What are Scope 3 emissions and why should you report them?

written by Michela Tallarico | Junior Sustainability Analyst at Ecometrica

Scope 3 emissions represent in many cases the largest portion of the corporate total CO2e generated by companies but few companies have reported them until now.

According to the IPCC, the need for net zero CO2 by 2050 is absolutely vital in order to remain aligned with a scenario that yields a long-term warming outcome of below 1.5°C. In other words, this means we require an immediate global clean energy and technologies push which can be achieved only if we tackle all the sources of our GHG emissions. And that’s where Scope 3 comes into play.

What is Scope 3?

The GHG Protocol – the only internationally accepted method for companies to account for these types of emissions – defines scope 3 emissions as “all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions”.  

Upstream emissions are those emissions up to your premises. For instance, raw materials that are shipped to your production plant – emissions associated with the raw materials as well as emissions associated with shipping them. Downstream emissions are those emissions from activities or products leaving your premises, such as use of sold products, end of life treatment, outgoing freight etc…

Different from Scope 1 and 2 which are mandatory, Scope 3 is an optional reporting category that, as said, allows for the accounting of all other indirect emissions. These are a consequence of the business’ supply chain activities, and so occur from sources not directly owned or controlled by the company. 

Source: Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Specifically, the GHG Protocol classifies these emissions into 15 different categories, divided into upstream and downstream activities. Not all 15 are equally important for all businesses, and sometimes it depends on the company nature and type of operations to determine what categories are to be considered and what not. Therefore, a tailored approach to each company is absolutely required.

Why should you report Scope 3 emissions?

With the effects of climate change becoming increasingly visible, more effective actions to contain the consequences of global warming are needed to ensure a decisive change of course. In this context, companies are certainly the key players, along with governments and international organisations, to reduce our global environmental impact. 

For years now, it has been customary for many businesses to report their greenhouse gas emissions in terms of Scope 1 and 2, i.e. those emissions that are under the direct control of the company or physically occur at the business facilities. These usually come from the combustion of fuels, the use of company vehicles and the generation of purchased electricity. But is this really enough to make a clean cut in our GHG emissions and avert the most critical and irreversible effects of climate change?

By reporting Scope 3 emissions, companies can evaluate the emissions that form a part of the entire chain of their business, looking at both upstream and downstream activities that form their carbon footprint. If there are sources of high carbon emissions anywhere in the chain, the organisation can then identify any issues that need to be sorted, improving their carbon footprint.

Why is Scope 3 so important? 

From goods and services purchased to the disposal of resources and products at the end of their life cycle, scope 3 emissions represent in many cases the largest portion of the corporate total CO2e generated by companies. It becomes clear that simply calculating scope 1 and 2 GHG emissions is no longer enough to strive for true carbon neutrality and radical change. 

However, addressing scope 3 emissions does not come without challenges. In fact, these emissions, not being under the direct control of companies, are very often overlooked due to the difficulty in data collection and data quality. 

In addition, the lack of clear guidelines and a universal tool for calculation are amongst the challenges that companies are called upon to face as part of the fact that this still represents a rather recent trend.  More guidance and instructions are certainly needed, so that companies can stop missing out on countless opportunities for improvement, as well as start taking full responsibility on their entire supply chains’ emissions and gain credibility with stakeholders. 

Ecometrica’s Scope 3 reporting application

As part of our journey to help organisations worldwide and in response to a rising clients’ demand to account and report on their scope 3 emissions, we are now offering a new application for calculating value chain emissions and comprehensively manage scope 3-related risks and opportunities. Our solution offers a very easy-to-use, accurate and customisable way of reporting on all of the 15 GHG categories which compound scope 3. 

Ecometrica’s services always uses the most up-to-date and accurate built-in emission factors, unit conversions and assumptions to guarantee clients best quality calculations and reliable data output. 

As well as offering our scope 3 calculation and reporting application, we provide a business intelligence tool for companies to gain actionable insights around their environmental performance and areas for improvements. Such understanding can   then be used by companies as a fundamental starting point for setting Science-Based Targets that are feasible, in line with the business’ goals and objectives and effective from a climate perspective.

Conclusion

Being able to have a more comprehensive and reliable picture of your emissions is the first real step for companies to focus their attention on what is really material, build a consistent corporate climate strategy and, ultimately, act effectively on their operations. 

As we have seen, the challenges are still many, but immediate action is required as a matter of urgency. Businesses worldwide should all take responsibility of their supply chains and start going one step beyond by accounting and reporting on their Scope 3 emissions if they truly want to engage in a long-term and sustained mitigation effort to reach net zero by 2050. 

If you have any questions on scope 3 reporting, please get in touch here