Scope 3 Emissions: Why They Matter and How to Measure Them

Imagine this: Your company is making great strides in sustainability, but there's a piece of the puzzle that's often overlooked—Scope 3 emissions. These indirect emissions occur across your value chain, from the production of raw materials to the disposal of your products. They’re often the largest part of your carbon footprint, yet managing them can seem overwhelming. If this sounds like your organization, you’re not alone. Many businesses are grappling with the same challenge. But understanding and addressing Scope 3 emissions is crucial for achieving real sustainability. In this article, we’ll dive into why Scope 3 matters, how to measure it, and the strategies that can help reduce emissions across your entire value chain.

What are Scope 3 Emissions and Why Do They Matter?

Scope 3 emissions are those indirect greenhouse gas (GHG) emissions that result from activities outside of a company's direct operations. These emissions typically come from the entire value chain—from the extraction of raw materials by suppliers to the end-of-life disposal of your product. Unlike Scope 1 and Scope 2 emissions, which are directly controlled by your business, Scope 3 emissions cover everything from the production of the products you purchase to the transportation of goods, employee business travel, and even the use of your products by consumers.

Why do they matter? Scope 3 emissions often represent the largest portion of a company’s total carbon footprint—sometimes as much as 70% or more, especially in industries like manufacturing, retail, and consumer goods. These emissions are hidden from immediate view, which can make them challenging to track and manage. However, addressing Scope 3 emissions is crucial because it can lead to substantial reductions in overall GHG emissions, which is vital in the fight against climate change. Moreover, focusing on Scope 3 not only improves a company’s environmental impact but also enhances long-term resilience, mitigates supply chain risks, and boosts the company’s reputation as a sustainability leader.

Why Should an Organization Measure Its Scope 3 Emissions?

Measuring Scope 3 emissions is no longer optional—it’s an essential component of any comprehensive sustainability strategy. Here's why:

• For Businesses: Reducing Scope 3 emissions can help businesses identify areas for cost reduction, such as energy inefficiency or transportation overuse. By tracking emissions in your supply chain, you can work with suppliers to innovate in areas like energy use, logistics, and packaging. It also helps reduce risks from potential future regulations on carbon emissions or shifts in consumer preferences towards more sustainable products. Addressing Scope 3 emissions also helps businesses maintain a competitive advantage in industries that increasingly demand transparency and responsibility from their partners and suppliers.

• For the Public Sector: Governments and public institutions have a key role to play in reducing Scope 3 emissions. By measuring these emissions, they ensure accountability to the public and align with national and international climate targets, like those set by the Paris Agreement. Public-sector organizations are often tasked with driving climate policy and setting an example for businesses to follow. Transparent reporting of Scope 3 emissions demonstrates leadership in climate action, while also contributing to meeting sustainability goals.

In essence, measuring Scope 3 emissions enables organizations to see where they stand in terms of sustainability, track progress, and identify opportunities for improvement.

Scope 3 Emissions Categories: What Falls Under Scope 3?

Scope 3 emissions are broad and encompass multiple areas across the value chain. To better manage these emissions, the Greenhouse Gas (GHG) Protocol divides them into 15 distinct categories. These categories help organizations understand the different sources of Scope 3 emissions, so they can prioritize where to focus their efforts. Here are the categories:

• Upstream Emissions (before your company’s operations):

  • Purchased goods and services: Emissions from the production of the goods and services your company purchases.

  • Capital goods: Emissions from the production of capital equipment like machinery, vehicles, and buildings.

  • Fuel- and energy-related activities (not included in Scope 1 or Scope 2): Emissions related to fuel extraction, production, and transportation.

  • Upstream transportation and distribution: Emissions from transporting goods to your company.

  • Waste generated in operations: Emissions from the disposal and treatment of waste produced by your company’s operations.

  • Employee business travel: Emissions from travel conducted by your employees for work purposes.

• Downstream Emissions (after your company’s operations):

  • Downstream transportation and distribution: Emissions from the distribution of your products to customers.

  • Use of sold products: Emissions associated with the use of your product by the end consumer (e.g., electricity consumed by a product during its lifecycle).

  • End-of-life treatment of sold products: Emissions from the disposal or recycling of your products.

  • Downstream leased assets: Emissions from leased properties or equipment that you do not control.

  • Franchise operations: Emissions from franchise operations not directly owned by your company.

These categories allow businesses to map out where they have the largest carbon impacts and decide where to focus reduction efforts. Understanding these categories can also help identify emissions hotspots and streamline supply chain strategies.

Scope 3 vs. Scope 1 and 2: Key Differences and Challenges

While Scope 1 and Scope 2 emissions are relatively straightforward to measure (Scope 1 from direct emissions and Scope 2 from purchased energy), Scope 3 is much more complex. The key difference lies in control and direct influence:

• Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, factories).

• Scope 2: Indirect emissions from the consumption of purchased electricity, steam, heating, and cooling.

• Scope 3: All other indirect emissions that occur from the value chain, including upstream and downstream activities.

The challenge with Scope 3 emissions is that they extend beyond your direct control, requiring coordination with external stakeholders such as suppliers, logistics partners, and customers. Collecting reliable data can be a significant challenge, and it often requires estimating emissions based on limited data. However, the potential impact of addressing Scope 3 emissions makes it crucial for long-term sustainability goals.

