Scope 3 Emissions at the Forefront of Corporate Strategies Scope

Understanding Scope 3 Emissions

For most companies, Scope 3 emissions represent the largest source of greenhouse gases (GHG) emissions. These emissions stem from assets that are neither controlled nor owned by the organization, which means they can also be the most difficult to address. Yet, the global push for Net Zero coupled with looming government legislation has brought Scope 3 emissions to the forefront of sustainability and corporate strategies.

What are Scope 1, 2 and 3 Emissions?

Corporate GHG emissions are tracked in the following categories.

Scope 1:

Scope 1 emissions are direct emissions from owned or controlled sources.

Scope 2:

Scope 2 emissions are indirect emissions from the generation of purchased energy.

Scope 3:

This covers GHGs that occur in an organization’s value chain – such as purchased goods and services, employees commuting, and waste generated at various points in a supply chain.

Currently Available Scope 3 Emission Categories

Scope 3 or value chain emissions are usually the largest of an organization’s total GHG emissions.

Scope 3 emissions are broken into 15 categories that include both upstream and downstream sources of emissions. Here are a few:

Definitions of Scopes 1, 2, and 3 Emissions

Purchased Goods and Services

  • This category includes all upstream emissions from the production of products purchased or acquired by an organization.
  • Products include both goods (tangible products) and services (intangible products).

Business Travel and Employee Commuting

  • Business travel emissions include employees traveling for business-related activities in aircraft, trains, buses and cars.
  • Employee commuting emissions include employees commuting between their homes and workplaces.

Scope 3 Upstream and Downstream Transportation and Distribution

  • Scope 3 upstream transportation and distribution include emissions from the transportation and distribution of materials purchased using vehicles/facilities not owned or operated by the business.
  • Scope 3 downstream transportation and distribution include emissions from transportation and distribution of products sold to the customer, using vehicles and facilities not owned or controlled by the business.

Waste Generated in Operations

This Scope 3 category is the waste generated from a company’s owned or controlled operations and the GHGs emitted from treating and disposing of that waste (including solid and wastewater) by a third party.

Why are Organizations Measuring Scope 3 Emissions?

In addition to proposed regulations and national targets, demonstrating a commitment to sustainability deep into the supply chain provides organizations with a true competitive advantage. However, you can’t measure what you don’t measure. So, organizations are looking into their value chain to measure Scope 3 emissions by fostering close collaboration with value chain partners and supplier networks and transparently sharing emissions data relative to the benchmarks set. The value chain approach to looking at carbon footprint focuses on reducing emissions from upstream activities and overall emissions from the business’s supply chain operations, thereby improving efficiency, resilience, and lowering costs.

Scope 3 Carbon Accounting

Carbon accounting is the process of quantifying and reporting greenhouse gas emissions. It refers to estimating the amount of carbon dioxide equivalents a business emits, known as carbon credits – a commodity that is traded on carbon markets.

Current software systems provide carbon-accounting platforms that calculate emissions by assessing utility bills, travel, and logistics patterns; some platforms also link carbon footprint insights to offsetting marketplaces.

Conclusion

Climate change poses an existential threat to all, and the climate crisis could cause extreme damage to people, property, businesses and supply chains. Eighty-one percent of executives agree that businesses should make even greater efforts to protect the environment. This transformation means those who don’t adapt will be left behind, as is the case with Scope 3 emissions – primarily because the private sector is responsible for addressing this threat.

Frequently Asked Questions

Scope 3 emissions are organized as upstream and downstream emissions.

Upstream emissions: Purchased goods and services, capital goods, fuel and energy-related activities not included in Scopes 1 and 2, upstream transportation and distribution, waste management, business travel, employee commuting and upstream leased assets.

Downstream emissions: Downstream transportation and distribution, processing of sold goods, end use of sold goods, end-of-life treatment/disposal of sold goods, operation of investments, downstream leased assets and operation of franchises.

In Scope 3 accounting, companies evaluate their end-to-end value chain emissions and their impact, and identify the focus areas for reduction.

Scope 3 emissions are typically the largest of an organization’s carbon footprint, so reporting Scope 3 emissions per global standards, such as GHG Protocol, Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP) transparency benchmarks, is essential. By reporting Scope 3 Emissions, businesses adhere to future regulatory requirements, create value for their stakeholders, and ensure reduced cost and enhanced efficiency.

Scope 3 Emissions cover indirect GHGs generated by an organization’s value chain – from purchased goods and services (upstream), employees traveling to and from work (downstream) to waste generated in supply chain operations (downstream).