What are upstream emissions?

Upstream emissions are the scope 3 emissions that are generated from cradle to gate. They are associated with processing, production, storage and distribution of fossil fuels. Upstream emissions represent around 4x of operations and therefore, reducing them mitigates climate change.

To effectively reduce upstream emissions businesses must actively engage with suppliers and vendors across the whole supply chain. That can be challenging as there can be thousands of suppliers, unavailable data, or gaps in the data, limited resources to collect and organize, or inefficiencies in communicating with other parties involved. Scope 3 emissions which are upstream and downstream activities, account for more than 70% of a company's emissions.

The Gold Standard has developed an effective framework for supplier engagement that empowers businesses to reduce upstream emissions and meet their targets. 

In this article, we will explain the framework in detail and show how Net0 empowers businesses to calculate, measure and reduce upstream emissions. 

What are the 8 upstream emissions categories?

There are 8 upstream emissions categories and 7 downstream emissions categories. For more detail about upstream vs. downstream and downstream categories, please see our article: Scope 3 Emissions: Contributing Factors, Measurement and Reduction.

Upstream emissions categories

Upstream emissions come from pre-production stages prior to reaching the reporting company's facility, including materials acquisition and preliminary processing emissions.

1. Purchased goods and services - This category encompasses the extraction, production, and transportation of goods and services procured by the reporting company during that reporting year. It includes materials acquired for product manufacturing, as well as non-production-related purchases, such as office furniture or outsourced services like accounting. Additionally, this classification includes raw materials, agricultural activities, upstream energy usage, waste treatment, land use, and transportation between suppliers

2. Capital goods - Refers to the extraction, production, and transportation of long-lasting goods purchased or acquired by the reporting company. These goods are utilized in manufacturing products, providing services, and storing manufactured items, and their emissions are calculated on a cradle-to-gate basis. Examples may include buildings, vehicles, and machinery.

3. Fuel and energy-related activities - Excluding scope 1 and scope 2, these activities involve the extraction, production, and transportation of fuels and purchased energy by the reporting company. Examples include cradle-to-gate emissions of purchased fuels, consumption in transmission and distribution (T&D) systems, and energy sold to end-users.

4. Upstream transportation and distribution - This category refers to a) transportation and distribution of products purchased by the reporting entity between tier 1 suppliers and its operations, and b) transportation and distribution services purchased by the reporting entity, including inbound logistics and outbound logistics. It also covers emissions from third-party warehousing.

5. Waste accumulated in operations - This category includes the disposal and treatment of waste generated by the reporting entity's operations, such as waste sent to landfills and wastewater treatments. Other GHGs like methane (CH4) and nitrous oxide (N2O) are considered, as they cause more significant environmental damage than CO2 alone. Waste-to-energy, composting, incineration, and recycling recovery are also included.

6. Business travel - This encompasses the transportation of employees for business-related activities, such as employee-owned vehicles used for work-related tasks. Emissions from hotel stays, waste, and energy usage during business trips are also considered. Various modes of transport are included such as rail, air travel, bus, and anything else that emits GHGs.

7. Employee commuting - This category covers the commute of employees between their homes and jobs, including but not limited to motorbikes, public transportation such as buses, rail, subways, and ferries.

8. Upstream leased assets - These refer to the operation of assets leased by the reporting entity that aren't included in scope 1 and 2 emissions to avoid double counting. Reporting is more straightforward for upstream leased assets due to data availability. Optionally, the lifecycle emissions of constructing leased assets could be included.

Why should my company reduce and report upstream emissions?

By making strategic decisions and fostering collaboration with suppliers, businesses can promote greater corporate sustainability practices in their supply chains. This approach helps mitigate the overall Scope 3 emissions linked to their products or services.

Accurately assessing upstream emissions is essential for obtaining a thorough comprehension of a company's overall carbon footprint, encompassing emissions throughout the entire value chain, not limited to direct operations alone. This meticulous accounting enhances supply chain accountability, gives companies a competitive advantage, and equips businesses to meet government regulations.

