By Anthony Casciano, CEO, Siemens Financial Services Americas and Erika Gupta, R&D Group Head for Sustainable Buildings and Grids, Siemens Technology
If you’re not yet feeling the pressure to decarbonize your business, you soon will. How you handle that pressure will determine your long-term success. But what exactly does this mean for you and where should you begin? For starters, it’s important that you understand what contributes to your carbon footprint and how to properly reduce it.
In the business sector, greenhouse gas emissions are categorized by Scopes 1, 2, and 3. Scope 1 emissions are those generated directly from fuel used on-site for company facilities and vehicles. Consider a manufacturer of medical supplies – its Scope 1 emissions can come from the boilers and furnaces within its facilities and the vehicles used to deliver supplies to hospitals.
Scope 2 emissions are indirect and associated with the purchase of electricity, steam, heat, or cooling for the facility. While these emissions aren’t generated on-site, they are an upstream consequence of the company’s energy use. The HVAC systems and lighting in the medical supply manufacturer’s facilities generate off-site emissions.
Historically, companies only reported on their Scope 1 and 2 emissions and due to a lack of consumer awareness and knowledge, a window existed where they could mask their emissions by outsourcing. The medical supply manufacturer could sell its delivery vehicles and rent them from a separate company. While the manufacturer would still produce the same emissions by using rented vehicles versus owned, those emissions technically fall to the owner of the rental company and not on the manufacturer. These are now referred to as Scope 3 emissions.
Scope 3 emissions are those generated by the assets in a company’s supply chain and often represent the majority of an organization’s total emissions. One company’s Scope 3 emissions are another company’s Scope 1 and 2 emissions.
Consumers are now holding companies accountable for their Scope 3 emissions and demanding action. Although not yet required, more and more companies are increasing transparency, recording and reporting their Scope 3 emissions along with 1 and 2. As a result, many large companies are cascading climate action down the supply chain to their suppliers and considering emissions heavily in the supplier decision-making process.
At Siemens Financial Services, we now require a carbon assessment from all suppliers as part of our vendor-selection process – and we’re not alone. For the medical supply manufacturer, this may mean switching to a rental company with electric vehicles, taking business away from its original rental company.
Companies making up our world’s supply chains must implement decarbonization strategies in order to remain competitive in the market. Suppliers and customers both must prioritize decarbonization expectations or risk losing significant business.
There are many resources at the state and federal levels to help companies decarbonize, as well as financial incentives from lenders. The goal of Siemens’ Kickstarter Capital program is to take the guess work out of decarbonizing by simplifying the entire process with a comprehensive solution that will benefit your business. Participants will consult with a team of Siemens finance and technology experts to create a custom, end-to-end decarbonization roadmap. Along with financing, participants will receive a scalable roadmap that integrates Siemens Smart Infrastructure products, solutions, and services such as energy efficiency technologies, alternative renewable energy sources and electric vehicle charging infrastructure.
Any business can tap into available decarbonization resources to defend their place in the market from reducing Scope 1 emissions by trading fuel fired boilers for electric heat pumps in a facility to reducing Scope 3 emissions by implementing an integrated vendor selection process, or something in between. At the end of the day, it’s sure to benefit business and the planet.