LET'S GET INFORMED ABOUT SCOPE 3 EMISSIONS
Answering some of the most critical aspects of Scope 3 emissions can help clarify particular actions that companies -mainly in Europe- need to take for 2024. Starting from the basics:
What Is Scope 3 Emissions?
The Greenhouse Gas (GHG) Protocol is a collaboration of businesses, NGOs, and governments to create standard reporting to reduce carbon emissions. The GHG Protocol categorizes emissions into three scopes for the most accurate and categorized reporting purposes.
Scope 1 emissions are direct emissions from the reporting company.
Scope 2 emissions are indirect emissions from energy consumed by the reporting company.
Scope 3 includes all other indirect emissions in a company's value chain. Emissions come from all other processes that get the product to the customer. (i.e. Upstream, downstream, production, marketing, transportation, IT, etc.) The aim of categorizing the emissions is to increase the business' GHG emissions reporting. If you can calculate correctly, then you can plan to reduce.
One significant factor we must consider is that Scope 3 emissions for one organization are typically the Scope 1 and 2 emissions of another organization. Thus, collaboration among companies and providers will be mandatory.
Six greenhouse gases are included in the Kyoto Protocol:
- Carbon dioxide (CO2)
- Methane (CH4)
- Nitrous oxide (N2O)
- Hydrofluorocarbons (HFCs)
- Perfluorocarbons (PFCs)
- Sulfur hexafluoride (SF6)
Scope 3 emissions include all indirect emissions produced upstream and downstream of a company in a supply chain. Upstream activities that fall under scope 3 emissions include, but are not limited to, business travel, employee commuting, waste generation, and purchased goods and services.
Downstream activities included in scope 3 emissions range from investments and leased assets to the use and disposal of products sold to customers.
Just Imagine: that you run a company that produces cars. First, you must purchase raw materials needed for production, such as steel & wires, glass & electrical parts. Then, you must transport all these materials to your factory by moving them from other locations. Furthermore, your employees must work on assembly and probably travel to introduce the new car to customers and suppliers. Once a customer buys a car and then uses it to travel, he produces CO2, and also, after some years, he wants to change the car, so he has to dispose of it.
All the above emissions created by the products fall under Scope 3. It makes sense that it represents the bulk of an organization's emissions.
Why should businesses care about scope 3 emissions?
There are 4 major factors! Let’s analyse:
Size matters, and it is an essential aspect of each organization's sustainability work. Also, let me name some more reasons why companies should calculate their scope 3 emissions.
The first and most important → Improving the product and increasing sales.
Consumers tend to change their behaviour and choices towards more sustainable products. As a result, global consumers search for sustainable products, transforming a once-niche market segment into a powerful mainstream audience. In 2022, purpose-driven consumers, who choose products and brands based on how well they align with their values, became the largest segment (44%) of consumers across all product categories. And their impact appears to be growing.
The relationship between the consumer and the company is a delicate one. Not only are brands tasked with staying relevant, affordable and being everywhere their customer wants them to be — whether online, at their favourite outdoor mall or even on Instagram — but as consumers get smarter and have more options to choose from every day, brands and retailers need to educate themselves and adapt to ensure a long-term and mutually beneficial relationship with the customer.
Growing demands by shareholders and consumers for more responsible and sustainable business practices have already reshaped the corporate environmental, social and governance (ESG) landscape. Consumers are more interested in shopping sustainably than ever, with 64% of Americans willing to pay more for sustainable products and 78% more likely to purchase a product clearly labelled as environmentally friendly, according to data from GreenPrint.
Not only are consumers catching up, but recent legislative moves to mandate due diligence in corporate sustainability, such as the directive from the European Commission, seek to compel businesses to proactively examine their supply chains and establish that they're doing the right thing. But decision-makers actually have plenty of opportunities to make small changes that compound to have a larger impact — both on the environment and their bottom line.
Number 2 → Comply with legislations.
More and more legislations are being enacted across the globe that will require companies to report their emissions as part of ESG reporting, which will be a requirement and not a voluntary activity.
Therefore, companies must accurately measure their scope 3 carbon emissions and substantiate how they estimate them to their auditors or relevant authorities.
Number 3 → Influence the supply chain.
As mentioned, Scope 3 emissions for one organization are typically the Scope 1 and 2 emissions of another organization. So, by helping your supply chain partner implement a sustainable program, you will have mutual benefits plus an excellent example of CSR than many companies nowadays. In addition, you can also optimize your suppliers in "High performance" ones, allowing them to do better in their sustainability performance. This paves the way for organizations to engage suppliers to reduce their emissions.
Number 4 → Engage employees.
Remember that scope 3 carbon emission covers an organization's employees' commuting and business travel. Therefore, this example is a great way to engage employees in sustainability and increase its importance personally.
Starting from a business, almost everyone is affected.
Scope 3 Emissions Need to Be Reduced. So let’s focus on that.
To affect climate change, we must reduce GHG emissions globally. Scope 3 emissions account for an average of 75% of companies' greenhouse gas emissions. So, scope 3 emissions are a good place to start, as reduction will have a significant impact. Business for Social Responsibility (BSR) notes in a 2020 report that companies have so far focused on measuring and reducing their Scope 1 and Scope 2 emissions. Yet, the most significant emission reduction opportunities lie in Scope 3 emissions, which are approximately 5.5 greater than Scope 1 and Scope 2 emissions combined (BSR 2020). In addition, over 50% of the world's carbon emissions come from only eight supply chains: food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight (World Economic Forum 2021). Therefore, measuring and managing Scope 3 emissions from these few industries would significantly impact reversing climate change.
How can businesses Measure up with scope 3 emissions?
Ok. Until now, we have established that scope 3 emissions are essential. It can improve an organization’s product, supply chain, employee engagement, customer choice, product lifetime… the list goes on! But how can we measure it?
Whether you're a curious employee wanting to know your role in scope 3 emissions, or a CEO looking to measure your organization's scope 3 carbon emissions, calculating and learning more about your commute and travel footprint is a great start.
Here are some of the best ways you can try:
A. By using Primary data calculations:
CO2 emissions can be calculated from primary data using the following equation: CO2 emissions = (Energy consumed) x (Emission factor). Where the energy consumed is the amount of energy used for a particular activity, and the Emission factor is the amount of carbon dioxide released per unit of energy used.
For example, if a building has a total energy consumption of 1000 kWh, and the emission factor for electricity is 0.5 kg of CO2 per kWh, then the total CO2 emissions from the building would be calculated as follows: CO2 emissions = (1000 kWh) x (0.5 kg of CO2 per kWh) CO2 emissions = 500 kg of CO2
B. By using Ideal data, but difficult to obtain.
CO2 emissions can be calculated using ideal data, but the data is often difficult to obtain due to the complexity of the emissions sources and the wide range of emissions factors that need to be considered. In order to accurately calculate CO2 emissions, detailed information is needed on the fuels used, the fuel's combustion efficiency, the fuel consumption rate, and the amount of carbon dioxide produced per unit of fuel burned. Additionally, data on the rate of release and transport of the CO2 emissions must be taken into account. This data can be difficult to obtain due to the complexity of the sources, variations in local and regional conditions, and the fact that data may only be widely available for some sources.
C. By using modelled data based on actual/primary data.
Modelled data based on actual/primary data is a type of data that has been derived from primary data to provide a new set of information. These data are accurate estimations of emissions by taking into consideration actual data like distances, geospatial and weather data in conjunction with modelled data like digital twins and more that allow us to get very accurate emissions calculations. Averages/Benchmarks.