How to Measure Scope 3 Emissions

Measuring Scope 3 emissions involves a detailed and methodical approach, as these emissions can span multiple activities in the supply chain. Here’s how to tackle it:

1. Identify Key Categories: Understand the 15 categories of Scope 3 emissions and identify which ones apply to your business. Prioritize the categories that represent the largest share of your emissions, as this will help target your reduction efforts more effectively.

2. Gather Data: Collect data from various departments within your company and collaborate with suppliers, distributors, and customers to obtain data on their emissions related to your products. Establish relationships and set clear expectations for data transparency.

3. Use Estimation Models and Tools: Many businesses rely on emission estimation tools such as the Greenhouse Gas (GHG) Protocol or Carbon Trust’s supply chain emissions tools. These tools help calculate emissions from activities where direct data is unavailable.

4. Track and Report: After collecting data, track your Scope 3 emissions on a regular basis and disclose them transparently through reports. Reporting frameworks like CDP or GRI can guide the process, ensuring that data is shared with stakeholders in a consistent and meaningful way.

Measuring Scope 3 emissions requires a robust data collection and management system, but with the right tools and collaboration, it becomes more feasible and actionable.

Developing a Scope 3 Strategy: Why You Need One Now

A proactive strategy for addressing Scope 3 emissions is essential for businesses seeking to lead in sustainability. Developing this strategy involves:

• Setting Clear Goals: Use insights from your emissions measurements to set clear, actionable goals. Consider aligning with science-based targets to ensure your targets are in line with global climate goals.

• Engaging Stakeholders: A successful Scope 3 strategy requires collaboration across your value chain, particularly with suppliers. Engage them early to encourage data transparency and build a shared commitment to emissions reductions.

• Prioritizing High-Impact Areas: Not all Scope 3 categories have the same impact on your overall emissions. By prioritizing high-impact categories such as purchased goods and services, transportation, and product use, you can focus your efforts where they matter most.

Having a defined Scope 3 strategy ensures that you don’t just meet regulatory requirements but also enhance your sustainability efforts in a meaningful way.

Science-Based Targets: What They Mean for Scope 3

Science-based targets (SBTs) are goals that align your emissions reductions with the level of decarbonization required to keep global temperature rise well below 2°C above pre-industrial levels. For Scope 3, setting science-based targets helps ensure that your emission reduction efforts are both ambitious and aligned with global climate science.

SBTs provide a clear roadmap for reducing emissions across Scope 1, 2, and 3. As Scope 3 emissions are often the hardest to address, having a science-based target can help guide your efforts and make them more actionable. By setting these targets, you send a clear message that your company is committed to meaningful climate action, which is increasingly important to investors, customers, and regulators.

Engaging Suppliers for Effective Scope 3 Management

Engaging suppliers is key to reducing Scope 3 emissions. Suppliers can help provide critical data on emissions from their operations and share best practices for decarbonization. Here’s how to engage them effectively:

• Build Relationships: Develop strong relationships with suppliers and educate them on the importance of Scope 3 emissions and how they can help reduce them.

• Data Transparency: Ask for detailed emissions data from your suppliers to ensure that your company has an accurate understanding of the emissions in your value chain.

• Collaborative Initiatives: Work with suppliers on joint sustainability initiatives, like renewable energy adoption or more sustainable material sourcing. This can not only reduce emissions but also improve the resilience and sustainability of your supply chain.

When suppliers are fully engaged, they become partners in driving Scope 3 emissions reductions.

Overview of Supplier Decarbonization Strategies

Here are a few key decarbonization strategies that suppliers can adopt to help reduce Scope 3 emissions:

• Energy Efficiency and Renewable Energy: Encourage suppliers to reduce energy use and adopt renewable energy sources like wind, solar, and biomass to cut emissions.

• Sustainable Sourcing: Collaborate with suppliers to source more sustainable materials and adopt low-carbon production methods.

• Green Logistics: Work with logistics providers to reduce the carbon intensity of transportation, including optimizing routes, shifting to electric vehicles, or using alternative fuels.

These strategies not only reduce Scope 3 emissions but also build a more resilient and sustainable supply chain.

Reporting Scope 3 Emissions: Transparency and Compliance

Reporting Scope 3 emissions is an essential aspect of sustainability reporting. Here’s how to do it effectively:

• Consistency: Ensure that you regularly update and monitor Scope 3 emissions data, as new suppliers, products, or activities may affect your carbon footprint.

• Transparency: Be transparent about the methodologies and assumptions used in your emissions calculations, providing full visibility to stakeholders.

• Disclosure: Publicly disclose your Scope 3 emissions using recognized frameworks like the GHG Protocol or CDP. This ensures accountability and helps stakeholders understand your efforts toward emission reductions.

Conclusion: Embracing the Scope 3 Challenge for a Sustainable Future

Scope 3 emissions are challenging to manage, but they represent an enormous opportunity for companies to drive substantial carbon reductions. By understanding, measuring, and managing Scope 3 emissions, organizations can demonstrate true climate leadership, reduce their carbon footprint, and build a sustainable business model that benefits both the planet and the bottom line.

Now is the time to embrace the Scope 3 challenge—because your sustainability future depends on it.