Investigating Scope 3 emissions in your value chain.
As our world becomes increasingly aware of the urgent need to mollify the effects of climate change, more and more businesses are recognizing the importance of understanding their greenhouse gas emissions.??By the end of 2021, 2,253 companies, representing more than one-third of global market capitalization, had adopted emissions reduction with the science-based target (SBTi).
However, accurately quantifying and effectively managing these emissions can be challenging and complex, particularly in the context of Scope 3 emissions. These emissions, which occur in a company's value chain beyond its direct operations, can account for a significant portion of its carbon footprint.
In addition, they are often difficult to measure and manage, presenting unique challenges to organizations committed to reducing their environmental impact.
In this article, we will underscore the importance of identifying and prioritizing Scope 3 Emissions in the value chain, and outline best practices for managing these emissions effectively.
What are Scope 3 emissions?
The Greenhouse Gas Protocol, which establishes the most commonly accepted calculation rules for greenhouse gas emissions, divides GHG emissions into three scopes:
Scope 1:?Covers emissions from sources directly generated and owned or controlled by the reporting company.
Scope 2: Accounts for emissions that arise indirectly from the acquisition and consumption of electricity, steam, heating, and cooling.?
Scope 3; Includes any other indirect emissions produced by an organization's upstream and downstream activities.?
Let's take the next few lines to explain what upstream and downstream activities include.?
The Upstream emissions are those created by third parties who obtain, manufacture, and transport the raw materials and components you utilize. Feel free to add company travel, staff commuting, and emissions from waste production and leased assets to this category.
Emissions from your items' transportation, usage, and disposal, and those from activities such as investment and franchising are downstream.
A company that relies on the activities of other organizations to produce or sell their product, must therefore consider any emissions generated by those other organizations as part of their Scope 3 emissions. The Scope 3 emissions of the reporting company comprise the Scope 1 and 2 emissions of the other organization.
Measuring and Reporting Scope 3 Emissions
Reporting on Scope 3 emissions can contribute to a company's decarbonization and sustainability strategies, offering business advantages. But, it is no walk in the park as reporting can be complex.
For starters, data availability can vary widely across different industries, regions, and supply chains, making it difficult to collect consistent and reliable data.
Plus, Scope 3 emissions do not have a standardized calculation method, leading to diverse methodologies and assumptions among organizations. This can result in inconsistency and variability in reported emissions, making it challenging to compare emissions across organizations or industries.
You also need to decide which emissions sources to include or exclude from the report, and this can vary depending on your organization's goals, industry, and stakeholder expectations. This decision-making process can impact the comprehensiveness and accuracy of Scope 3 emissions data.
Today, we have several reporting frameworks that guide measuring and reporting Scope 3 emissions. They include the Greenhouse Gas Protocol (GHG Protocol), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD).?
But, these frameworks have the following limitations:
·???????Some frameworks may focus on specific sectors or industries, while others may have a broader scope. This can result in variability in the comprehensiveness of reported emissions across organizations.
领英推荐
·???????Reporting frameworks may have different methodologies for calculating Scope 3 emissions, resulting in inconsistencies in how emissions are calculated and reported.
·???????Existing frameworks may not always require organizations to disclose detailed data on their Scope 3 emissions, which can limit transparency and hinder stakeholders' ability to assess the accuracy and reliability of the reported data.
Emerging reporting standards, like Science-Based Targets (SBTs), Circular Economy Reporting, and Task Force on Nature-related Financial Disclosures (TNFD), address some of the limitations of existing frameworks.
Proven approaches for successfully handling Scope 3 emissions in your organization.
The complex nature of Scope 3 emissions requires a strategic approach to effectively manage emissions associated with activities beyond the reporting company's direct control.?
These best practices are effective for managing Scope 3 emissions:
·???????Create a holistic emissions reduction strategy that encompasses Scope 3 emissions. This strategy should outline the organization's goals, targets, and timelines for reducing Scope 3 emissions, and should align with the organization's overall sustainability and decarbonization objectives.
·???????Conduct a thorough assessment to identify and prioritize the emissions sources within your value chain that contribute significantly to their Scope 3 emissions. This could include activities such as procurement, transportation, and product use.?
·???????Engage with supply chain partners to understand their emissions profiles, share best practices, and work together to identify and implement emissions reduction measures.?
·???????Set specific and measurable emissions reduction targets, including Scope 3 emissions, that are integrated into your organization's overarching sustainability goals.
·???????Adopt a multifaceted approach to emissions reduction, implementing measures across your value chain to effectively manage Scope 3 emissions. This could include improving energy efficiency, transitioning to renewable energy sources, optimizing transportation and logistics, promoting circular economy practices, and encouraging sustainable product use by customers.?
·???????Invest in robust data collection and management systems to ensure accurate measurement and reporting of Scope 3 emissions.?
·???????Integrate the consideration of Scope 3 emissions into their decision-making processes.?
Considering Scope 3 emissions requires taking into account both your role as a supplier to customers and as a customer to suppliers. Accurate measurement and reporting of emissions are essential to understanding the starting point for both parties. Once the emissions are identified, collaborative efforts can be made to explore opportunities for emissions reduction together.