The industrial sector is the third-largest source of direct greenhouse gas (GHG) emissions in the U.S. So, in response, many manufacturing, warehousing and distribution businesses nationwide are increasingly folding GHG reduction targets into their corporate strategies.
While business and sustainability leaders in these industries understand the urgent need to reduce GHG, how to successfully do so in a meaningful and sustainable way still remains elusive.
That’s because decarbonization requires a multi-pronged approach that requires a thorough understanding of three groups of carbon emissions: Scope 1 emissions, Scope 2 emissions and Scope 3 emissions.
Why three groups, though? Why not one?
Because supply chains are long. And complex.
The three scope emissions subgroups account for various aspects of the entire supply chain to give a better idea of what contributes to the size of a company’s carbon footprint.
Put simply, a product’s lifecycle is a long journey, with each stage yielding a measure of emissions.
Differences Between Scope 1, 2, and 3 Emissions
Tracking emissions is like looking at a roadmap with three intertwining pathways. Each pathway leads toward the same location: a business’s total CO2 and pollution emissions.
Scope 1 emissions include energy usage on your business premises. Think of direct emissions created by the operations and processes controlled by your company, such as fleet vehicles and machinery.
If your business is connected to and uses energy supplied by the grid — as with most C&I companies — your Scope 2 emissions are the indirect off-site emissions from electricity or natural gas purchased from your utility company.
Scope 3 emissions are indirect emissions from the supply chain, ranging from product procurement to waste storage.
Scope 1 and 2 emissions are generally easy to define and track.
However, Scope 3 emissions are disparate and include processes before and after product manufacturing. To complicate matters further, Scope 3 also tracks elements outside your direct control in the most expansive part of the supply chain.
Common Sources of Scope 3 Emissions
Who and what are to blame for Scope 3 carbon emissions? There’s no easy answer.
That’s because calculating Scope 3 emissions looks different for every company. And learning how to reduce them requires the ability and know-how to track them.
To help companies better understand how to reduce Scope 3 emissions, the Carbon Disclosure Project outlined 17 common categories that significantly contribute to a company’s total Scope 3 emissions, including:
- Emissions created from purchased goods and services
- Employee commutes
- Upstream transportation and distribution
- Processing of sold products
- Use of sold products
- Waste management of sold products
For example, consider a food manufacturer.
Scope 1 would include direct emissions from the food manufacturer’s machinery, equipment, and company-owned vehicles. Scope 2 would consist of emissions from the electricity, steam, heating and cooling purchased from the utility.
However, Scope 3 includes all emissions created upstream (products produced before they get to your facility) and downstream (everything occurring during and after your product reaches the market) in the supply chain. That includes everything from the raw materials and packaging materials for products used by your company to transportation of your product to retailers (and those retailers’ operations and point-of-sale emissions, too!).
When calculating Scope 3 emissions for your business, you could find up to hundreds of data points. That’s what makes it one of the most challenging emissions to eliminate.
But trying to do so will be helpful to both your business, its goals and its bottom line.
Why Reducing Scope Emissions Is Critical
The environmental benefits of reducing scope emissions are vast.
GHGs contribute to climate change, threatening drought, flooding, dangerous storms and wildfires. Companies that work to reduce their emissions will not only help to mitigate the most devastating effects of climate change for future generations but will also help to improve public health.
However, the benefits of reducing emissions aren’t limited only to the environment. Here are a few more benefits of lowering scope emissions.
Economic Impacts of Reducing Scope Emissions
Reducing any scope emissions can provide significant savings.
Switching to clean energy sources at your facilities will immediately lower your energy bills, leading to direct cost savings.
However, manufacturers, warehouses, and distributors also have a financial benefit in tracking their Scope 3 supply chain emissions to offset carbon footprints and achieve net-zero goals.
For example, one study of manufacturing suppliers found that tracking Scope 3 emissions helped save $29 billion by finding ways to enhance operational efficiency and transition to renewable energy.
Prioritizing emissions reduction has also been proven to build customer trust and brand loyalty.
While most businesses are familiar with Gen Z’s sustainability-first buying decisions, they may be surprised by that generation’s outsized influence on Gen X and Baby Boomers, who have also begun shifting their buying behavior toward sustainable products.
