As more and more organizations set ambitious goals to reduce their impact on the environment, reducing emissions related to their business activities is becoming an increasingly important measurement for success.
Organizations that are taking measures to be environmentally friendly are making efforts to calculate and reduce greenhouse gasses across their value chain, which includes any third-party entities in the supply chain.
Scope 3 Emissions Explained
To help companies identify their emissions as well as implement a way to see how much energy is being used, three different accounting scopes were developed: scopes 1, 2, and 3.
- Scope 1 = Direct emissions within the company’s main buildings or satellite offices.
- Scope 2 = Indirect emissions and includes sources of electricity and natural gas, as well as offsite fuel purchases.
- Scope 3 = Supply chain emissions, encompass all emissions beyond scope 2, that arise from any point of the reporting company’s supply chain including upstream and downstream emissions.
One of the largest complications is understanding which of the 15 Greenhouse Gas (GHG) Protocol scope 3 categories apply to your company. These categories include:
- Purchased goods and services
- Capital goods
- Fuel and energy-related activities
- Upstream transportation and distribution
- Waste generated in operations
- Business travel
- Employee commuting
- Upstream leased assets
- Downstream transportation and distribution
- Processing of sold products
- Use of sold products
- End-of-life treatment of sold products
- Downstream leased assets
How to Measure Scope 3 in the Supply Chain?
According to the GHG Protocol, there are four methods for calculating supplier emissions. These are broadly split into two approaches: those that require information directly from the supplier and those that use secondary data.
In the GHG Protocol Technical Guidance for Calculating Scope 3 document, the four methods of measurement are as follows:
- Supplier-specific method – collects product-level cradle-to-gate GHG inventory data from goods or services suppliers
- Hybrid method – uses a combination of supplier-specific activity data (where available) and secondary data to fill the gaps
- Average-data method – estimates emissions for goods and services by collecting data on the mass (e.g., kilograms or pounds), or other relevant units of goods or services purchased and multiplying by the relevant secondary (e.g., industry average) emission factors (e.g., average emissions per unit of good or service)
- Spend-based method – estimates emissions for goods and services by collecting data on the economic value of goods and services purchased and multiplying it by relevant secondary (e.g., industry average) emission factors (e.g., average emissions per monetary value of goods)
Methods 1 and 2 require data directly from suppliers, whereas methods 3 and 4 rely on secondary data — bridging gaps in the suppliers’ information.
Reducing Scope 3 Emissions
Emissions from activities that occur indirectly from a company’s core operations can be difficult to measure. The GHG Protocol has created the above Scope 3 Standard which measures the 15 different categories of indirect emissions so that companies may take steps to address their Scope 3 impact.
And even if you’re not ready to deal with Scope 3 emissions, it’s a good idea to begin working on a way to keep track of the overall effect that your value chain is having on the environment. Companies like yours will start coming under closer scrutiny in the future because Scope 3 emissions represents the majority for many industries.
Tackling scope 3 emissions starts with knowing which part of your business processes has the deepest impacts. Once you have identified the major sources of indirect emissions in your value chain, you’ll be better positioned to devise an effective plan to mitigate them.
Here are some steps that businesses can follow:
Here’s a good way to think of carbon footprinting — approach it similarly to reverse sourcing. Rather than starting high up on the distribution chain, start at the very bottom and work your way back up. Where are you reducing emissions? It’s all about going back inwards and identifying potentials for reduction.
Make use of pilot projects
Emission reductions are often easier to showcase through pilot projects so companies can determine the most effective methods of achieving GHG reductions at scale. Pilot projects will often also show to other industries throughout the value chain that emission reductions are a viable and worthwhile investment, encouraging further industry collaboration for larger-scale adoption in the future.
Engage partners and peers
Scale-up and collaborate with other firms that are involved in your value chain. If you want to achieve your Scope 3 targets, you will have to widen the scope of collaboration with firms that are part of your value chain. This will ensure that any internal processes related to procurement and marketing, for example, are well-placed to support collaborations more effectively.
Taking the initiative to tackle your scope 3 emissions positions your business as an intentional, future-forward sustainability key player.
However, if you find it too complex or simply don’t know where to start, our experts can help.
Our Custom Carbon Footprint Calculations service will help you measure emissions in your business operations.
Get in touch with us to start today!