Scope 3 emissions are the greenhouse gases produced into the atmosphere as an indirect result of a company or organisation’s activities.
The Scope accounts for up to 80% of the greenhouse gas emissions that a company produces, but reporting on it is only mandatory for large unquoted companies and LLPs.
Activities of a company’s operations within Scope 3 include the purchasing of raw materials, employee commuting and the end-of-life treatment of sold products.
The mandatory section of reporting for unquoted companies and LLPs is the energy use and related emissions from business travel in rented cars and employee-owned vehicles.
For companies to become carbon neutral they must develop an understanding of their emissions through the entirety of Scope 3 to understand how, where and why changes are to be made.
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Where did the Scopes Originate?
In late 1997 senior officials at the World Resources Institute (WRI) met with members of the World Business Council for Sustainable Development (WBCSD) to discuss a standardised model for greenhouse gas accounting.
This discussion led to a non-governmental organisation business partnership between the WRI and the WBCSD.
The WRI and WBSCD assembled a core group of environmentally and industry focused entities which would help to guide this new initiative.
In 1998 the WRI published a report titled “Safe Climate, Sound Business” after working with large corporate partners such as BP.
The report illustrated a course of action needed to tackle climate change, which included a standardised measurement of greenhouse gas emissions.
Since its initial publication in 2001 the Corporate Standard has been updated to provide guidance on how companies can measure emissions from heat and electricity providers (Scope 2) and account for emissions throughout their value chains (Scope 3).
The Greenhouse Gas Protocol (GHG Protocol) developed an array of calculation tools to help assist in calculating greenhouse gas emissions a company may have.
What is the difference between Scope 1, 2 and 3?
Scope 3 contrasts with both Scope 1, the on-site generated emissions, and Scope 2, the emissions produced from bought electricity and heat.
Scope 3 is tied to sources that are external to the recording company or organisation; this includes suppliers, distributors and end customers.
A second well-known term for Scope 3 emissions is “value chain emissions” which may help to frame a better picture.
The Impact of Scope 3 Reporting
Whilst reporting on Scope 1 and 2 are mandatory in most countries, reporting on Scope 3 is not and makes up for up to 80% of a company or organisation’s greenhouse gas impact on the planet.
However, the United Kingdom is making a shift to ensure that certain parts of Scope 3 are to be reported.
The benefits of reporting on Scope 3 are numerous and include:
- Being able to assess your value chain and find the emission hotspots
- Identifying energy efficiency issues and fixing them
- Recognising the cost reduction opportunities in your supply chain
Upstream and Downstream Activities
Typical words that are paired with Scope 3 emissions are “upstream” and “downstream” which illustrate the placement of the emissions relative to Scope 1.
Upstream is the term given to the activities that take place before a product undergoes production, such as buying goods and services, employee commuting and the waste generated in operations.
Downstream is the term given to the activities that take place after the product is produced, this includes the use of sold products, transportation, distribution and franchises.
A diagram to illustrate further what can be found both upstream and downstream of a company’s activities can be seen below:
The issues faced when reporting Scope 3 emissions is that sometimes no clear data is available, meaning that a certain percentage of the submitted report is based on estimates.
There are four ways in which a company or organisation can work out its Scope 3 emissions.
The first and generally least accurate is known as “Spend-based”, within which estimates are produced by finding the supplier’s average spend and then estimating the total emissions from it.
The second is to use what is known as “Average data” which makes estimates based on data like mass and volume of production within the same industry.
The third is to use a “Hybrid” approach that takes information from the supplier specific data and then uses industry averages to fill in the gaps.
The last and most accurate way of calculating Scope 3 emissions is through “Supplier-specific” information which contains data that the supplier has collected.
How will reporting Scope 3 have a long-term impact?
With all the jargon surrounding emissions and climate change it is very easy to get caught up in the specifics without realising the overall goal.
Greenhouse gases create a blanket layer in the atmosphere of the planet, allowing sunlight in to provide heat but prevents that heat from escaping, this warms the planet.
In balance these gases are useful for our planet, like water vapour which can be seen in the forms of clouds providing fresh water for life on earth.
Gases like carbon dioxide however are a different story, although carbon dioxide is a natural gas given off by living organisms, decaying matter and volcanoes, we have increased carbon dioxide emissions through power plants, transportation and the day to day running of machinery.
This imbalance is why it is so important we start making a change in human activity.
Reporting on Scope 3 is just one of these changes that companies can make to have a decisive impact as we aim to become carbon neutral, or better yet, carbon negative by 2050.
It will help to gauge our efforts in the fight for a sustainable future as we begin to negate the effects that climate change is having on our planet.
A great way to start with lower carbon emissions within your Scope 3 is to look at the assets you have and work out which can be bought or exchanged for a more sustainable alternative.
By totally eliminating any carbon emissions in a workforce that has switched to a somewhat semi-permanent mobile work life it is more crucial now to consider the emissions from all of your IT assets.