scrutiny on Scope 3 emissions.
- Meet Science-based Target requirements:
- Law firms wishing to set science-based targets must complete a Scope 3 screening exercise, and if Scope 3 emissions exceed 40% of the total footprint, set a target to reduce these emissions.
- De-risk supply chains and reduce costs:
- A decarbonised supply chain helps to reduce costs through improved supply chain efficiency and exposure to regulation. Understanding and reducing your Scope 3 emissions will enable firms to identify and manage climate risks across their supply chain.
- Take responsibility for your total footprint and scale your impact:
- The majority of an organisation’s emissions sits in Scope 3. Addressing Scope 3 enables firms to support decarbonisation across their supply chain. By collaborating with suppliers, firms can have a positive climate impact at a far greater scale than working in isolation.
What challenges do law firms face with Scope 3?
- The legal sector has a tradition of heavy business-related travel. This is driven by legacy organisational behaviour as well as client/matter demand
- Some return to travel is anticipated as restrictions ease across the world but there is a significant opportunity to reduce the burden of travel in future
- A return to ‘Business as usual’ travel is not something we should be chasing.
- Employee commuting and working from home emissions.
- The majority of emissions sit in Scope 3 purchased goods and services
- Primary suppliers include IT and software, catering, external advisors like special counsel or expert witnesses
- The built environment footprint also tends to be significant, though we are seeing firms considering reduction in floor space as a result of the pandemic and successful home working
- Procurement teams tend to have direct control of areas such as IT, banks, catering, and facilities management. They have limited control over external costs like special counsel because these decisions are taken by the relevant partners.
Next steps for tackling your Scope 3 emissions?
There are four steps for getting started in managing Scope 3 emissions:
- Download our Scope 3 guide for law firms from the Legal Sustainability Alliance
- Build the business case internally – educate the business on why Scope 3 is important, obtain Senior-Level sponsorship to tackle Scope 3 emissions, engage key teams (Procurement, Finance) to get them involved from the start
- Define your Scope 3 objectives – what’s driving this, is it the ability to set Science-based Targets, or greater supply chain insight. Define the end goals
- Start with a Scope 3 screening – quick process to identify material Scope 3 categories and emission hotspots. Use it strategically to build a plan, focus efforts.
Carbon Intelligence can help you establish your firm as a leader through setting and achieving ambitious carbon reduction targets, helping you move towards a net-zero carbon future in a way that will improve your brand reputation. We can show you what a low-carbon future looks like for your firm – and give you the strategic roadmap to get there.
Carbon Intelligence have produced two other helpful guides to get you started