Many companies struggle to properly map out their scope 3 emissions and report on them transparently. That large companies and organizations also struggle with this was shown in a thorough analysis by the NewClimate Institute commissioned by Milieudefensie. Companies active in the oil sector seem to forget that the fuel they help find and transport is also going to be burned. Fertilizer producers don’t seem to realize that the N2O released during use is also a greenhouse gas. And financial institutions often adopt their borrowers’ flawed analyses entirely, without measuring or even estimating the missing emissions. Mapping scope 3 emissions does matter a lot, on average 80% of the CO2 emissions needed to deliver a product are in an organization’s value chain. It is important to know what to measure, and to do it carefully. In this article, we’ll help you get started.
What are scope 3 emissions?
When you start mapping an organization’s emissions, you do so at three levels: scope 1, 2 and 3. Scope 1 is about an organization’s direct emissions; scope 2 is about the indirect emissions from the purchase of energy (think about the generation of electricity); and scope 3 is about looking at the indirect emissions of your activities from suppliers, customers and investors, among others. Obviously, scope 3 mapping is the most complex, especially when you consider that you also have to include, for example, the scope 3 emissions from suppliers, and thus also the scope 3 emissions from your suppliers’ suppliers. Still, the lion’s share of most companies’ emissions are in scope 3, so it is very important to form a good picture of this. This accurately be done using the guidelines of the Greenhouse Gas Protocol.
Scope 3: upstream and downstream emissions.
The figure below shows which emission sources are important for each scope. When we look at Scope 3 emissions, they are divided into upstream and downstream sources. Upstream emissions are emissions from activities that take place in the chain before the product is produced. These include emissions from suppliers and emissions during the transport of raw materials and semi-finished products. Downstream emissions refer to emissions after production. Think of emissions when the product is used or processed. For an overview of the 15 main emission sources in scope 3, see the table below.
Upstream emissions | Downstream emissions |
1. Purchased goods and services. | 9. Downstream transportation and distribution |
2. Capital assets | 10. Processing of products sold |
3. Fuel and energy related activities (not included in scope 2 and 3) | 11. Use of products sold |
4. Upstream transportation and distribution | 12. End-of-life treatment of sold products |
5. Waste from operational activities | 13. Downstream leased assets |
6. Business travel | 14. Franchises |
7. Commuting employees | 15. Investments |
8. Upstream leased assets |
Making Scope 3 chain analysis: identifying and excluding
Creating a scope 3 chain analysis then consists of calculating emissions for at least all 15 scope 3 activities. This starts with identifying and excluding sources, following the principles of relevance, consistency and transparency. For example, companies that do not work with franchises or leases can demonstrate this and do not have to report on it. You may also exclude non-material emissions. These are emissions that are negligible in relation to business activities, such as emissions from the production of a coffee machine in a steel company’s canteen or hiring an ESG consultant like Empact to help you determine scope 3. Emissions that are likely to make up a large portion of total scope 3 emissions, however, should be explicitly included in the analysis.
Roadmap establishing scope 3 emissions
- Conduct a scope 1 and 2 emissions measurement.
- Identify scope 3 emissions.
- Set boundaries and exclude non-material emissions.
- Collect data and assess data for quality. In addition, screen value chains to identify emissions. Use primary and secondary data to calculate greenhouse gas emissions.
- Use GHG Protocol guidelines to calculate emissions by category.
- Allocation of emissions from value chain to own organization.
- Set reduction targets and track emissions performance.
- External verification by auditor (optional).
- Report and publish.
Start mapping your value chain immediately
Mapping all scope 3 emissions (along with scope 1 and 2) is a first step in reducing your carbon footprint and optimizing. Moreover, in this way you make it easier for the companies in your organizations you work with to perform their own scope 3 analysis. In addition, by starting now, you will be ready for future legislation that will make these analyses mandatory. Want to know more about managing your value chain? Take a look here or contact us.