To drive a company’s emissions down, one cannot overlook its Scope 3 emissions, says Gabriele Unger, general manager of Together for Sustainability (TfS).
In the case of chemical companies, ignoring Scope 3 emissions – which refer to indirect emissions that are released along the value chain of chemical companies – would mean disregarding the majority of their emissions.
In the chemicals sector, this includes emissions stemming from the production, transportation, and use of raw materials by chemical companies. Scope 3 also considers emissions from the use of sold products, all the way to the emissions released from the disposal or treatment of chemicals or products at the end of their life cycle, through incineration, landfilling, or other waste management activities.
The chemicals sector essentially refers to companies involved in the production, manufacturing, and distribution of chemicals – be it pharmaceuticals, petrochemicals, agrochemicals or industrial chemicals, for instance.
It is one of the largest industries worldwide, with annual revenues of approximately US$4.7 trillion, according to a McKinsey report. The products created by the chemicals industry, the report noted, are also deeply embedded in the world’s largest value chains, such as manufacturing and construction. In 2021, the chemical industry’s emissions accounted for around 2 per cent of total global emissions.
TfS strives to address this issue. By working with major chemical manufacturers, the organisation promotes sustainability within the chemical industry’s supply chain and provides a platform for its member companies to exchange data and standardise processes. This, Unger notes, allows members to evaluate and improve the sustainability performance of their suppliers more efficiently than doing it alone.
Unger has been at the helm of TfS since its creation as an international non-profit entity in 2015 and previously worked at chemical company BASF. She has over 20 years of experience in the chemical industry.
TfS was formed in 2011 when chemical companies BASF, Bayer, Evonik Industries, Henkel, Lanxess and Solvay joined forces as a global initiative to enhance sustainability within chemical supply chains. There are 50 TfS member companies as of October 2023. All of the TfS member companies are part of the chemical industry ranging from paints, construction, additives, polymers, fragrances and household care products, for instance.
In this interview with Eco-Business, Unger talks about the role TfS plays in driving members’ sustainability, the importance of scope 3, and why striving for green supply chains is key going forward.
Together for Sustainability (TfS) focuses on promoting sustainability practices in the chemical industry’s supply chain. How are chemical companies applying TfS and how has it impacted their operations?
First of all, TfS focuses on helping chemical companies move forward with sustainability in mind. Since many chemical companies, especially the larger ones, often work with thousands of suppliers, this can complicate sustainability efforts. We aim to provide a platform for chemical companies to discuss and share sustainability best practices, and so they do not feel alone in this journey. We believe this is a major benefit of being a TfS member.
Instead of having a company assess or audit the sustainability of their suppliers through questionnaires and surveys, they can refer to data-sharing solution platforms, which TfS uses to enable member companies and suppliers to safely share upstream product carbon footprint information. This, we believe, promotes transparency and collaboration in addressing environmental impacts.
We also have standardised tools for evaluations and assessments, and we offer training for members and their staff. Typically, after each supplier evaluation – which takes place through an assessment or on-site audit – we issue a corrective action plan. This way, we avoid simply telling suppliers what was missing or what can be improved but create an improvement plan backed up by support through training. So, we offer training and tools that the supplier can use. At the same time, as a member company, you find a network of people working on the same topic, and there are many opportunities to learn and share best practices.
Can you comment on the scope 3 emissions in the chemicals industry and the complexities involved in decarbonising supply chains?
For a long time, companies mainly focused on their Scope 1 and 2 emissions, such as those from their production processes or energy usage. Now, if companies choose to look at the total portfolio of emissions, they must consider Scope 3 emissions. These emissions make up 70 to 80 per cent of the total emissions portfolio of a company, depending on their type of business.
We understand that tackling Scope 3 emissions can be challenging. To start, companies need the right emissions data. This is why we put together a guideline on calculating a product’s carbon footprint (PCF), which we call the TfS PCF Guideline, to enable suppliers and corporations to determine and later on share high-quality carbon footprint data. This also helps suppliers to understand the amount of emissions they have reduced.
We have also invested in the TfS Academy to offer training in reducing waste and emissions, such as calculating emission reductions and reviewing supply chain emissions. Scope 3 is a big question for the whole industry; each company needs to find out the source of the largest emissions in their supply chain and start working with those suppliers to reduce them.
Your career spans more than 20 years in the chemicals sector. Has sustainability grown in importance among chemical companies in the last decade?
Yes, sustainability has grown in importance. In many ways, it has evolved from being done in one corner of the organisation to forming a part of a company’s strategy. While there are certainly varying degrees of maturity across different companies, it’s interesting to see how the role of procurement – or the process of sourcing and acquiring goods, services, or raw materials for an enterprise’s operations – is evolving to include more responsibility. Greenhouse gas emissions are a particularly important example because when companies look at emissions data, they might ask themselves: “Who is responsible for Scope 3 emissions: procurement?”
The growing demand for sustainable procurement has led to increased interest in TfS from companies’ procurement and sustainability departments, who say: “I want to be part of that because I don’t want to develop it all on my own.” We hope to continue offering a space for efficient and meaningful peer-to-peer exchange for our member companies.
“
The main idea of TfS assessments and audits is to ensure that companies enhance their sustainability transparently.
Gabriele Unger, general manager of Together for Sustainability (TfS)
How do assessments and audits by TfS help to strengthen the sustainability performance of companies in the chemical sector while assuring investors? What sets TfS apart from other companies that strive to green company supply chains?
The organisation uses assessments and audits to measure and improve the sustainability of chemical supply chains. Our assessments and audits, for example, cover management, environmental impact, health and safety, labour and human rights, and corporate governance. Our audits are on-site examinations of a company’s business sites and practices and conducted by an independent third-party auditor approved by TfS.
The main idea of TfS assessments and audits is to ensure that companies enhance their sustainability transparently. We encourage TfS members to make use of assessments, audits and training with targeted suppliers who may be facing certain risks and to also engage with business partners who may greatly benefit from training. This helps both parties to identify concrete solutions to address any sustainability-related risks.
I think what sets TfS apart is that instead of performing individual tasks on behalf of our members, companies are responsible for taking action. It may be straightforward to push for change with one supplier, but implementing changes across thousands of suppliers is a huge task. So we enable our members to utilise standardised processes, evaluations, and any required training. In the end, the shared knowledge and efficiency of members benefits everyone.
Looking ahead, what are the most significant sustainability risks that companies in the chemical industry will need to navigate and what are the consequences of failing?
Reducing greenhouse gas emissions is undoubtedly the most significant challenge. It is not only an issue for the chemical industry but also for the planet. The consequences of climate change, which we witnessed this year and continue to experience daily, have far-reaching impacts. While different industries and regions may experience these consequences differently, the failure to effectively reduce greenhouse gas emissions will be felt globally.
