From June issue, NZ Manufacturer magazine.

-Insa Errey

In the ever-evolving landscape of regulations, New Zealand manufactures find themselves connected to the regulatory frameworks of key trading partners such as the European Union (EU). The EU has positioned itself as a global leader in climate action, with ambitious targets set under the European Green Deal and the European Climate Law.

As part of its efforts to reduce greenhouse gas emissions, the EU has implemented regulations on Scope 3 emissions reporting through directives such as the Non-Financial Reporting Directive (NFRD) and the EU Taxonomy Regulation.

Understanding the impacts of Scope 3 regulations in these markets is crucial for New Zealand manufacturing. Let’s delve into how regulations in the EU can shape the strategies and operations of New Zealand manufacturers.

First what is Scope 3?

Scope 3 emissions refer to indirect greenhouse gas emissions that occur in the value chain of a company, including both upstream and downstream activities. These emissions often result from activities such as the production of purchased goods and services, transportation and distribution, and waste disposal.

For any EU customer this may just be your manufacturing sites Scope 1 or 2 emissions. Meaning the emissions your site emits from use of direct combustion (scope 1) or indirect emissions on site from purchased electricity (scope 2).

What does this mean for NZ manufacturers?

Market Access and compliance pressure to adhere to these standards is required for exporting to the EU which governs Scope 3 emissions disclosure and reduction. Failure to meet these requirements can result in barriers to market entry.

In a global market increasingly, prioritising emissions reduction is becoming an advantage, as exporters can face competition from countries with lower carbon footprints. Failure to manage or measure emissions can put NZ manufacturers at a competitive disadvantage and could impact market share.

Even if you are not directly exporting to the EU you might find that your product ends up selling in these markets and as such the supply chain now requires supply chain transparency on scope 3 emissions. Supply chain transparency means gaining comprehensive visibility of the supply chain to identify emission hotspots and opportunities for improvement.

This involves engaging with suppliers and partners to collect data on emissions across the entire value chain. Requiring monitoring and reporting of emissions associated with raw materials, production processes, and distribution channels, which may just include your site.

An example of Nestlé’s Net Zero Roadmap

Nestlé, a global food and beverage company, has responded with thorough supply chain transparency measures to trace the origin of raw materials and assess environmental impacts. By working closely with suppliers, Nestlé aims to reduce Scope 3 emissions associated with its products and promote sustainable sourcing practices across its supply chain.

Putting pressure on the likes of their major NZ suppliers which include Fonterra. Fonterra has responded with their own scope 3 targets. Targeting a 30% intensity reduction in on-farm emissions by 2030 which aims to accelerate emissions reduction and provide transparency within their own local scope 3.

Addressing your emissions is not just a matter of environmental responsibility, it’s now a strategic advantage. Understanding and calculating your emissions is a great starting point and key for businesses to maintain competitiveness in the marketplace.