ECJ EUROPEAN Cleaning Journal

Working with scope 3 greenhouse gas emissions is not only about saving the planet. It also serves your company’s bottom line. In fact, it is a business opportunity the cleaning industry should seize. Malene Thiele, global VP, ESG & sustainability at Nilfisk tells us more.

HAVE YOU BEEN GETTING questions about your company’s scope 3 emissions? The indirect CO2 emissions throughout your value chain. If not, I predict you will soon. That’s because new European regulation is making scope 3 reporting mandatory for many companies. Some may be your customers. And when your customer must report on scope 3, you’re going to have to give them some answers.

Our industry must be prepared

As part of their own response to climate change, your customers most likely will be asking about the resource consumption of the overall cleaning solution you provide. But they will not stop there. Most likely they will also ask about how you manage your value chain. For example:

• From where do you source your materials and components?
• How do you transport purchased materials and components to your sites?
• How are you distributing and selling your products?
• What are the emissions targets of your suppliers, if any?
• How are your suppliers working to reduce their emissions over time?

In essence, your customers want suppliers like you to tell them whether their purchase of a particular solution will escalate or limit global warming. Their questions will revolve around issues related to scope 3. Your answers will help them decide whether you’re an asset or a potential liability.

The bottom of the iceberg

Scope 3 emissions take place throughout the lifecycle of a product or service. That is, from the extraction and purchasing of raw materials, to inbound and outbound logistics, to the final consumption and disposal of the product. And they are crucial to address – for the sustainability of the planet and your business, because scope 3 is almost always a company’s biggest category of emissions.

On average, 75 per cent of a company’s emissions are indirect and can be defined as scope 3 emissions, according to CDP (CDP Technical Note: Relevance of Scope 3 Categories by Sector, 2023). In that respect companies are much more than the buildings they own and the fleets
they operate.

Companies are made up of collaborations between suppliers and customers. They are made up of people trading with each other.

Many companies work with scope 1 (direct emissions from the company’s operations) and scope 2 (indirect emissions from production of the energy the company buys). And that is a great place to start. But it is only the tip of the iceberg. Our industry needs to work with the bottom of the iceberg too.

At Nilfisk only one per cent of our emissions come from the total energy consumption in scopes 1 and 2. The rest is scope 3. (See the graph on the next page) For us and many other manufacturers, driving sustainable growth depends on reducing emissions from the use of
our products.

The good news is that when manufacturing companies in the cleaning industry, like Nilfisk, reduce greenhouse gas emissions from the use of their products, we in turn help our customers lower their own CO2 emissions from purchased electricity or fuel use. One company’s scope 3 is another company’s scope 1 and 2. We are part of each other’s value chains in our web of trading with each other. Whenever one company assumes leadership and reduces their product use emissions, the effect ripples out. That means individual efforts have the potential to make big waves. And this is why we need to talk about scope 3.

An industry-wide ripple effect

Consequently, scope 3 is a discipline of dialogue. Sustainability is a conversation we want to have – with our customers, our suppliers, our colleagues, and the communities we are part of. We have the chance to create a ripple effect in the cleaning industry – just as you do.

Together we can make waves by engaging our suppliers. We all can strategically choose which suppliers to use based on their ability to limit their emissions. We all can make and buy products that are more energy efficient. And we all can gently nudge our customers to make the most sustainable choices when they browse our product portfolios.

When you engage with your suppliers on their emissions, I recommend keeping your questions simple and using the existing recognised standards and reporting frameworks, such as CDP and SBTi. Do not invent your own tailored questionnaires. Use the ratings, rankings and information already out there. Otherwise, we end up spending more time reporting to one another than we do decarbonising our businesses. And that is not good for anyone.

Nilfisk is choosing to engage with a small number of key suppliers that comprise 50 per cent of our spend. Given the size of our mutual engagement, we would like to see their emissions quantified and managed. Otherwise, over time they may pose a risk to us, providing our company with high-emission materials or components.

Scope 3 reporting is happening

The first set of European sustainability reporting standards, which requires reports for financial year 2024, calls for scope 3 disclosure. It requires reporting both on significant scope 3 categories and on absolute emissions.

The new EU regulation currently makes reporting on scope 3 mandatory “only” for European listed companies with more than 500 employees. But in 2025 the regulation will expand to include large companies, including commercial foundations and cooperative companies with more than 250 employees that earn above certain revenue thresholds. And from 2026, all listed small and medium-sized enterprises will also have to report on scope 3.

And from 2028 non-EU companies with revenue in the EU above a certain threshold and with an EU subsidiary or branch with a certain level of turnover will be included as well. This means that certain non-EU groups will eventually also have to prepare consolidated sustainability information as per the Corporate Sustainability Reporting Directive (CSRD).

In the US, the Securities and Exchange Commission (SEC) has also proposed mandatory scope 3 reporting. So far, it is not law. Still, WWF reports that 60 per cent of Fortune 500 companies have set some type of climate or energy commitment, up from 48 per cent in 2017. Are any of them your customers?

Scope 3 is on its way and coming to a customer near you soon. To stay competitive and successful, our industry needs to prepare.

www.nilfisk.com