The sense and nonsense of benchmarks and industry comparisons for Scope 1, 2 and 3

Scope 3 encompasses all indirect emissions that occur throughout a company's value chain, including emissions from suppliers and from product disposal. This area is particularly extensive and complex, as it covers a wide variety of different emission sources that are not directly controlled by the reporting company.

The materiality analysis and its impact on Scope 3

A materiality analysis can determine, which parts the value chain and which emissions in the Scope 3 a company included and which can be excluded. The analysis helps companies identify and prioritize the emission sources most relevant to their specific business activities.

Based on this individual assessment, the extent of Scope 3 vary considerably between different companies, even within the same industry. A company that uses certain emission sources in Scope 3 includes, while another may exclude them, cannot be compared objectively.

This can lead to the misconception that a company due to its specifically chosen boundaries the reporting appears more or less environmentally friendly than it actually is.

conclusion

The complexity of Scope 3 and the differences in the application of materiality analysis make it difficult to draw fair and meaningful comparisons between the emissions performance of different companies. It is important that companies and stakeholders consider these factors and exercise caution in drawing interpretations and conclusions based on such comparisons.

Industry comparisons are a tempting way to quickly and efficiently demonstrate apparent successes in company performance. However, this practice carries the risk that companies focus more on short-term objectives, which can undermine the very intention of sustainable development. This often leads to a superficial approach that neglects long-term and far-reaching environmental strategies.

Example: Outsourcing of emission-intensive activities

Outsourcing of emissions-intensive processes is a method companies use to reduce their CO2 emissions in the short term by transferring certain production steps to external service providers, often in countries with less stringent environmental regulations. This practice leads to a visible reduction in the company's Scope 1 and 2 emissions, as the emissions are now Scope 3, i.e. the indirect emissions of the value chain.

Problems and long-term effects:

• Shifting rather than reducing emissions: Total emissions are not actually reduced, but merely shifted. This can lead to an increase in global emissions, especially if the external provider uses less efficient technologies.
• Reputational risks: In the long term, the practice may be perceived as greenwashing because the company transfers responsibility for emissions to others.

To avoid these pitfalls, companies should adopt a holistic approach that focuses not only on short-term profits but also on long-term, sustainable success. This often requires a critical analysis of their own processes, a firm integration of environmental goals into the corporate culture, and a willingness to adhere to these goals even in difficult economic times.

A comparison with oneself, that is Measuring your own progress over time, offers compared to an industry comparison several decisive advantages. These differences become particularly clear when it comes to optimizing internal processes, pursuing long-term goals, and authentically presenting one's own commitment to sustainability.

1. Specific adaptation to company conditions

Internal benchmarking allows a company to tailor measures precisely to its specific requirements. Unlike a general industry benchmarking, internal analyses can provide deeper insights into company-specific challenges such as seasonal fluctuations or the impact of new technologies.

2. Continuous improvement and long-term goals

Self-comparison promotes continuous improvement by focusing on long-term goals rather than short-term benchmarks. Companies can track their progress over years, ensuring they develop sustainable strategies that go beyond temporary performance improvements. This contrasts with industry benchmarking, which often leads companies to take short-term measures to improve their rankings without achieving real or sustainable improvements.

3. Avoiding misleading external factors

Industry comparisons can be misleading because they don't always adequately account for external factors such as regional regulations, market dynamics, or varying economic conditions. A company that compares itself with its own historical data avoids these pitfalls and gains a clearer picture of its actual performance and progress.

4. Increased transparency and credibility

Companies that self-monitor their progress and communicate this information transparently build trust with stakeholders. It's normal to have high emissions levels in some areas at the beginning. This shouldn't be viewed as a disadvantage, but rather as a starting point for improvement. This type of reporting is often considered more credible than simply participating in industry rankings, which can be distorted by various manipulations. Customers, investors, and other stakeholders value companies that provide open and accountable data on their climate performance.

Internal comparisons provide companies with targeted insights that enable tailored improvement strategies, particularly in the area of emissions reduction. They allow progress to be clearly documented, thereby strengthening not only internal motivation but also external credibility.

In contrast, Industry comparisons misleading, as they do not always take into account the specific circumstances of each company and often lead to short-term decisions. Therefore, they should should only be used with caution and not serve as a basis for communication and decisions.