Using Supply Sheds to Decarbonize Agricultural Supply Chains

Myra Fong

28 Apr, 2025

The Science Based Targets initiative (SBTi) is currently exploring new ways in which companies manage emissions within complex supply chains. On March 18, 2025, it released a draft version of its Corporate Net-Zero Standard V2, which includes potential changes that could provide companies with new strategies to address hard-to-trace upstream emissions.

One notable development in the draft is the recognition that when direct traceability to emission sources is not feasible, companies may implement interventions at the activity-pool level, such as within Supply Sheds. This approach could be particularly relevant for sectors like agriculture, where direct traceability to suppliers is often impractical due to the dispersed and dynamic nature of the supply chain. But first, let’s take a step back and learn what a Supply Shed is.

What is a Supply Shed?

The concept of a Supply Shed, introduced by the Value Change Initiative (VCI), helps companies manage greenhouse gas (GHG) emissions even when they cannot trace raw materials to specific farms or suppliers. If sourcing can be credibly linked to a defined region—such as a country, province, or local area—that region can serve as a single “activity pool” for climate interventions. While companies may lack farm-level traceability, they typically know which collection centers their materials come from. These centers collect commodities from surrounding farms and deliver them to processing plants, as illustrated in the figure below.

According to VCI, a Supply Shed is:

“A group of suppliers in a specifically defined market (e.g., at a national or sub-national level) providing functionally equivalent goods or services (commodities) that can be demonstrated to be within the company’s supply chain.”

This means that even without pinpointing a single farm or supplier, companies can still credibly engage in climate action by targeting the broader region where their materials are sourced from. A growing number of organizations —including ReGrow, Soil Capital, Quantis, Textile Exchange and the Apparel Impact Institute—have embraced the Supply Shed approach, recognizing its ability to coordinate regional actions, improve traceability and cut emissions across agricultural value chains.

In essence, a Supply Shed provides companies with a way to account for and address emissions associated with a geographic cluster of suppliers — offering an actionable path forward even when full traceability isn’t achievable.

Why This Matters for Agricultural Supply Chains

Agricultural supply chains often suffer from poor data quality and limited traceability. This is primarily due to the complex, decentralized nature of sourcing in agriculture, where suppliers are spread across different regions and countries, each with varying standards of record-keeping and transparency. Many agricultural products move through multiple layers of processing and distribution, making it difficult to track emissions accurately at each stage. Additionally, the data available from suppliers is often incomplete or inconsistent, which complicates efforts to measure and reduce emissions. Previously, this posed a barrier to decarbonization, since many climate frameworks required direct connections to emission sources.

The inclusion of Supply Sheds in the SBTi’s draft Corporate Net-Zero Standard V2 indicates a growing acknowledgment of the challenges companies face in achieving full traceability within complex supply chains. While the standard is still under development, this approach could offer a practical pathway for emissions reductions in sectors like agriculture, where supplier networks are often fragmented and opaque.

Upcoming: A Lock Two Three case study with Mars

Lock Two Three is already putting this development into action. In May, we’ll publish a case study showcasing how Mars, the global food and consumer products brand, used a LockStatement and the Supply Shed concept to decarbonize electricity use in its agricultural value chain. It’s a case study you won’t want to miss!

Procuring RECs on Behalf of Others: A Strategy for Value Chain Decarbonization

Myra Fong

28 Apr, 2025

As businesses set ambitious emission reduction goals, many are looking beyond their own operations to reduce their overall carbon footprint. As discussed in our last blog post, decarbonizing electricity consumption in the value chain is an accessible starting point due to the availability of multiple renewable electricity procurement options. One particular strategy gaining traction is to procure Renewable Energy Certificates (RECs) on behalf of others to decarbonize electricity use in a company’s value chain. But why would a company take this step, and how can they ensure credibility in their claims?

Supporting Upstream Suppliers’ Transition to Clean Energy

For companies with complex supply chains, relying solely on suppliers to independently procure renewable electricity may significantly delay progress towards corporate sustainability targets. Many suppliers may face barriers such as limited expertise, financial constraints, or a lack of motivation to make the transition. By purchasing RECs on behalf of their suppliers, companies can accelerate the transition to renewable energy, set a strong example, and pave the way for suppliers to take independent action in the future.

