The Carbon Column – Addressing Scope 3 Emissions

In this post I address scope 3 emissions and what they mean for businesses

Big Zero Report 2022

Scope 3

There is a lot of talk about scope 3. Many businesses I am talking to are addressing scope 3 to create an accurate view of their full carbon footprint.

So, what is scope 3?

Well, we discussed scope 1 and 2 which are relatively straightforward. Scope 3 is less so.

Scope 3 emissions are indirect emissions occurring from upstream and downstream activities. It involves the full supply chain. From extraction of raw materials, to end of life treatment of products.

There are 15 separate reporting categories. 8 upstream and 7 downstream. There are certain categories that are relevant to both upstream and downstream such as transportation and distribution.

 

The categories are split out as follows:

Upstream

  • Purchased goods and services
  • Capital goods
  • Fuel from energy related activities
  • Transportation and distribution
  • Waste generated in operations
  • Business travel
  • Employee commuting
  • Leased assets

 

Downstream

  • Transportation and distribution
  • Processing of sold products
  • Use of sold products
  • End-of-life treatment of sold products
  • Leased assets
  • Franchises
  • Investments

 

It may feel overwhelming with the number of categories to consider. We work with businesses to reduce the complexity and keep it simple.

We want more businesses reporting on scope 3, and if it is too complex, they don’t want to do it.

If you’re beginning your scope 3 reporting, maybe start by asking:

Is the activity significant in our operations?

If yes, it is worth reporting on it in as much detail as possible. If it isn’t significant, then it is okay using average, industry data.

For example, if you’re a distribution business but don’t own any vehicles, then you know you’re probably going to have high emissions from distribution downstream. Based on this assumption, the business should address this.

I believe it is better to focus on the main emissions contribution areas, as this is where businesses can have the most impact.

 

Do our suppliers calculate their emissions?

If your suppliers calculate their emissions or have life-cycle emissions of products you buy, then it makes calculating emissions for your business activities much easier and much more accurately.

Next, you’ll want to ask, what data do we have access to?

If your supplier calculates the emissions then you can use a methodology to give you a good representation of the emissions, a supplier specific methodology.

If they don’t then you need to understand what data is available before determining the best methodology for calculating emissions.

Most business start with average emissions calculations using GHG conversion factors and volume of the purchase, or whatever metric is used for the category type. There are also methods based on spend, known as the environmentally extended input-output (EEIO) method.

The downside with this method is the only way to reduce your footprint is by reducing spend. So, getting to net zero this way is virtually impossible, unless you plan to reduce your business spend by 90%.

However, I believe it is a great start point for any business with limited access to data.

Starting with something is better than not starting at all. Making continuous improvements. Getting slightly better every day.

 

The better the data, the more accurate the emissions calculation.

Over the coming years, companies will need to engage and influence their supply chain to improve reporting. This won’t happen overnight but it can be a business goal to work towards.

There are other nuances when calculating scope 3 using the GHG Protocol that are specific to each business.

If you have any thoughts on this topic or questions on other net zero topics, please get in touch.

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