Summary
- Scope 2 emissions, generated from the energy retailers purchase, are critical to sustainability efforts. They differ from Scope 1 (direct emissions) and Scope 3 (supply chain emissions).
- Reducing Scope 2 emissions is extremely challenging due to the heavy reliance placed on non-renewable energy, and the volatile commodity landscape.
- Retailers can reduce Scope 2 emissions by incorporating mitigation hierarchies into procurement, and building partnerships with energy providers and sustainability experts.
- In the absence of these practices, retailers can also consider banding together into industry associations, and lobby for better practices around renewable energy.
Introduction
The retail industry is a major part of the global economy. Whether these are local businesses or multinational giants, retail plays a crucial role in daily life and global commerce. Its extensive supply chains, massive energy consumption, and global reach carry a considerable carbon footprint. Retailers have been called upon to prioritise sustainability and reduce their environmental impact in recent years. While much attention is given to Scope 1 and Scope 3 emissions, Scope 2 emissions—those associated with the energy retailers purchase—have also become a critical focus.
Understanding Scope 2 Emissions
Scope 2 emissions should be a priority because these are indirect emissions generated from the energy a company purchases for its operations. These emissions occur at the power plant or other energy-producing facilities, not at the retailer's location itself. They differ from Scope 1, which are direct emissions from owned or controlled sources or Scope 3, where emissions come from upstream and downstream activities in a company's supply chain.
| Scope | Description | Examples |
|---|---|---|
| Scope 1 | Direct Emissions | Company vehicles, on-site fuel combustion |
| Scope 2 | Indirect Emissions | Purchased electricity, steam, heating, cooling |
| Scope 3 | Other Indirect Emissions | Supply chain emissions, product use, end-of-life disposal |
Challenges/Obstacles for Retailers in Scope 2 Reductions
Given the nature of their operations, reducing Scope 2 emissions may be challenging for retailers due to:
- High Energy Consumption: Stores, warehouses, and logistics are energy-intensive. This is made more complicated if keeping items in storage requires constant refrigeration at the risk of spoilage. The resultant substantial energy demand translates to higher Scope 2 emissions, making it a challenge to reduce a company’s carbon footprint.
- Reliance on Non-Renewable Energy: Many retailers do not always have much choice when it comes to purchasing renewable grid electricity. Whilst more developed nations around the world are conducive towards switching away from non-renewables, this can be daunting in nations with less developed renewable energy infrastructure. This may also not be scalable due to limited awareness, or the need for wider industry investment that may not be feasible, lack of availability, and infrastructural changes.
- Regulatory Pressures And Increasing Commodity Costs: Governments and regulatory bodies are taking proactive measures to reduce carbon emissions by tightening regulations around fossil fuel use. Historical fuel subsidies have been trimmed back in favor of encouraging customers towards renewable energy. The resultant high cost of fuel has meant that the global fossil fuel market is highly volatile, leading to surging electricity prices.
Strategies to Address Scope 2 Emissions
- Include Decarbonisation In Procurement Planning: Retailers can add decarbonisation and sustainability goals into procurement planning by choosing to associate with suppliers and products that use green energy and have lower carbon footprints. Ratifying long-term contracts with green energy providers can ensure consistent access to clean energy, allowing retailers to indirectly reduce Scope 2 emissions.
- Engage Investors In Decarbonisation Strategy: Retailers should leverage the fact that investors are increasingly keen to align themselves with decarbonisation strategies. Maintaining transparency on data emissions and reduction efforts can increase desirability to sustainability-linked finance. Platforms like Terrascope can help retailers with data visibility and help them showcase progress to stakeholders.
- Develop Relevant Industry Partnerships: Retailers can collaborate with their peers, energy providers, and sustainability experts to group together in industry associations that can encourage the shift to renewable energy and energy-efficiency. Relying on industry partnerships can ensure the timely development of shared resources, knowledge and insights.
Conclusion
Addressing Scope 2 emissions is crucial for retailers who want to make sustainability a standard practice across the supply chain and strive for long-term success. By understanding the significance of these emissions, and recognising these challenges retailers can reduce their environmental impact. Leveraging tools and expertise from platforms like Terrascope can help retailers to act on their Scope 2 emissions successfully, leading to a sustainable future and positive business outcomes.
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