Encouraging Downstream Customers to Green Their Electricity Use

On the end user side, many customers are unaware that they can voluntarily account for their electricity use by purchasing renewable energy. Even when aware, navigating the procurement process can be challenging for individual users. Companies can address this gap by procuring RECs on behalf of their customers, enabling them to reduce their carbon footprint and foster broader clean energy adoption. This strategy is particularly relevant for industries where downstream electricity use is a major source of emissions, such as in consumer electronics, electric vehicles, and digital services like streaming or cloud computing.

Through the procurement of RECs to cover the electricity consumption of upstream suppliers and downstream customers, companies can effectively reduce their own Scope 3 emissions.

Ensuring Credibility: Documentation and Transparency with LockStatements

According to the EPA document Renewable Electricity Procurement on Behalf of Others: A Corporate Reporting Guide (2022), when a company purchases RECs on behalf of value chain partners, it has an obligation to maintain clear, transparent, and auditable documentation. This ensures that renewable electricity claims are accurately allocated and verifiable by third-party auditors.

To satisfy this need for an audit trail, Lock Two Three developed the LockStatement, a document that provides a link between a company’s value chain electricity decarbonization and their Scope 3 emission reductions.

The LockStatement contains information about what share of a value chain partner’s electricity consumption the company is responsible for, the electricity consumption period, and geographic location of electricity consumption. With this LockStatement, companies can confidently procure RECs for value chain partners, calculate their reduction in Scope 3 emissions and report their progress.

For companies looking to drive meaningful decarbonization across entire value chains, LockStatements can provide an immutable and verifiable record of REC allocations, ensuring transparency and accountability in emissions reporting.

Next post: Decarbonizing Value Chains with Supply Sheds

Be sure to check out our upcoming blog post where we’ll explore the Supply Shed concept and its role in decarbonizing value chains. Or contact us now to learn more about how Lock Two Three can help with your organizations’ value chain decarbonization journey.

Understanding Scope 3 Emissions: The Role of Electricity

Myra Fong

7 Apr, 2025

What Are Scope 3 Emissions?

Scope 3 emissions are indirect greenhouse gas (GHG) emissions that occur throughout a company’s value chain and often account for the largest share of its total carbon footprint. These emissions are generated by activities outside a company’s direct control, both upstream and downstream. (For a breakdown of Scope 3 categories and value chain structure, see our introductory post on Scope 3 emissions). While Scope 3 covers a broad range of emission sources, electricity-related Scope 3 emissions is one area where companies have a clear path to action. Before exploring that in more detail, it’s helpful to look at some of the most common sources of Scope 3 emissions across industries.

Sources of Scope 3 Emissions

Scope 3 emissions originate from a wide variety of activities across the value chain. While specific sources vary by sector, common examples include:

- Fossil Fuel Use at Supplier Factories: Many suppliers still burn fossil fuels, such as natural gas or coal, to generate steam or heat for manufacturing processes. The resulting emissions are embedded in the carbon footprint of the raw materials that a company purchases from these suppliers.
- Methane Emissions from Agriculture: Agricultural supply chains release methane (CH₄) through various processes, including livestock digestion, manure management, and rice cultivation. These activities are significant contributors to global warming, as methane is 28 times more potent than CO₂ at trapping heat in the atmosphere.
- Transportation and Distribution: The movement of raw materials and finished goods generates emissions from fuel combustion in trucks, ships, and airplanes.

Use of Sold Product: Some products generate emissions during use – throughout their lifetime. These emissions can be direct, (e.g. carbon dioxide emitted from driving a car) or indirect (e.g. emissions generated to produce electricity to power an electronic product).

While these examples highlight the breadth of Scope 3, electricity plays a unique role across multiple categories—particularly in supplier operations. The next section explores why electricity-related Scope 3 emissions present a focused opportunity for emissions reductions.

The Challenge of Scope 3 Reductions – and the Role of Electricity

Reducing Scope 3 emissions remains one of the most complex challenges in corporate decarbonization. While companies can redesign processes to use low carbon materials, or reroute supply chains to reduce emissions from transportation, they often struggle to influence activities outside their direct control. Emissions data from suppliers or downstream partners can be difficult to access or verify. However, electricity use often represents a known, consistent input – and, given the availability of renewable energy solutions, one that can be addressed without needing to overhaul entire supplier operations.

When a supplier consumes electricity, those emissions fall under the supplier’s Scope 2 – but they are also included in the reporting company’s Scope 3 emissions. This overlap creates an opportunity: by supporting suppliers with decarbonizing their electricity consumption, companies can reduce their own Scope 3 footprint in a measurable and targeted way.

