We recently published our annual Environmental Impact Report, which documents Scott Logic’s carbon footprint in 2022, describes what we are currently doing to reduce our ongoing environmental impact, and sets out our roadmap to net zero. I’m extremely proud that we are managing to reduce our total emissions even as our business grows. Go read the report for all the details. In this post, I share some thoughts and work that we’ve started doing alongside our reduction efforts.
In analysing our emissions, it’s pretty stark that Scope 3 emissions – those from all other indirect sources that occur throughout our value chain – constitute 98% of our total carbon footprint. Scott Logic is not some anomaly here, nor is this a trait particular to either the professional services or technology industries to which we belong. In its baseline year, IKEA – a bold climate leader committed to reducing Scope 1, 2 and 3 emissions – identified that 98% of its emissions originated in its value chain. Wherever you look, you’ll see 90%+ of organisations’ emissions attributed to Scope 3 (unless perhaps they didn’t measure their full Scope 3 emissions).
A number of significant categories of Scope 3 emissions have relatively direct measurement methods based on typically available information. For example, business travel emissions can be readily derived by combining travel distance, mode of transport and standardised conversion factors (e.g. those from the Department for Energy Security and Net Zero).
However, the majority of Scope 3 emissions are the result of an organisation’s suppliers. These are typically calculated using spend-based conversion factors rather than measured using a more direct means. That is, the money spent with a supplier is multiplied by a rough industry-level approximation of associated emissions.
The margins of error in this approach are pronounced, particularly when it comes to professional services. For example, using this method, Scott Logic’s indirect emissions from recruitment agents in our supply chain were roughly 66 tCO2e. That’s slightly more than all our travel and commuting! But think back through the methodology and the business model of recruitment agents and it makes sense: recruitment fees (i.e. the spend with this supplier type) are linked to the value of placed candidates, not the effort (as a proxy for emissions) associated with placing them.
But we’re a supplier too!
So how can we improve these measurements? “Better, more accurate methodology” is typically the first answer that springs to mind. But more pragmatically, environmental sustainability is an ecosystem challenge best tackled through collective action.
We believe the better approach is for suppliers self-reporting the environmental cost of their services/goods. We already have a well-understood ecosystem for this around financial cost (the price sticker…), and we need to head towards something similar for environmental cost.
The most obvious place I have noticed this creeping in is with travel bookings, where carbon footprint comparisons are now offered on many sites between say, car travel and the train journey you’re booking. Elsewhere, the fundamentals for this are already happening for some physical goods – you can, for example, look up the embodied carbon and energy consumption of Apple and Dell hardware. And, the big cloud providers are providing ever-improving tooling for you to calculate emissions associated with software you run on their infrastructure. But I’m starting to run very thin on examples beyond that.
I have participated in many sustainability conversations with experts and others in industries related to ours that highlight and lament this “supply chain challenge”. However, there seems to be little recognition that nearly all of our businesses are themselves suppliers! How can we complain that our suppliers do not report the specific environmental cost of what we purchase when we ourselves similarly do not?! If we’re all waiting for our suppliers to answer the question before we can, then we’re stuck in a deadlock.
Our first stab at an approach
I believe organisations need to recognise and embrace imperfection, for the sake of progress. If an organisation can measure its own environmental impact, then it should be exploring methods appropriate to its value proposition for attributing appropriate elements of that downstream. The figures may not be entirely accurate, but if the ecosystem around them is freed from its deadlock then methods will rapidly evolve, mature and standardise. If the deadlock remains then no progress will be made.
My initial exploration of existing methodologies suitable for Scott Logic as a professional services business only found “attribute your total emissions to clients based on the proportion of your total revenue generated from that client”. While I understand the rationale for that approach, I have two fundamental issues with it:
- It suggests that financial price is a direct proxy of effort and associated emissions. It is no secret in a professional services business that not all clients enjoy the same rates, and that more experienced individuals attract higher rates than more junior individuals. A short, heavily discounted R&D project with a team of junior developers may cost less than a long-running advisory engagement with a principal consultant, but its environmental impact is intuitively greater.
- It attributes ALL the business’ emissions to clients, suggesting that no element of the organisation exists or happens for any reason other than to create value for clients. I don’t believe that to be true, certainly not here at Scott Logic, where we openly recognise in both our Purpose and Missions that we exist to create wider value as well.
Instead, we’re trialling a methodology where for each client, we have apportioned Scott Logic’s total month-by-month GHG emissions based on a ratio of the client-assigned headcount to Scott Logic’s total headcount. I believe this improves on #1 above, as it uses people and time as a more accurate proxy for emissions for a professional services business. This method also addresses #2, since there will always be a proportion of our footprint attributed to Scott Logic because we employ people in non-consultancy roles. So, even if at some point all our consultants were assigned to client work (rarely/never happens in practice), there are still other individuals in our total headcount to whom a proportion of our emissions are attributed.
And, to top this off, our records include all travel expensed to clients – travel that is not included in Scott Logic’s GHG emissions measurement. This allows us to calculate the associated environmental impact and report that to our clients alongside the carbon cost of delivering our services.
I’m not claiming this approach is perfect. By sharing this, I’m hoping to provoke other, brighter minds into action on this matter, and to open a dialogue. None of us can solve this problem individually but collectively we can make progress.