Understanding upstream and downstream emissions enables businesses to identify where the emissions are coming from and using a carbon accounting methodology with thorough data collection and measurement, empowers companies to devise focused reduction strategies, and meet government standards. With the escalating global emphasis on sustainability, adopting a net zero strategy is now necessary to compete in the green economy.

The Gold Standard Framework for Supplier Engagement

The framework for supplier engagement consists of two stages: 

1. Stage 1 focuses on developing a supply chain engagement strategy 

2. Stage 2 focuses on implementing the supply chain engagement strategy

Stage 1: Develop a supply chain engagement strategy to reduce upstream emissions

Step 1: Identify suppliers to engage with

To develop a sustainable strategy, the company must first (1) identify the suppliers to engage with and then (2) formulate the strategy. 

The most effective strategy proves to be starting with the highest emitting suppliers and once those are identified, moving on to the rest. 

How can Net0 help to identify suppliers? 

• Organize all of your suppliers in one place:
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  Net0 emissions management platform allows businesses to list all suppliers in one place. Listing and organizing all suppliers in one platform is especially beneficial for big companies with thousands of suppliers.

• View upstream emissions contribution by every supplier:
  
  Net0 enables companies to view emissions profiles of each vendor to identify the suppliers with the highest upstream emissions. It’s quick and simple to use and the data can be visible to team members that you give access to.

• Automate emissions data collection from suppliers:
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  Net0 enables companies to put carbon accounting on autopilot. Simply connect Net0's system to invoices from suppliers or via API integrations, and data from each of the suppliers will automatically flow in your Net0 platform. 

Step 2: Formulate the strategy to reduce upstream emissions

Once all suppliers are identified and organized, the strategy of engagement should be formulated. 

The strategy should be actively promoted by the CEO, CPO and other responsible leadership teams across various departments of the company. 

How can Net0 help to formulate a strategy? 

• Get matched with sustainability experts and ESG consultants: 

Net0’s community of professional consultants (both agencies and individual experts) offers great help when it comes to formulating strategies. Depending on the industry, location and other requirements, Net0's team will help you find an expert to work with to consider available resources and constraints, and define a clear strategy with measurable and reliable goals. 

Related content:
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To learn about more strategies and approaches, take a look at these free resources about guides and regulations:
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• Article: GHG Reporting: Everything You Need to Know
• Article: Scope 3 Emissions: Contributing Factors, Measurement and Reduction
• Article: Scope 4 Avoided Emissions: What You Need to Know

Stage 2: Implement a supply chain engagement strategy

Step 3: Communicate with suppliers

Establishing a transparent and effective two-way communication with suppliers is a crucial step in the process. The company's goal will be to inform suppliers of desired actions and outcomes as well as collect data to monitor progress and improve processes. 

Sometimes establishing such communication might not be as easy as suppliers might choose not to disclose the information. In fact, if two companies request a supplier to disclose to the CDP, there is a 68% probability that the supplier will respond. If three companies send a request, then there is a 76% likelihood they will respond, according to reporting statistics provided by the Gold Standard.

How can Net0 help to improve communication with suppliers? 

• Leave communication to professional consultants:
  
  Reaching out to suppliers might be costly and take a lot of time. Understanding how to define responsibilities can also be a challenge and may cause misinformation and data gaps amongst suppliers. Net0's consultant partners can help work with suppliers directly, establish communication channels, define responsibilities, and keep up communication in the future to ensure the emissions data provided is up to date and reliable.

• Use APIs to collect and organize the data:
  
  Make the most out of 350+ integrations available to collect the data from suppliers and track the progress on the Net0 platform’s dashboard. Collect data through API, machine-learning powered OCR, invoices, and more sources. 

Step 4: Collaborate with suppliers

Consistently collaborating with suppliers is important for achieving long-term goals. This determines the methods with which the suppliers will engage. These methods can fall under the following categories: 

• obligatory (e.g. standards)

• voluntary (e.g. promotion) 

• competitive (e.g. a rating/scoring system)

The cascade mechanism is effective for suppliers to engage with each other throughout various tiers of the supply chain to adopt upstream emissions reduction targets.

How can Net0 help to collaborate with suppliers? 

