In most cases, over 60% of a company’s emissions lie outside its own operation, in the supply chain. New guidance released by the Science-Based Targets initiative aims to help demystify Scope 3 greenhouse gas emissions, supporting companies to make material emission reductions.
What are Scope 3 emissions and why are they important?
To help avoid the worst impacts of climate change, companies must reduce their greenhouse gas (GHG) emissions as much and as quickly as possible. This includes emissions from across the value chain (i.e. scope 3) emissions. Scope 3 emissions often represent the largest portion of companies’ GHG inventories but due to challenges around data quality and degree of control, it can be difficult to know how to make meaningful Scope 3 emission reductions. Despite the challenges, addressing Scope 3 emissions can lead to substantial business benefits. For example, companies can mitigate climate-related risks within their value chains, unlock new innovations and collaborations, and respond to mounting pressure from investors, customers and society.
How do you calculate Scope 3 emissions?
Calculating Scope 3 emissions can be complicated. The first step is to conduct a Scope 3 gap analysis or screening, to understand what is relevant and determine the materiality of each emission source. The GHG Protocol Scope 3 Standard outlines the components of a company’s value chain (upstream in the supply chain and downstream) that make up a Scope 3 footprint.
Did you know?
The Science-Based Target Initiative (SBTi) requires companies submitting targets to undertake a Scope 3 screening. If Scope 3 emissions make up over 40% of total Scope 1, 2, and 3 emissions then at least 66% of Scope 3 emissions must be included in the target. Read a blog by our technical lead on science-based targets to understand more.
Recent guidance by the SBTi highlights some key levers companies can use to tackle Scope 3 emissions.
7 ways to reduce Scope 3 emissions
Once you’ve conducted a screening and have a good understanding of emission hotspots in your value chain the next step is to build a strategy to reduce Scope 3 emissions. This can be difficult due to the global scale and complexity of corporate supply chains. Recent guidance by the SBTi highlights some key levers companies can use to tackle Scope 3 emissions. Scope 3 management is not easy, but new technologies such as data analytics, smart sensors, and blockchain will help by offering powerful insight into complex, global value chains. These technologies will play a key role in business innovation and offer exciting opportunities to improve a company’s environmental footprint, but also its bottom line.
Demonstrating the impact of Scope 3 management?
Complexities around data availability can make it difficult to show the positive impact of Scope 3 reduction strategies. A new standard is under development that aims to help companies account for emissions ‘interventions’ (i.e. programmes and decisions that reduce emissions in key areas of their supply chain) and include them in reporting in a credible way. The approach is to be used in conjunction with the accounting methodology provided in the GHG Protocol Scope 3 Standard. We will keep you updated on the guidance as it develops.
Whether you’re are the start of your Scope 3 journey or looking to build a strategy to monitor and reduce key Scope 3 emission sources – we can help. Please get in touch at firstname.lastname@example.org.