Moves aimed at harmonising how food and drink businesses account for value chain emissions have the potential to unlock a range of benefits. By Nick Hughes.
Any food business on the path towards net-zero will know by now that scope 3 emissions represent both the largest source of greenhouse gas (GHG) emissions and the most challenging to reduce.
The indirect emissions that occur outside of a company’s direct control, from land use change to how food is disposed of, can account for up to 95% of the total for a typical wholesaler, restaurant chain or contract caterer.
This matters since businesses are coming under increasing pressure from customers, investors, governments and other stakeholders to transparently measure, report and reduce their greenhouse gas emissions across all scopes – including scope 3.
Yet the task of accurately accounting for scope 3 emissions has to-date been far from a walk in the park. The question of what to measure and where to set the parameters looms large for businesses at the start of their scope 3 journey: which categories of scope 3 emissions should you include in your inventory, for example, and which – such as how the customer disposes of a product – is it reasonable to omit?
Then there are challenges associated with the quality of data itself. Are businesses calculating emissions based on spend rather than volume data when the latter is widely accepted as the gold standard?
A lack of consistency in approaches makes the job of comparing one business’s footprint (and green claims) with another’s nearly impossible – for customers, investors and anyone else interested in a company’s sustainability credentials.
Thankfully, things are starting to change for the better amid recognition that in order to enable businesses to compete (and collaborate) on a level playing field there needs to be a common set of rules on how to measure emissions from value chains.
Work is ongoing both internationally and within the UK to create greater harmonisation around reporting and accounting of scope 3 emissions. The UK Government continues to review the extent to which it will endorse the global corporate reporting baseline standards issued last year by the International Sustainability Standards Board (ISSB), of which scope 3 reporting forms a key part. A decision by the Department for Business and Trade is expected in the first quarter of 2025 and any standards adopted will form part of a wider sustainability disclosure reporting framework for UK businesses.
The ISSB standards, and those they are based on like the GHG Protocol, are sector-agnostic and so there is recognition too that food and drink requires its own specific guidance reflecting the nuances of agricultural production and supply chains. That’s why the charity, Wrap, has developed bespoke industry protocols for scope 3 measurement and reporting, a second version of which was published in June following a period of consultation and testing of version one.
Work is also ongoing to develop a standardised product level accounting method for the agri-food sector through the Defra-funded ‘Long-term improvements to environmental impact data for Food’ (LED4Food) project. The project has four work programmes in total with the other three focused on improving the quality and quantity of data available for scope 3 assessments, improving how data is shared to enable the data flows needed in the system, and supporting better data accessibility.
Overall, there is a growing sense that the ambition for greater consistency in scope 3 accounting and reporting is finally within reach.
So what are the implications and potential benefits for businesses and other food and drink sector stakeholders of a shift towards standardisation?
Consistency is key
Experts embedded in the work of helping businesses calculate their GHG emissions footprint say progress towards accurately measuring and reporting scope 3 emissions varies across the sector. What businesses have in common is that “everyone is on the data improvement journey”, according to Alastair Tyson, head of carbon measurement at Zero Carbon Forum (ZCF).
ZCF was established in 2020 to help the hospitality and brewing sectors move towards net-zero. Its membership now accounts for around a third of total sector sales and a cumulative 8.4 million tonnes of carbon annually. Tyson stresses the importance of consistency in how members measure and report progress towards their net-zero targets. “No matter whether you’re starting your journey or you think you’re towards the end, it’s about being consistent in your approach and understanding what you’re measuring, why you’re measuring it, and what you’re looking to improve going forward.”
Moves internationally to standardise reporting frameworks can be of major benefit to businesses, especially those that operate across borders. “We’re in that transition phase between scope 3 [reporting] being very much a voluntary piece for industry leaders to a position where it’s going to become mandatory in the very near future,” says Joe Duncan-Duggal, chief scientific officer for Foodsteps, a food sustainability platform. “A lot of businesses that are going to be swept up in the mandatory reporting at first are large international businesses, so they will increasingly have multiple legislative requirements that they need to meet in different areas. We’re really hopeful that, as far as possible, these standards will align internationally to streamline the work required.”
Common rules
Consistency in measurement is one of the key aims of the UK government’s Food Data Transparency Partnership (FDTP), established under the previous Conservative government as a collaboration between government, industry and civil society.
In April, Defra published a roadmap for the FDTP’s eco working group in which it set out its priority to help support a common approach to communicating the environmental impacts of food and drink products and businesses through standardisation of company level scope 3 GHG emissions accounting and reporting, product level environmental impact quantification, and ultimately food and drink eco-labelling.
Working group members were involved in testing Wrap’s scope 3 protocols which, although voluntary, are described in April’s FDTP roadmap as “the definitive source for UK food and drink companies to guide their measurement, reporting and action on reducing scope 3 emissions”.
The protocols include guidance on how to identify which of the 15 categories of scope 3 emissions are most significant for a business and which activities must therefore be included within the company’s scope 3 inventory. Purchased goods (category 1) is identified as the most important and so must be included in the scope 3 inventory for all types of food business – from manufacturers and processors through to restaurants and pubs. (It is encouraging to note that despite foodservice companies not being required to include category 1 emissions in order to win government contracts, many are going further and voluntarily providing the data.)
