Matthew Bateson – former vice president of environment, closure and climate change at Rio Tinto, former vice president corporate affairs at Shell and Critical Resource’s senior advisor – argues that companies need to improve their understanding of the emissions in their value chain before setting scope 3 targets, and that the mining industry can learn from the oil and gas sector in creating more effective industry-wide climate action.
Understanding of scope 3 emissions issues is still maturing
“Resource companies are starting to understand the need to take action on reducing scope 3 emissions – particularly those which come from the use of sold products and are by far the largest share of lifecycle emissions for natural resource companies. There is increasing recognition that it will not be enough for companies to commit to decreasing their operational emissions (scopes 1 and 2), or even to produce hydrocarbons or metals at net zero emissions. Addressing scope 3 emissions will be necessary to meet the central objective of the Paris Agreement, which is to limit average global warming to well below 2°C above pre-industrial levels. Therefore, companies are starting to look at what their role is along the whole value chain.
As part of this, a handful of companies have announced they are setting scope 3 targets. Shell has put a lot of effort into understanding scope 3 emissions, the related business and financial risks and opportunities and what this might mean for its business strategy. It is now looking to change the mix of what it produces and sells to its customers. It has stated an ambition of becoming the world’s largest renewable energy company. BHP also recently announced that it will set targets for reducing customers’ carbon emissions. Both companies have faced a degree of cynicism around whether this is greenwashing given the limited ability of companies to currently influence activity in their supply chain. Nonetheless, such criticism often accompanies first-movers, when actually they should be applauded for taking up the challenge.
The problem with a few individual companies taking the lead and setting scope 3 targets is that it can encourage investors and other stakeholders to focus on this as the answer, and to put pressure on companies to set targets they are not yet ready for. This risks poorly thought-through knee-jerk reactions just to tick ‘compliance’ boxes. At this stage, I am not convinced that targets are necessarily the answer to drive action on scope 3 emissions. Targets can act as a useful measure of progress against a clear business strategy and performance ambition. But they need to be well thought-through. Before focusing on targets there needs to be a maturity of understanding of the scope 3 challenge, what can be done along the value chain and what the role of individual companies can be.”
The mining sector can learn from the energy sector in terms of industry collaboration on climate change
“Companies are looking to differentiate themselves against their competition on climate change, and this is having the positive effect of raising the bar on performance and driving new initiatives. However, there is also scope for peer companies to work together. The mining sector would benefit from a consolidated voice with an ambitious position on challenges around reducing scope 3 emissions and supporting the ambitions of the Paris Agreement. Efforts towards reducing emissions would benefit from alignment on the technologies in which suppliers or customers might invest, such as through the ICMM-led Innovation for Cleaner Safer Vehicles initiative, or from achieving a critical mass to scale-up natural climate solutions. If the industry is able to align and put forward a consistent set of climate policy recommendations, this could help governments as they seek to design policy and regulation. A coherent approach would also mitigate accusations of inconsistencies in policy advocacy and lobbying efforts.
The mining sector would do well to reflect on what the oil and gas industry has done through the Oil & Gas Climate Initiative. CEO alignment on climate policy statements, commitments around issues such as flaring and methane emissions, and financial commitments to support investment in emission reduction technologies have been positive for the oil and gas industry.”
Perceived inconsistency by companies in their lobbying practices has invited criticism
“Many companies, particularly those with stronger public commitments on climate change, have faced scepticism and criticism for being members of industry associations that promote contradictory (and often regressive) policy positions on climate change. In many cases it is important and necessary for companies to be able to use industry groups to lobby for commercial interests or seek specific protection for an industry. It should also be recognised that it can be challenging for companies to influence or dictate how industry associations should act on climate change.
Some companies are responding to stakeholder criticism by releasing reports that clarify why they remain a member of a specific association and highlighting their engagement strategies with the association on climate issues. This can often be a more proactive approach than being publicly defensive. Ultimately, however, when the actions of an association are perceived to hinder a company’s initiatives to combat climate change, and where there is little scope to influence change, a company might need to consider pulling out from that association in order both to meet stakeholder pressures and to be able to pursue its own strategy on climate.”