As more and more organisations set ambitious reduction targets, it is becoming increasingly essential that they are able to measure and reduce greenhouse gas (GHG) emissions associated with their value chain.
Over the coming weeks and months, Greenstone will be providing webinars and blogs to help businesses understand the challenges of scope 3 emissions, where to start in tackling scope 3 reporting and how software solutions are being used to solve the challenges of calculation, reduction and reporting.
What are scope 3 emissions?
Scope 3 emissions, also known as value chain emissions, are indirect GHG emissions both upstream and downstream of an organisation’s main operations. This usually means all of the emissions a company is responsible for outside of its own operations—from the goods it purchases to the disposal of the products it sells.
It is often the case that scope 3 emissions are by far the largest proportion of an organisations’ carbon footprint. However, they are also the area over which businesses have the least control and have the most difficulty quantifying.
Under the Greenhouse Gas Protocol guidance, these emissions are split into 15 categories. This is done to help businesses identify which activities are relevant to them, break down how they might more easily collect the data and inform the reporting and management of calculated emissions.
The environmental case for measuring scope 3
With time running out to make the drastic global emissions cuts required under the Paris Agreement, scope 3 offers an opportunity to drive rapid environmental engagement through supply chains, global and local businesses, local and national governments and consumers.
Whilst reducing the emissions associated with your own organisation’s operational or equity boundary ensures that your own sustainability performance improves, tackling scope 3 requires engaging with many other businesses and stakeholders throughout the value chain.
What is driving increased scope 3 emissions disclosure from businesses?
There are numerous reasons beyond the urgent need for rapid global decarbonisation that are driving organisations towards more accurate scope 3 emissions disclosure. Two of the key drivers are Science-Based Targets and Net-Zero pathways.
By the end of 2020 over 1000 companies across over 60 countries had committed to setting a science-based target. These targets align your organisation’s reduction targets with the latest climate science for limiting warming to 1.5 degrees or well below 2 degrees. Should your scope 3 emissions account for more than 40% of your overall emissions, then the SBTi requires you to set a target to cover this impact.
Net-zero goals demand similarly long term and well-defined emission reduction pathways. In order to be able to achieve net-zero goals, organisations need to not only disclose and understand their scope 3 emissions, but they also need an accurate approach that enables them to actually reduce these emissions. For example, estimated scope 3 emissions based on spend datasets (such as invoices or bills) mean that the only way to reduce the emissions is through a reduction in spending.
In addition to the need to set and track against long term emission reduction targets aligned with science, there are also growing demands from multiple stakeholders for organisations to report on scope 3 emissions. Indeed, most sustainability reporting frameworks and ratings now all include scope 3 criteria.
What are the challenges of capturing scope 3 data?
Scope 3 emissions are typically outside the direct control of an organisation and therefore accessing data and accurately calculating the associated emissions is a significant challenge. In addition, the value chain itself is likely to be global and extremely complex, further exacerbating the difficulty in communicating with the relevant stakeholders effectively, let alone collecting accurate data to calculate carbon emissions.
Communication, collaboration and shared goals are key to achieving successful scope 3 disclosure. However, even if you have a high level of buy-in both up and down the value chain there are still complexities around the data itself and the methodologies used to calculate emissions. For example, understanding the proportion of emissions from a supplier that relate to the goods or services that you purchase, or balancing the need between acceptable assumptions and the need for accurate primary data.
How can Greenstone help?
Through its award-winning software solutions and client support team of reporting experts, Greenstone enables its clients to accurately calculate and report on all scope 3 categories.
Greenstone’s suite of sustainability, ESG and supply chain software solutions provide integrated GHG emissions calculations in accordance with the GHG Protocol. This means that not only can all 15 scope 3 categories be tracked against long term targets in our Enterprise Environment module, but data directly gathered from suppliers and portfolio companies is converted into carbon emissions data and automatically shared across our platform to ensure the clients have an accurate and responsive scope 3 emissions inventory.