According to Global Compact Network UK, Scope 3 Emissions usually account for more than 70% of a business’s carbon footprint – but what do these emissions really mean? In this blog, we answer these three key questions as well as the importance of these emissions in today’s climate.
Key Questions
- What are Scope 3 emissions?
- Do you need to include them in legal reporting?
- Do you need to include them in your carbon footprint?
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Definition Of Scope 3 Emissions: What Are They?
Scope 3 emissions are the most difficult category to define in carbon accounting. To put it simply, Scope 3 emissions are indirect emissions which don’t fall into Scope 1 or 2. The emissions are caused by activities which occur in the supply chain. The emissions are indirect because they are not within a company’s direct control.
Examples of Scope 3 Emissions:
- Purchased goods and services
- Employee commuting
- Business travel
- Use of raw materials
- Investments
Recap: Scope 1 and 2 Emissions
Scope 1: Fuel which you burn directly. Typically, gas, diesel and petrol.
Scope 2: Electricity, where Co2 is emitted remotely by power generators, approximately in proportion to how much electricity you use.
Scope 3 Emission Factors:
1) Purchased goods and services
2) Capital goods
3) Fuel and energy-related activities (not included in Scope 1 or 2)
4) Upstream transportation and distribution
5) Waste generated in operations
6) Business travel
7) Employee travel
8) Upstream leased assets
9) Downstream transportation and distribution
10) Processing of sold products
11) Use of sold products
12) End-of-life treatment of sold products
13) Downstream leased assets
14) Franchises
15) Investment
Do You Need To Include Scope 3 Emissions In Legal Reporting?
UK Streamlined Energy and Carbon Reporting (SECR, implemented in 2019) legally requires disclosure of Scope 1 and 2 emissions for large companies with over 250 employees or a turnover of over £36 million.
Although legal requirements are definitely evolving for reporting scope 3 emissions, scope 3 remains largely voluntary under SECR in the UK. Having said this, more and more companies are recognising and encouraging the importance of including scope 3 emissions in calculating corporate carbon footprints. Non compliance can lead to financial penalties, tainted business reputations and disengagement from stakeholders.
Some standards do require scope 3 disclosures in their carbon reporting. For example, CSRD, SBTi and ISSB require entities to report their scope 3 emissions, which is the first time a major global-standard setting institution has required reporting. Therefore, it is important to track and monitor scope 3 emissions for environmental regulations such as these.
The Importance Of Scope 3 Reporting
Scope 3 emissions account for a significant portion of overall emissions, making them essential to monitor and manage effectively. They are typically viewed as the hardest scope to measure because they are not within a company’s direct control, but instead, their supply chain.
Scope 3 often represents the largest source of emissions for a lot of businesses. Because there are so many factors causing them, they also offer the most opportunities to influence overall greenhouse gas emissions. According to the Greenhouse Gas Protocol, scope 3 can include over 90% of a company’s scope 1, 2 and 3 emissions. Therefore, though it may not be a strict regulatory requirement for all companies in the UK, it is still commercially wise for companies to disclose their scope 3 emissions.
Challenges And Solutions In Measuring And Reporting Scope 3 Emissions
Scope 3 emissions are the most difficult emissions to have complete authority over due to the fact that carbon emitting takes place outside of the realm of control of the company. Some of the more specific challenges include:
Poor data quality/availability: Good value data is often lacking across value chains and small businesses. A solution to this issue would be to get yourself a good software with experts who can analyse this data for you. In the meantime, start tracking basic emissions and use industry averages and assumptions to fill in the gaps.
Lack Of Measurement: Many suppliers do not measure their emissions. Those who do may not be open to sharing data due to confidentiality or contractual issues. Increasing awareness of the importance of measuring scope 3 emissions is vital in today’s climate.
Stakeholder Engagement: Obtaining emission data can be challenging due to concerns about confidentiality and reputation. Often, the process requires co-operation from stakeholders across the value chain.
Complex measurements and resource intensive: Scope 3 measurements often require expertise, lots of resources and efficient data management. Getting yourself a reliable, accurate platform ensuring your compliance is a great solution to this issue.
Why Should You Report On Your Scope 3 Emissions?
Increase and build upon your brand reputation:
Increase the credibility of your sustainability plans among a variety of investors, customers and stakeholders. Engage your suppliers and assist them in order to implement sustainability initiatives.
Advance your carbon strategy and drive corporate change:
Demonstrate your corporate commitment to climate change by measuring scope 3 emissions and contribute to the movement towards a greener, healthier planet and brighter future.
Identify where your emission hotspots are:
Work out the main factors causing your emissions to assess where you and your company can make improvements in order to reduce your carbon emissions.
Contribute to global and national efforts towards achieving Net Zero: By disclosing and tracking your scope 3 emissions, you and your business can help drive climate change by identifying key areas where you can reduce your carbon emissions.
How Can Carbon Accounting Platforms Assist In This Process?
- Carbon accounting platforms allow businesses to identify where their biggest emissions come from across the value chain. This process enables emission reduction efforts on a company’s behalf.
- Comply with and meet reporting standards. Carbon accounting platforms can help businesses comply with the climate-related disclosures and reporting standards.
- Attract investment by demonstrating your business’s commitment to reducing scope 3 emissions.
If you are interested in finding out more about measuring and keeping track of your scope 3 emissions, please don’t hesitate to get in touch with us.