As Demand for Transparent and Sustainable Telco Operations Increases, How Should Operators and Vendors Be Addressing Scope 3 Emissions?

Scope 3 emissions typically contribute over 80% of a telco’s overall emissions, arising from upstream and downstream activities that are often outside of their direct control and difficult to address. These emissions include those from suppliers through the purchase of goods and services and from customers during the use of products sold. In recent years, telcos are facing increasing pressure to address these emissions by creating sustainable and energy-efficient operations amid rising network traffic demand.

Despite successfully implementing initiatives to cut Scope 1 and Scope 2 emissions, Scope 3 emissions have typically been overlooked by telco companies. Over the last couple of years, mandatory disclosure regulations and increasing stakeholder pressure to cut emissions have emerged as effective mechanisms to improve the transparency of an organization’s environmental impact and demand accountability. Some telco organizations have responded to these pressures promptly, but most are still coming to grips with Scope 3 measurement and reporting responsibilities.

The majority of telco organizations globally are still in the early stages of addressing and reducing Scope 3 emissions. There are clear regional disparities in progress, with European companies leading the efforts to measure, report, and manage emissions from their value chains. This is expected as European telcos face stricter external pressure from the Corporation Sustainability Reporting Directive (CSRD) to disclose emissions and implement environmentally conscious practices. Initiatives to reduce emissions are also being driven by the cost-saving potential associated with energy-efficiency improvements and investor/customer expectations.

Companies in Europe are demonstrating efforts to reduce Scope 3 emissions through progressive target setting, robust Scope 3 reporting, close supplier engagement, energy efficiency solution development, and establishing corporate-level teams to ensure effective strategy implementation. However, progress in North America and Asia-Pacific on tackling Scope 3 has been slower, particularly in Asia-Pacific, where most companies do not report Scope 3 emissions and have not established net-zero targets.

On the vendor side, Nokia is among the leaders of companies showcasing their commitment to reducing Scope 3, targeting emissions from the use of sold products, which account for around 97% of its total Scope 3. To minimize energy consumption from its product portfolio, Nokia is embedding energy efficiency into its entire product development process from design to manufacturing to circularity. The development of solutions to enhance energy efficiency of network equipment has been critical to Nokia’s success, helping its customers minimize energy consumption. Nokia’s MantaRay Energy solution, for example, leverages Artificial Intelligence (AI)-powered Radio Access Network (RAN) energy-saving features to help customers reduce cell site energy consumption by up to 30%. Through its solution portfolio, Nokia has managed to reduce Scope 3 emissions by 10% and reached its target of halving average energy consumption of 5G Massive Multiple Input, Multiple Output (mMIMO) base stations, while doubling performance compared to a 2019 baseline.

On the operator side, Telefónica reports that over 50% of its Scope 3 emissions originate from its supplier base, so it has developed an industry-leading phased approach to engage with categorized groups through its Supplier Engagement Program (SEP). Through the initiative, Telefónica requires 200 of its key suppliers to disclose its emissions through the CDP Supply Chain program and establish emissions reduction targets, which has contributed to overall Scope 3 reductions of 31% between 2016 and 2023.

Strategies to reduce Scope 3 emissions will differ for vendors and operators based on their product portfolios and role within the telco market. Typically, the bulk of operators’ Scope 3 emissions originate from their suppliers when purchasing goods and services. For Verizon, for example, 81% of its Scope 3 emissions are from its suppliers from the purchase of network equipment and components. The focus for these companies should be on strategic supplier engagement and product lifecycle management of purchased and capital goods. For vendors, the majority of emissions occur from the use of sold network equipment by customers. For Ericsson, use phase emissions account for 94% of total Scope 3 emissions. For telco hardware and software vendors, most Scope 3 emissions (up to 99%) come from the “use of sold products,” particularly the energy use of sold equipment. Vendors should focus on improving the energy efficiency of products such as mobile devices and network equipment, and incorporate power-saving features into RAN infrastructure. ABI Research also recommends the following best practices to tackle Scope 3 emissions:

• Measure and Report: Standardized and transparent Scope 3 reporting is key to understanding emission hotspots, determining emissions baselines, and tracking progress over time. High-quality, third-party verified emissions data are becoming necessary to attract both investors and customers. Telco organizations must work to continuously evolve their calculation and reporting practices to make continuous improvements and keep up with industry best practices.
• Establish Targets & Strategy Roadmap: While Environmental Social, and Governance (ESG) goals related to the reduction of Scope 3 emissions do not necessarily translate to sustainable practices, setting progressive environmental targets and forming a detailed strategy around them can help to form a structured roadmap for achieving significant reductions in emissions. Telco organizations should commit to setting targets using standards, tools, and guidance from the Science Based Targets initiative (SBTi).
• Leverage Third-Party Resources: Utilizing information and tools from organizations such as GSMA, JAC, SBT, and CDP will help companies ensure compliance with global standards, measure and manage value chain impacts, identify best practices, and enhance supplier engagement.
• Collaborate with Other Industry Players: Collaboration with among industry players is crucial to driving Scope 3 progress by sharing data, best practices, and technologies to achieve sustainable growth. Open cooperation between operators and vendors, suppliers, and customers, and aligning stakeholders will enable meaningful, industry-wide emission reductions in the industry.

Addressing Scope 3 emissions is now no longer an option, but an imperative for telco vendors and operators in an increasingly innovative and sustainable market. Adopting a more active approach to Scope 3 management and considering these emissions when building and operating networks is now critical to remaining competitive in the telco market. Integrating initiatives and programs targeting Scope 3 emissions is key to building a comprehensive and effective sustainability strategy and securing long-term growth.

See ABI Research’s Reducing Telco Scope 3 Emissions report (AN-6091) and upcoming Telco Scope 3 Emissions Management (CA-1450) competitive assessment for more information on addressing Scope 3 emissions in the telco sector.