CIO get ready: Scope 3 is going to strike hard!
More than ever, Sustainability is an urgent priority for all industries to define. As a result, IT Directors worldwide find themselves in the top leading roles in sustainability initiatives.
Let’s not forget that in Europe, measurements and activities for Sustainability started in July 2020. The goal is to reach a climate-neutral economy in the EU by 2050. A central goal is reaching a 55% reduction in emissions by 2030. Therefore, data Collection must start NOW since European companies must start reporting for CO2 emissions Scope 3 by 2024 with data from 2023. Scope 3 emissions reporting -indirect emissions, meaning those not produced by the company itself- may be the most detailed and challenging requirement. Even if scope 3 reporting isn’t compulsory before 2024, most companies are already working hard to prepare even though the outline is not yet finalized.
Niklas Sundberg, CIO of global solutions at Swedish conglomerate Assa Abloy, states in an article published in CIO.com: “Scope 3 reporting will come as a shock to a lot of technology leaders. I think this is going to be even more massive than GDPR. Companies will be required to publish real numbers about Sustainability across the supply chain—and much of the data will come from IT procurement.”
Scope 3 reporting places explicitly a heavy burden on many CIOs. This burden is because IT -almost all times- is one of the largest departments of procurement. Furthermore, IT is responsible for most energy expenditures. As a result, there will be enormous errors, vague and partial calculations. However, once the reporting becomes mandatory, third-party consultants can put together accurate measurement that traces carbon emissions across supply chains.In the US, the SEC (Securities and Exchange Commission) published a proposal in March 2022 addressing companies to start gathering scope 3 emission data in 2024 for reporting in 2025. While this is not yet law, the fact that the SEC published this proposal indicates that it will soon be.
EUROPE has started. The US is there to follow.
Big companies that are more sensible with environmental issues and see that their customers are day-by-day more and more sensitive about CO2 emissions and the environment have already started to report. Thus, their related suppliers must provide emission numbers. This creates a chain pressure that even if your company has not started to report yet, a requirement by law it’s just around the corner. “One of the challenges with scope 3 is that a lot of vendors in your supply chain can’t disclose this information today,” says Sundberg, who echoes these points in his new book Sustainable IT Playbook for Technology Leaders. “Nobody can tell you how much CO2 emission is embedded in some of the more popular software—for example, how much is consumed for one user to run Office 365 for a year. If you have 50,000 Office 365 users, there are no metrics to help you calculate this point.”
IT sustainability role has become more common in Europe!
Large companies in Europe have already started building teams to address IT Sustainability. The main goal of these teams is to automate as many processes as possible and try getting source data directly from their suppliers, processing them quickly to report as accurately as possible to the front line. Rainer Karcher, head of IT sustainability, says: “My job is to automate the whole process as much as possible. This includes getting source data directly from suppliers and feeding that into data cubes and data meshes that go into the reporting system on the front end. Because it’s hard to get independent and science-based measurements from IT suppliers, we started working with external partners and startups who can make an estimation for us. So, if I can’t get carbon emissions data directly from a cloud provider, I take my invoices containing consumption data and then take the location of the data center and the kinds of equipment used. Then, I put all that information to a rest API provided by a Berlin-based company and using a transparent algorithm, they give me carbon emissions per service.”
Srini Koushik, CTO of Rackspace Technology in the US: “Europe is a step ahead. We’re a global company, so we have already started our preparations for scope 3 reporting. Our approach has been if we can meet the European standard, then we’ll be a year or two ahead of the rest of US organizations.” Large companies have already begun working on scope 3 reporting, which has already put pressure on smaller partners. “Companies do a calculation on how much overhead they have to put in to make up for suppliers that don’t give them enough information,” “If the supplier isn’t worth that overhead, they’ll change suppliers.” “I know so many IT leaders who are unfamiliar with the GHG protocol,” “Now is a good time for them to get started.” says Koushik. Let’s not forget that your Scope 3 emissions are the Scope 1 or Scope 2 emissions for the carriers so collaboration can help!The overall reason for reporting CO2 emissions is that companies want to start evaluating their suppliers and proceed to change them if needed. Too many companies do not have in-house expertise, and even now, they do not try to reach it in-house or with an external partner.
START MEASURING NOW is the motto of 2023!
2023 is already here, and the time for CIOs to act is now. They risk being left behind if they don't take the initiative to stay ahead of the competition and lead the future. They will rely on external partners to calculate CO2 emissions, which will be beneficial, but it is essential to make this decision after research (and choose the best partner) and not because of a lack of time. Don't let the future pass you by - jump ahead and get ahead of the game.