Corporate carbon reduction has ventured into uncharted waters. Recent environmental, sustainability, and governance (ESG) reports from various companies show that businesses have become adept at accounting for and reducing Scope 1 and 2 emissions, with information disclosure becoming routine. Some companies are also steadily approaching their carbon neutrality targets for their operations.
The real challenge now lies in reducing Scope 3 emissions, which encompass the entire value chain’s upstream and downstream emissions.
Unlike Scope 1 and 2, which focus on a company’s own operations, Scope 3 involves the entire supply and value chains, including numerous entities and categories, making it significantly more complex. For most companies, Scope 3 remains a convoluted area, with several listed companies noted to not yet disclose their Scope 3 data.
On June 13, Ant Group released its 2023 sustainability report. According to 36Kr, Ant not only disclosed its progress in reducing operational emissions since 2021 but also conducted a comprehensive Scope 3 assessment for the first time in 2023.
Ant Group, not being part of the traditional high-carbon industries, raised the question: why is an internet technology company investing heavily in assessing and disclosing Scope 3 emissions? How does Ant calculate its Scope 3 data?
Measuring Scope 3 carbon emissions
In 2023, Ant’s absolute Scope 1 and 2 emissions decreased by 43.19% compared to the baseline year 2020. Since 2021, through low-carbon operations and green electricity substitution, Ant has achieved annual reductions in operational emissions, complemented by high-quality carbon credits. Verified by the China Environmental United Certification Center (CEC), Ant has achieved carbon neutrality for its operations for three consecutive years.
The highlight of Ant’s latest carbon reduction efforts, which is also its innovative and progressive aspect, lies in Scope 3. According to the report, in 2023, Ant conducted a comprehensive Scope 3 assessment for the first time, identifying 12 relevant categories and disclosing data for 11 of them. The total emissions for these 11 categories amounted to roughly 764,179 tons of CO2 equivalent.
Challenges in Scope 3 accounting
The challenges in Scope 3 accounting are significant. According to Zhao Lijian, China country manager at Carbon Trust, the scientific quantification and public disclosure of Scope 3 emissions remains a significant challenge for most companies. Zhao added that the difficulty often lies in the lack of tools as well as the accessibility and accuracy of carbon emission data from upstream and downstream companies.
Ant has experienced these challenges firsthand. Yan Meng, global head of ESG and sustainability at Ant Group, was noted to attribute the lack of ability to manage directly, obtain, and measure accurately Scope 3 data as the core of the issues at hand.
“Ant cannot enforce carbon reduction on companies involved in Scope 3—it can only indirectly influence them through procurement or investment. In reality, these companies’ willingness and capability to reduce emissions vary, and some cannot yet provide low-carbon products or services to Ant. Moreover, during specific calculations, there are issues with the applicability of industry factors to individual companies,” Yan said.
Despite the difficulties, Scope 3 is a significant part of many companies’ carbon emissions. For example, over 90% of Apple’s emissions come from Scope 3. To truly achieve carbon neutrality, companies must inevitably tackle Scope 3 emissions.
Zhang Jiancheng, director of green and low-carbon operations at Ant Group’s ESG office, detailed the Scope 3 assessment process adopted by the company. Ant first identified 12 relevant categories from the 15 categories under the global greenhouse gas (GHG) accounting system before analyzing the data in two steps.
The first and key step is to find data sources. Ant sought to use accurate financial data to estimate emissions by identifying the specific departments responsible and collecting physical data where possible for more detailed calculations. For example, Ant estimated carbon emissions from paper procurement costs and refined this with actual usage data to achieve more accurate carbon estimates. Over 60% of the carbon emission data in Ant’s first comprehensive assessment came from physical data.
After accounting, the next step was to review the data for accuracy.
Yan acknowledged that the data accuracy remains insufficient despite Ant managing to perform a comprehensive Scope 3 assessment for the first time. However, she believes that Ant has developed a solid foundation and will be able to continue improving disclosure categories and data quality simultaneously.
Calculating carbon emissions is just the first step. For Ant, the ultimate goal is to leverage technological innovation to improve carbon reduction efficiency and support sustainable business development.
Technology as the “big gun” for carbon reduction
Different industries have different carbon reduction agendas and focal points. As an internet tech company, Ant’s carbon reduction practices and supporting capabilities stem primarily from its technological prowess.
Currently, the hottest environmental topic in tech is the surge in computing power demand driven by the artificial intelligence boom, leading to significant energy consumption and carbon emissions. The industry quips that “the end of AI is energy storage.” Consequently, energy-saving and low-carbon computing has become a new trend among tech giants like Google and Microsoft.
According to 36Kr, Ant has been exploring green computing early on, building a complete green computing capability system and deploying it at scale. Ant improves hardware resource utilization in computing applications through high-quality, efficient distributed computing infrastructure, thereby reducing computing energy consumption.
Regarding specific carbon reduction results, according to Ant’s latest data, in 2023, Ant reduced approximately 72,026 tons of CO2 equivalent emissions in upstream data centers through green computing.
Ant’s sustainable practices revolve around its business operations. Besides upstream data center carbon reduction, Ant uses technological means and financial tools to guide small and medium enterprises toward green transformation.
According to the report, by the end of 2023, Ant supported around 8.39 million SMEs in obtaining free green ratings through intelligent tools. Additionally, MYbank provided preferential green loans to 1.31 million SMEs, guiding them toward green low-carbon production.
Driving ESG momentum through Ant Forest
Ant Forest is ostensibly the most high-profile sustainability project of Ant.
For a public welfare project that has persisted for seven years, Ant Forest reflects Ant’s long-term efforts in sustainability, serving as a microcosm of its ESG practices.
Public data shows that, as of August 2023, Ant Forest users have applied for and received over RMB 34 billion in donations from Ant, planting over 475 million trees, aiding ecological restoration in 11 provinces nationwide, with 90% of trees planted in the “Three-North” areas of China.
Today, Ant Forest does more than just planting trees. From land ecological restoration to biodiversity and marine ecological protection, projects undertaken by Ant in this space continue to expand.
According to 36Kr, Ant has contributed to social public welfare protection areas totaling 4,800 square kilometers in 13 provinces across China. In marine protection, Ant Forest has restored over 1,000 acres of seagrass beds in Shandong and over 2,000 acres of mangroves in Fujian, and continues to support marine life rescue and beach plastic reduction.
Persistence and innovation are two sides of the same coin for Ant Forest. Peng Yijie, senior vice president and chief sustainability officer at Ant Group, said that Ant Forest is preparing a new initiative to help the public better understand and participate in green consumption.
Ant aims to collaborate with public welfare organizations, professional institutions, and over 600 corporate brands, leveraging its vast user base and activity level to drive green consumption among users. Specifically, it is aiming to use Ant Forest as a vehicle to incentivize green consumer behavior, encouraging the public to choose low-carbon products and services.
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Looking ahead, growth in this aspect can further promote green transformation in related industries such as tourism, transportation, apparel, and electronics, achieving broader coordinated actions.
“We believe that every small effort becomes more valuable through sustained persistence,” Peng said. “Promoting sustainable development is not a one-day task but a long-term effort that brings real change in areas needed by society.”
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Xiao Xi for 36Kr.