Businesses are constantly pressed to migrate their operations towards sustainability. This is because the importance of measuring and reducing carbon footprints in achieving that goal cannot be overemphasised.
The greenhouse gas (GHG) Protocol Corporate Accounting and Reporting Standard step-by-step guide, otherwise known as emission scopes (scope 1 emission, scope 2 emissions, and scope 3 emissions) set an international standard for organizations to correctly assess their carbon footprints.
Scope 3 emissions encompasses all sources beyond the purview of Scope 1 and 2 boundaries. It is notably the most challenging to quantify since they often involve activities not directly linked to the company’s operations.
Surprisingly, on average, about three-quarters of a company’s total carbon footprint falls within the purview of Scope 3 emissions. This underscores the significance of addressing and reducing these emissions.
The specific sources of Scope 3 emissions can vary by sector and type of business:
- Service organizations, like law firms, often find that travel to and from clients constitutes a major portion of their Scope 3 emissions.
- Restaurants might discover that the food and beverages they purchase for their menus are their primary source of Scope 3 emissions.
- Technology providers selling computer equipment might contribute most of their emissions when their customers regularly use the devices.
Scope 3 also encompass emissions related to transportation, waste generation, employee commutes, and investments. Recognizing and addressing these emissions is essential for organizations striving to reduce their environmental impact and contribute to global efforts to combat climate change.
The significance of scope 3 emissions
Scope 3 emissions are a crucial aspect of an organization’s carbon footprint, representing the greenhouse gas emissions embedded within its “value chain.” These emissions arise from various sources:
- Upstream value chain: This includes emissions associated with the materials, goods, and services an organization sources from its suppliers to facilitate its operations.
- Downstream value chain: These emissions stem from the goods and services that an organization sells to customers, as well as how customers use and eventually dispose of these products.
- Investments: Emissions can also result from investments made by the organization, such as holdings in land and other companies.
- Employee travel: This category encompasses emissions generated by employees’ business-related travel, including the use of vehicles not owned by the organization, as well as commuting to and from work.
It’s worth noting that for many organizations, Scope 3 emissions can outweigh the combined emissions of Scope 1 and Scope 2. As such, reducing Scope 3 emissions is a pivotal step in aligning with the objectives of the Paris Agreement, which seeks to limit global warming to well below 2°C, ideally targeting 1.5°C.
Scope 3 data collection
Scope 3 emissions data is instrumental in calculating a company’s comprehensive carbon footprint. However, many companies encounter significant hurdles when collecting Scope 3 emissions data, particularly from their suppliers.
A study by the Task Force on Climate-Related Financial Disclosures (TCFD) found that 80% of companies preparing TCFD reports found disclosing Scope 3 emissions data to be challenging.
Similarly, a study by S&P Global found that a mere 29.7% of the companies included disclosed their Scope 3 emissions and the reason is that Scope 3 emissions can be a challenging task, primarily due to the need to obtain precise emissions data from suppliers, some of which may operate in countries lacking robust disclosure regulations.
Understanding primary and secondary data
In the context of Scope 3 emissions, data can be categorized into primary and secondary data. Primary data is obtained directly from suppliers and is based on their energy and material flows. In contrast, secondary data relies on model-based estimates derived from emission factors, often from databases like GEMIS and ecoinvent. The choice between primary and secondary data depends on the objectives of the data evaluation.
Secondary data is valuable for understanding relative emission levels and identifying hotspots. It can also help fill data gaps. However, for setting specific decarbonization targets for different organizational areas, primary data is essential, as it offers more detailed insights.
Between primary and secondary data
The journey toward collecting and improving data quality is a critical step in addressing climate change. The data collection process must be transparent and well-documented to ensure repeatability.
At this level, consistency in data quality is crucial for tasks like baseline comparisons and auditing. In cases where primary data quality is lacking, secondary data from databases can provide a starting point.
To strike a balance between primary and secondary data, an 80/20 split is recommended initially. This means:
- focusing on the most important hotspots in scope 3
- collecting ∼80 % primary data
- using databases for the remaining ∼20 %.
This approach offers an initial overview, allowing for adjustments in system boundaries and gradual improvements in data quality by involving suppliers or introducing data management systems over time.
Impact of improved data quality
Data quality is a paramount consideration in calculating carbon emissions. Timeliness, regionality, sector-specificity, and data source all play vital roles. Thorough documentation is crucial, especially when data is used as a model. Transparent, plausible, and realistic data is essential for accurate calculations, especially during external audits.
Improved data quality can significantly influence emission figures within the supply chain. It can lead to both reductions and increases in calculated emissions.
For instance, identifying a previously unknown use of green electricity by a supplier can reduce emissions, while discovering a shift to heavy-duty diesel trucks can increase them.
Understanding these fluctuations is essential for crafting effective reduction strategies and achieving meaningful climate action.
In conclusion, measuring carbon footprints through Scope 3 emissions is just one piece of the puzzle. To achieve comprehensive climate action, addressing Scope 3 emissions and collecting high-quality data are imperative steps toward a sustainable future. The road to transparency and effective carbon reduction may be long, but every small step counts in the fight against climate change.
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