Scope 3 Emissions: Unveiling the Hidden Impact and Navigating Effective Management
In the dynamic field of sustainability, companies are increasingly recognising the critical importance of addressing the full environmental impact of their value chains. This article explores the challenges, solutions and future trends associated with managing Scope 3 emissions.
Understanding Scope 3 Emissions
Scope 3 emissions arise from activities outside a company's direct control, but within its value chain. These emissions cover a wide range of sources and extend to assets and operations that are not owned or controlled by the reporting organisation. Representing the combined Scope 1 and 2 emissions of other entities within the same value chain, Scope 3 emissions account for a significant proportion of an organisation's total GHG emissions, around 40% globally.
Complexity and Challenges
The challenges of managing the complexity of Scope 3 emissions include accountability, accuracy, transparency and data standardisation. The difficulty of determining what to account for, how to measure it, and the methodologies for calculating both primary and secondary data is a significant hurdle. In addition, the lack of control over Scope 3 emissions, coupled with their varying nature across industries, adds to the complexity.
The Importance of Scope 3 Emissions
Scope 3 emissions have become a critical aspect of corporate responsibility . With outsourcing models contributing more than 40-50% of an organisation's total GHG emissions, companies are being pushed to take a holistic approach to their value chain. Increasing stakeholder demand and scrutiny requires companies to be accountable for their entire carbon footprint, including Scope 3 emissions, in order to meet carbon neutrality or net zero targets.
Engagement with Suppliers and Partners
To meet the challenge of collecting Scope 3 emissions data, effective engagement with suppliers and partners is critical. Digitalisation is proving to be a convenient and effective tool for streamlining data collection across the complex supply chain ecosystem. Training, aligning targets and engaging suppliers in the sustainability journey are highlighted as key strategies to improve collaboration and transparency.
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Setting Ambitious and Achievable Targets
Setting progressive targets for Scope 3 emissions reduction is a key strategy. Reduction targets can focus on specific categories within the 15 different categories defined by the Greenhouse Gas Protocol. Initiatives can include fuel switching in upstream processes, employee commuting in company vehicles, recycling of process waste and sustainable procurement. Updating corporate policies, frameworks and ensuring a sustainable governance structure are identified as critical success factors.
Regulations and Frameworks
Various frameworks and regulations mandate Scope 3 emissions accounting, including GRI, CDP, SBTi and others. The impending impact of regulations such as the Carbon Border Adjustment Mechanism (CBAM) and carbon taxation is highlighted, emphasising the need for companies to not only account for Scope 3 emissions, but to actively work to reduce them.
The Future of Scope 3 Emissions Management
Envisioning a future where Scope 3 accounting is an integral part of corporate GHG accounting, the article predicts that Scope 3 emissions will remain at the forefront of corporate responsibility efforts . With a global trend towards carbon taxation and an increased emphasis on sustainability, the role of digitalisation will continue to play a pivotal role in simplifying accounting processes and ensuring transparency across the value chain.
Do you want to get first-hand insights into Scope 3 emissions? Khushboo Oswal , Global Head of Climate Action Certification at TüV SüD, shares her expertise in our latest episode of the "Sustainability unravelled" podcast and together we delve into emerging trends, cutting-edge technologies, and the evolving landscape of Scope 3 emissions management. Tune into our podcast and learn more now!