What are Scope 3 emissions?
- Scope 1 refers to the direct emissions from company activities - this may include fuel combustion, industrial process emissions, fugitive emissions, agriculture and other direct emissions from within company boundaries
- Scope 2 captures all of the indirect emissions a company creates, from the energy purchased used for heating, cooling, and general electricity
- Scope 3 emissions are the most complex of the categories – it involves measuring a company’s indirect upstream and downstream emissions
Within Scope 3 emissions, there are 15 subcategories, spanning from the goods and services a company purchases, the waste generated and treated outside of company boundaries, business travel emissions, and employee commuting, to even the end-of-life treatment of a company’s products. Not all of these subcategories will apply to every business's operations. The value chain and type of operations and business facilities owned by the company will determine which categories apply to them.
Why should companies care about measuring Scope 3 emissions?
As mentioned in our last blog, Scope 3 emissions are subject to increased regulations and mandatory disclosure laws put in place by governments. As carbon pricing models and other regulatory systems emerge, companies will need to quantify their indirect upstream and downstream emissions. Measuring Scope 3 emissions can also create immediate and long-term avenues for cost reduction, such as increased energy efficiency.
In addition, consumers and investors are beginning to include climate risk and mitigation in their spending and purchasing habits. Companies will want to ensure their Scope 3 emissions are a part of their path to decarbonization to stay relevant during this transformation in public awareness.
How can companies get started measuring their scope 3 emissions?
1. Conduct a screening to identify material emission categories
In traditional consulting engagements, there would be necessary trade-offs between obtaining higher data quality versus obtaining an emissions profile quickly, with minimal data collection efforts. Typically, a materiality assessment is conducted via a 1-2 day workshop with stakeholders to determine the most relevant Scope 3 emission categories, based on the following criteria:
After the materiality assessment is complete, a company will better understand which areas it should focus its data collection efforts on. Specifically, a company may select certain categories to seek higher data quality. As mentioned, not all categories will apply to all companies.
For example, purchased goods and services will be a material category for most companies. On one hand, manufacturing-intensive and consumer goods industries will find that upstream and downstream logistics are important, along with the processing, use, and end-of-life treatment of their sold products. On the other hand, professional services companies may find that business travel and employee commuting are more material for them.
Collecting higher quality data for priority activities allows companies to focus resources on the most significant GHG emissions in the value chain, more effectively set reduction targets, and track and demonstrate GHG reductions over time.
Thinking of getting a headstart? Unlike traditional consulting companies, Unravel Carbon enables you to minimize the trade-offs between obtaining high-quality data and speed of measurement. Contact Unravel Carbon to find out more about how we can help you to measure, track and reduce your Scope 3 emissions at speed and scale.
2. Identify data gaps
One of the biggest challenges that companies face when trying to assess Scope 3 emissions is a lack of data. Many companies do not know how to locate the specific data needed for Scope 3 emissions reporting, because it is indirect and not easily obtained.
Scope 2 emissions are easier to locate because data such as electricity costs can simply be found in a business’s monthly bill. However, it isn’t always easy to find the upstream and downstream data involved in Scope 3 measurements.
In some cases, the finance or human resources team of a company will have the bills, statements, or other sources needed. In other cases, employees tasked with finding this data need to contact the company’s major suppliers. These vendors can share their emissions data for the company to determine their indirect emissions from purchasing goods and/or services from them. There may also be internal surveying involved to determine internal behaviors such as the commuting methods of employees.
To break this task down into pieces, it’s recommended for companies to first map out what data sources and information they are looking for, then determine who the data sits with. Finally, they’ll have to sort out a data collection process, or how to best obtain the information for each Scope 3 category. By mapping the data identification task out this way, companies will have a more structured and systematic plan for obtaining the information needed to measure (and then reduce) Scope 3 emissions.
It will take cooperation and coordination from various departments within a company to achieve this task. Sustainability personnel or teams embarking on Scope 3 emissions accounting will need to reach out to different groups such as the Procurement, Finance, Operations, and HR departments. It is thus advisable for management to provide a strong mandate for task completion.
For larger organizations, it is best to set up cross-functional steering committees to support the data collection exercise. That way, there is someone on board from different groups across the organization, and obtaining the information needed can be a procedure owned and controlled by everyone. This teamwork and shared effort will be a useful groundwork to lay when future reduction plans are made, as well.
3. Make a plan to close the data gaps over time
In the initial stages, companies tend to rely on data averages to get an initial assessment of their carbon footprint. It can be challenging to dive deep into data sets that are difficult to obtain, such as the emissions records of major company suppliers. This overview of emissions that companies typically use is a great start, but the next step is to obtain more detailed information about the company’s suppliers and overall business operations in order to make an actionable plan for decarbonization.
The assembled team tasked with Scope 3 emissions measurement should outline an action plan on how to obtain the more accurate and specific data points it needs in order to close the data gaps found in Step 2.
However, as knowledge is built around the process, companies will find that it is prudent to engage with upstream suppliers to obtain more accurate, supplier-specific data. This will allow for more actionable insights that can truly help shape business decisions around target setting and carbon reduction solutions, such as identifying low-carbon suppliers to procure key materials or packaging inputs.
Looking for an automated solution to engage your suppliers? Contact Unravel Carbon to find out more about how we can help you with our supplier engagement module.
Getting to work
Collecting all of the Scope 3 data is a critical task, but it’s only the beginning. After a company has collected all its data and closed any important gaps in the information set, it will be time to make an action plan for decarbonization.
Stay tuned for future posts, where we will dive deeper into setting credible reduction targets, as well as adopting different types of decarbonization solutions to achieve net zero!
Completing this process may seem daunting, but Unravel Carbon is here to help. Reach out to find out how we can help you measure, track and reduce your emissions.