• Connect your suppliers to Net0.

Net0's software solution aims to make carbon accounting and emissions management as seamless for all value chain participants as possible. Automating data collection through integrations with ERP systems and API access simplifies data collection on an ongoing basis and ensures accuracy. 

Step 5: Support your suppliers

Since there are many challenges along the way (such as emission data gaps, inability to organize data, sparse and of poor quality data, and the high cost of acquiring the information), constant support is needed for smooth cooperation. 

How can Net0 help to support suppliers? 

• Utilize Net0's consultants for ongoing support.
  
  Whether the business prefers a one-off workshop to cover certain questions, or prefers to follow a more partnered approach when working with suppliers, Net0's community of partners is flexible with the requirements of the business. 

Step 6: Monitor emissions by assessing actions

Monitoring your emissions actions is key when following a carbon reduction strategy to assess progress and make even more robust emissions targets every year.

How can Net0 help monitor progress? 

• Internal dashboard: 

The Net0 platform records all emissions, categorizes and itemizes emissions by activities, vendors, or emission scopes, provides businesses with in-depth analyses, and empowers teams to track the progress of the way to net zero.

• Public access dashboard: 

Progress can also easily be communicated to the public, media, investors, and end consumers via the public dashboard that companies can give access to by sharing their customized link. Being transparent by communicating their efforts with others in the ecosystem with live data, increases trust, loyalty, and drives strong, reliable partnerships. 

Step 7: Reinforce your climate actions

The last step of the process is the one that creates measurable and continuous impact across the value chain. 

At this stage of the process the company should actively and continuously employ reinforcement mechanisms, positive or negative, to incentivize action. 

How can Net0 help to take practical actions to reduce upstream emissions for good? 

• Use predictive technology and simulation tools:
  
  Net0's simulator tool enables businesses to accurately measure the impact of internal business process changes. The tool allows businesses to see the impact of their actions (e.g. what happens if the business changed the supplier or the supplier switches to renewable electricity), understand which actions accelerate the progress towards set targets, and see the trajectory of the carbon emissions profile.

• Set targets:
  
  Set measurable, achievable, timely targets on the yearly basis and share them with the rest of the company.

• Use benchmarks: 

Compare your business targets and processes to other players in your industry. See what other companies are committing to and which actions they are taking to get to their targets.

• Add actions to take directly to the platform: 

Create a to-do list for your team. An intuitive tool allows managers to organize action cards according to the completion stage and stay on top of the current progress.

• Appoint responsibilities to team members: 

Allocate actions and assign tasks to team members where they can contribute on personal dashboards. Track the progress of the team collectively on the company dashboard and see the contributions of every team member, all in one place.

• If necessary, find new or alternative vendors: 

Sometimes to achieve targets, the business would need to consider switching to more sustainable vendors with a lower emissions profile. Green Vendor empowers businesses to find and switch to new suppliers.

Final thoughts about reducing upstream emissions

Involving vendors and other players in your supply chain to help reduce upstream emissions is a necessary practice to mitigate carbon and significantly cut carbon emissions across the supply chain. The framework for supplier engagement developed by the Gold Standard is a helpful step-by-step guide on how to approach management of value chain CO2 emissions. While the framework is a great guide, practical tools are needed to accurately follow each of the steps outlined in the framework. Net0 carbon accounting software offers a practical solution for each of the stages of the process and transforms the way businesses connect with suppliers, collect data, and improves transparency with its precision. Data analytics available on the Net0 platform translates these into actionable insights, empowers team involvement, promotes transparency, and significantly improves the decision making process within the business as well as outside of internal business processes. 

For most companies, acting to reduce carbon emissions throughout the value chain is one of the most important and impactful steps that can be taken to fight climate change. Net0 makes the transition smooth and effective.

Go one step further and make the decision to book a free call today with an expert from Net0. Experience how the platform takes your upstream emissions data and converts it accurately to carbon tonnage, making it easy for you to measure, track, pinpoint and reduce emissions from various sources, offset, accurately report, and get carbon-neutral certified.

Cover photo by Chris LeBoutillier from Pexels