Many companies have difficulties mapping out their scope 3 emissions and reporting them transparently. Even large companies and organisations are struggling with this, as a thorough analysis of the NewClimate Institute commissioned by Milieudefensie recently showed. Companies active in the oil sector seem to forget that the fuel they help to find and transport will also be burned. Fertiliser manufacturers do not seem to realise that the N2O released during use is also a greenhouse gas. And financial institutions often adopt the flawed analysis of their borrowers entirely, without measuring or even estimating the missing issues. Mapping scope 3 emissions is very important. On average, 80% of the CO2 emissions required to deliver a product are in an organisation’s value chain. It is important that you know what to measure and that you do it carefully. In this article, we help you on your way.
What are scope 3 emissions?
When you map out an organisation’s emissions, you do this at three levels: scope 1, 2 and 3. Scope 1 concerns the direct emissions of an organisation; for scope 2, the indirect emissions from the purchase of energy (for example, the generation of electricity); and in scope 3 you look at the indirect emissions of your activities by suppliers, customers, and investors, among others. Obviously, mapping out scope 3 is the most complex, all the more when you consider that, for example, you also need to include scope 3 emissions from suppliers, and therefore also scope 3 emissions from your suppliers’ suppliers. Nevertheless, the lion’s share of the emissions of most companies is in scope 3, so it is essential to get a good picture of this. This can be done accurately by applying the guidelines of the Greenhouse Gas Protocol (GHP).
Scope 3: upstream and downstream emissions
The image below shows which emission sources are important per scope. When looking at scope 3 emissions, they are divided into upstream and downstream sources. Upstream emissions are emissions from activities in the value chain before the product is produced. Think of the suppliers’ emissions caused while transporting raw materials and semi-finished products. By downstream emissions, we mean the emissions after production. Think of the emissions when using or processing the product. See the table below for an overview of the 15 most important emission sources in scope 3.
|1. Purchased goods and services
|9. Downstream transportation and distribution
|2. Capital goods
|10. Processing of sold products
|3. Fuel- and energy-related activities (not included in scopes 1 and 2)
|11. Use of sold products
|4. Upstream transportation and distribution
|12. End-of-life treatment of sold products
|5. Waste generated in operations
|13. Downstream leased assets
|6. Business travel
|7. Employee commuting
|8. Upstream leased assets
Scope 3 chain analysis: identifying and excluding
Making a scope 3 chain analysis involves calculating the emissions for at least all 15 scope 3 activities. This starts with identifying and excluding sources according to relevance, consistency and transparency principles. For example, companies that do not work with franchises or lease contracts can demonstrate this and are not required to report on this. You may also exclude non-material emissions. These are negligible emissions in relation to business activities, such as emissions from the production of a coffee machine in the canteen of a steel company or hiring an ESG consultant like Empact to help you determine scope 3. Emissions that probably make up a large part of the total scope 3 emissions must emphatically be included in the analysis.
Step-by-step plan for determining scope 3 emissions
- Perform a scope 1 and 2 emissions measurement.
- Identify scope 3 emissions.
- Set limits and exclude non-material emissions.
- Collect data and assess data quality. Use primary and secondary data to calculate greenhouse gas emissions. In addition, screen value chains to identify emissions.
- Use the guidelines of the GHG Protocol to calculate emissions per category.
- Allocation of emissions from value chain to own organisation.
- Set reduction targets and track emissions performance.
- External verification by an auditor (optional).
- Reporting and publishing.
Start mapping your value chain right away
Mapping all scope 3 emissions (together with scope 1 and 2) is a first step in reducing your CO2 footprint and optimising it. In addition, you make it easier for the companies in your organisation that you work with to carry out a scope 3 analysis. In addition, by starting now, you are ready for future legislation that will make these analyses mandatory. Would you like to know more about managing your value chain? Take a look here or contact us without obligation.