In fact, a study shows that across the generational divide, consumers are prepared to spend more on sustainable products than just a few years ago.
Regulatory Pressure and Corporate Responsibility
To help lower emissions, governments are also stepping into the fray to ensure businesses commit to reducing emissions.
Take the Warehouse Actions and Investments to Reduce Emissions (WAIRE) program in California, for example.
WAIRE targets tracking and reducing emissions in transporting and storing goods. The program offers incentive programs such as tax rebates through investment in renewable energy and diesel emission reduction, a key step to reducing Scope emissions.
Even so, there is pressure from more than just federal, state, and local regulations.
Investors and consumers increasingly expect the companies they invest in and patronize to prioritize social responsibility and sustainable practices. Proving this commitment means tracking, recording, and acting on supply-change data.
Ways Manufacturing Can Reduce Emissions
Reducing Scope emissions is a journey every company must embark on individually. However, while every business and supply chain is unique, all efforts require actionable steps.
Here are ways you can reduce your scope emissions
How to Reduce Scope 1 Emissions
Scope 1 emissions are the easiest to calculate for many organizations because they relate to what is owned and controlled.
To reduce your scope emissions, consider
- Bundling fleet electrification with solar: You can reduce scope 1 emissions by electrifying your fleets. And when bundling zero-emissions EV charging with a solar carport, you’re better able to reduce energy consumption, ramp up decarbonization efforts and save more.
Take Anaheim Transportation Network, for example. In April 2024, ATN opened its solar-powered EV charging hub that provides charging for its fleet of 80 battery electric buses — complete with a 514 kW solar canopy that provides 25% of ATN’s total expected energy consumption.
By financing the project as a power purchase agreement (PPA), ATN brought predictability to its budget, reduced exposure to high rates and maximized EV savings. The solar canopy and overhead electric charging solution will generate energy to drive 1.2 million ATN bus miles annually. Overall, ATN estimates the solar-powered EV charging facility will help to save $4.8 million in fuel over 20 years compared to liquid natural gas or compressed natural gas.
How to Reduce Scope 2 Emissions
This is where renewable energy comes in, as Scope 2 emissions are created by energy purchased.
Here’s how you can reduce your Scope 2 emissions:
- Install on-site solar: Solar energy remains one of the fastest-growing and most affordable ways to approach sustainable manufacturing. Investing in a rooftop, ground mount or solar carport system is one of the best, immediate and efficient ways to reduce GHG (and costs).
- Shift Demand & Deploy Energy Storage — Battery energy storage systems (BESS) store excess generation and, thus, help avoid the need for large, fossil-fueled power plants with limited duration that run during high electricity demand periods (such as heat waves). This load shift is referred to as demand response and ultimately reduces the stress on the grid.
Trinchero Family Estates, the world’s second-largest family-owned winery and the largest winery in Napa Valley, provides an excellent example of effectively reducing Scope 2 emissions. To help achieve its ambitious sustainability goals of a 50% reduction in carbon emissions by 2030, TFE installed rooftop, ground mount and solar carport arrays at four locations. The arrays will produce 9.7 million kWh annually, significantly reducing the winery’s carbon footprint (and helping them save $21 million over 15 years).
How to Reduce Scope 3 Emissions
Reducing your Scope 3 emissions is possible without conducting a complex and full-blown GHG life cycle analysis of your products and operations. It’s at your discretion what you report and reduce.
Here’s how you can reduce your Scope 3 emissions:
- Require Your Supply & Distribution Chains to Reduce Emissions — Emissions happen throughout the supply chain, from manufacturing goods and services to transport. Favoring sustainable suppliers helps. You can also work with your sustainable energy suppliers to devise options to help your suppliers benchmark and improve their energy carbon footprint.
Achieve Sustainability with REC Solar
Just as total emissions are a product of companies across an entire supply chain, eliminating GHG is also a network approach. That’s why you should work with an experienced, dedicated solar developer you trust to be there for your business in the long run.
Our team of REC Solar experts have decades of experience helping organizations across all sectors reduce emissions and meet sustainability goals.
Contact us today for a free consultation.