Scope 3 Emissions - What You Need To Know
The global conversation about climate change has led to increased scrutiny of carbon emissions across all industries.
While Scope 1 and Scope 2 emissions are relatively well-defined and regulated, the complexities of Scope 3 emissions make them a challenging aspect to tackle. It can make calculating Scope 3 emissions feel like an overwhelming and insurmountable task.
Below we have answered the top 6 commonly asked questions by our clients.
What is Scope 3?
Scope 3 emissions are those throughout a company’s value chain that are not included in Scope 1 or 2 and that the company does not have direct control over.
The Greenhouse Gas Protocol splits Scope 3 into 15 categories, 8 that cover upstream activities and 7 that cover downstream.
Do you have to report to all 15 categories?
No. The Greenhouse Gas Protocol recommends only reporting on those categories that are material to your business.
What makes them material?
Categories can be material for a range of reasons; they could be a significant source of emissions, a source of risk for your business, important to your stakeholders, recommended by an industry body, or be a category that your company has influence over.
The Greenhouse Gas Protocol suggests estimating (at a high level) the emissions from each category to determine which categories contain the largest emissions and starting from there.
How do you calculate the emissions?
Scope 3 is the same as Scope 1 and 2, whereby it relies on the use of activity data and emissions factors to determine the amount of greenhouse gases released under each category. For most categories companies will need to start with generic activity data and average emissions factors from approved databases.
Data quality and specificity can be improved over time for the most important categories, replacing average data with site-specific measurements.
The greatest time, effort and cost should be spent on those categories that account for the highest proportion of your emissions or have the greatest potential for reductions.
What about double accounting?
People often question whether Scope 3 accounting is in itself double counting, as what one company reports in their Scope 3 will be another company’s Scope 1 and/or 2 emissions. Guidance is clear that double counting should be avoided when calculating emissions, and all measures should be taken to avoid double counting within your Scope 1 and 2 accounting.
However, it is accepted that there will always be overlap between the Scope 1 emissions of one company in a value chain and another company’s Scope 3.
This is not a reason to ignore Scope 3 emissions: understanding emissions from your value chain is the first step to being able to make changes to your business processes and operations that will reduce your company’s overall emissions impact.
What is the future of Scope 3 Emissions?
The future of Scope 3 emissions is poised to be a central theme in sustainability efforts as the world intensifies its focus on climate change mitigation. Proactive engagement with these emissions will position companies favourably for a sustainable future, driven by several key factors:
Firstly, heightened regulatory pressure globally will necessitate increased disclosure and reduction of Scope 3 emissions. Simultaneously, consumer and investor expectations for transparency and sustainability commitments will rise, granting a competitive edge to companies that prioritise Scope 3 emissions.
Furthermore, stakeholders' awareness and advancements in data collection, analytics, and supply chain management tools will streamline the management and reduction of these emissions, while fostering global collaboration and cross-industry initiatives will collectively address Scope 3 emissions on a broader scale.
Sustain:able regularly assists companies with their emissions accounting, forecasting and reduction planning. More and more of our clients are asking for assistance in calculating their Scope 3 emissions.
Please do get in touch if we can help you with understanding and reporting your emissions and wider ESG data.