Other categories are rated on a sector-by-sector basis; for example employee commuting is rated as recommended for contract caterers while upstream transportation and distribution is considered a lower priority. For food manufacturers, by contrast, both upstream and downstream transportation and distribution are recommended to be included within business inventories. This is guidance only, and a screening assessment for each individual business is the best way of deciding which categories to focus on.
The protocol also includes information on accounting and reporting for things like carbon removals, emissions from land use change (informed by the GHG Protocol’s draft ‘Land sector and removals guidance’ for which a final version is due next year) and emissions linked to the use and end-of-life of products that businesses sell.
Business benefits
By creating a common set of rules for food and drink businesses, Wrap’s protocols should enable greater consistency – and by extension greater comparability – in how businesses report their scope 3 emissions. One of the businesses to pilot the original scope 3 protocols, wholesaler Bidfood, noted how the purchased goods category makes up a whopping 92% of its overall carbon footprint. “We’re acutely aware of the need for standardisation across the food and drink industry, so that we can all genuinely compare apples with apples,” said the business in a published case study.
Suppliers like Bidfood may benefit in other ways too. Standardising the emissions data that operators require from their suppliers should in theory reduce duplication of effort. “The problem for suppliers is that they’re currently getting so many inbound customer requests asking for data that it’s stopping them from doing anything else,” says Tyson.
Wrap notes how better data quality gives businesses better information to make effective decisions to reduce scope 3 emissions. Poor data quality, by contrast, could lead to the wrong decisions being made. For this reason, it says companies should work towards having ‘good quality’ data for the product and ingredient types that contribute at least 80% of the emissions in the initial screening exercise.
Data quality
That brings us to the knotty question of what constitutes good quality data. The FDTP has recognised that a standardised product level accounting method, following a life cycle assessment approach, is needed so that the food and drink industry can readily compare product level environmental impact data. Defra has commissioned new work to develop methodological recommendations for such a standard as part of the LED4Food project. The project will be delivered by a consortium led by Wrap with partners including Oxford University, Rothamsted Research and Foodsteps over a three year period from March 2024. The aim is for a resulting standardised product level accounting method to be delivered by spring 2025, with an approach for multi-metric product level reporting to be delivered by spring 2026 which will ultimately inform the government’s approach to food and drink eco-labelling.
A key principle behind the work is the need to establish more stringent rules for different use cases for emissions data. In its roadmap, the FDTP sets out how data based on product averages can be useful for identifying hotspots in supply chains, but where businesses want to label products with green claims, supply chain specific product level data will be more appropriate.
Software platforms are looking to support businesses on this journey towards more granular level data through their own product offerings. Foodsteps this week launched a new scope 3 emissions solution that it says offers “greater accuracy and rigour behind scope three assessments”, including by incorporating supply-chain specific data. “If you’re using solutions that rely on generic data and don’t include, for example, primary data showing the value in your suppliers adopting new, more sustainable practices, then the reductions won’t be accounted for,” says Duncan-Duggal.
Supply switches
Supply chain specific data is especially important where businesses are seeking to switch suppliers of the same ingredient in order to lower their emissions. Speaking at a recent Westminster Food and Nutrition Forum, Fidelity Weston, chair of the Clear campaign for better food labelling, noted how there are many different ways in which the same product can be produced that are not always captured in footprinting data. “For instance, we could have a tomato that’s produced out in the sun in a rain-fed climate, or it could be produced under glass in a climate where there are water resource issues; there is a big difference, and these are important and relevant pieces of information for us all,” she said.
ZCF director Bob Gordon notes how some businesses are already seeing the benefits from switching suppliers in order to source ingredients that have a lower emissions factor. Gipsy Hill and Azzurri Group, for example, are respectively sourcing barley and flour from Wildfarmed, which allows them to recalculate their footprint downwards as a result of sourcing ingredients from regenerative farming systems.
In this context, recent moves to harmonise how farm-level carbon is calculated represent an important sector development. In June, three major farm carbon calculators – Farm Carbon Cutting Toolkit, Cool Farm Alliance and Agrecalc Limited – reached an agreement to work together to harmonise the methodologies and outputs of their carbon calculation tools. Richard Profit, Cool Farm Alliance CEO, says the collaboration “will help align methodologies where that makes sense” as well as allowing the trio “to look into new areas that require attention”.
Beyond carbon, efforts to develop a more holistic, consistent set of sustainability metrics are gathering pace through initiatives like the Global Farm Metric and Soil Association Exchange programme.
Better decisions
Growing scrutiny of green claims by regulators has led some businesses to retreat from publicly promoting their carbon reduction efforts – so-called ‘greenhushing’. Greater standardisation in scope 3 methodologies could potentially remove some of this reticence while also building consumer confidence in carbon footprints.
Gordon, however, believes we’ll still see a “more measured approach” to green claims moving forward amid a greater focus on the fundamental business benefits that can be unlocked through transparency of data. “It will be less about the green claim you’ve made and more about whether your footprint has changed and the extent to which your actions have had a meaningful impact on your emissions,” he suggests.
Better data can drive better decision making. For some businesses, that might be about unlocking efficiency gains; “turning carbon into cash” as Tyson puts it. For others, the value may lie in the ability to give investors and other stakeholders the confidence that you have identified where your supply chain risks exist and are taking action to address them.
Will we soon reach a point where scope 3 emissions data can be perfectly compared between food and drink businesses? Almost certainly not, but moves towards standardisation are a necessary step towards ensuring that, where environmental footprinting data is concerned, companies will soon be competing on a more equal footing.
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