Electricity is also a more standardised and traceable input than many other Scope 3 categories. It’s typically easier to quantify than emissions from raw materials, transport logistics, or product end-use, and in most markets renewable energy procurement is a mature, widely available solution. Understanding how electricity-related emissions show up in different sectors can help companies identify where interventions are likely to have the most impact.

Electricity Use by Sector: What the Data Tells Us

To better understand where electricity use plays a material role in supply chain emissions, it’s useful to look at sector-level data. Insights from CDP highlight industries where Scope 2 emissions, largely from electricity, make up a notable share of total emissions. These sectors include Chemicals, Food, Beverage & Tobacco, Paper & Forestry, Real Estate, and Steel.

However, the electricity intensity of certain sectors is not always clearly reflected in aggregated reporting categories. Industries such as data centers, aluminum production, textiles, electronics, and semiconductor manufacturing may fall under broader classifications, but often rely heavily on purchased electricity. In semiconductor fabrication, for example, electricity alone can account for up to 45% of a facility’s carbon footprint.

For companies with suppliers in these high-electricity sectors, enabling access to renewable electricity can be one of the most direct and scalable ways to reduce Scope 3 emissions. One way to support this transition, and to account for electricity-related emissions reductions in a verifiable way, is through the use of Renewable Energy Certificates (RECs).

The Role of Renewable Energy Certificates (RECs)

RECs are a market-based instrument used to verify that electricity was generated from renewable sources. When companies purchase RECs, they can match their electricity consumption with clean energy – even in markets where direct procurement through power purchase agreements (PPAs) or on-site solar isn’t feasible. As such, RECs are one of the most widely used instruments for addressing Scope 2 emissions.

For companies seeking to decarbonize their supply chains, supplier electricity use presents one of the few areas where Scope 3 emissions can be directly influenced and credibly reduced. Because electricity-related emissions fall under a supplier’s Scope 2 and the buyer’s Scope 3, RECs can support verified reductions in Scope 3 Category 1: Purchased Goods and Services.

In certain situations, companies may wish to take an active role in supporting a suppliers’ transition to renewable energy, with interventions that could include encouraging suppliers to procure RECs independently, providing guidance or technical support, or – in some cases – purchasing RECs on their behalf. These interventions can help overcome market, regulatory, or capacity barriers that would otherwise prevent supplier action.

However, attribution is not always straightforward. In complex or shared supply chains, it can be difficult to link a supplier’s REC-backed electricity use to a specific product, production run, or customer. Establishing clear and auditable boundaries is essential for companies looking to make credible Scope 3 claims.

In our next blog post, we’ll explore how LockStatements can help address this challenge by enabling RE purchases to be tracked, attributed, and validated across supply chains. Stay tuned!

Why Scope 3 Emissions Matter More Than Ever

Myra Fong

19 Feb, 2025

As an increasing number of companies set ambitious climate targets to reduce their overall carbon footprint, managing indirect value chain emissions has emerged as a key priority. While Scope 1 direct on-site emissions and Scope 2 emissions from purchased energy have been comparatively easier to reduce, Scope 3 emissions remain a challenge because they come from areas in the value chain that the company does not directly control. These emissions often make up the largest share of a company’s carbon footprint, and addressing them is essential for real progress toward climate goals.

The Role of Scope 3 in Corporate Sustainability

The proportion of total emissions from Scope 3 varies greatly by sector, ranging from 16% in the cement industry to 100% in financial services. Companies that fail to address Scope 3 emissions risk falling short of their net-zero commitments.

Scope 3 Categories

There are 15 Scope 3 categories, divided into upstream and downstream activities in the company’s value chain. Upstream emissions are those that occur from activities associated with producing and delivering goods and services that a company purchases, including purchased raw material and transportation. Downstream emissions are those that occur after the product leaves the company’s gates, including emissions emitted from use of the product and end-of-life disposal. These emissions include carbon dioxide, as well as other greenhouse gases such as methane, nitrous oxide and hydrofluorocarbons.

The relevance of each category varies by industry. For example, a significant portion of an electronics company’s Scope 3 emissions will come from use of the sold product, category 11. By assessing their value chains, companies can identify emission hotspots and opportunities for reduction.

The Bottom Line

Scope 3 emissions are no longer an afterthought—they are central to corporate sustainability. Businesses that take action now will build long-term resilience in the low-carbon economy. Ready to take the next step? Sign up for Lock Two Three to explore how your company can take real action on Scope 3 emissions.