Understanding Scope 3 Emissions

What is a scope 3 emission?

Emissions are classified into three different scopes to differentiate between direct and indirect emissions of a business, creating more accurate measurement and reporting. Scope 1 covers direct emissions from owned or controlled sources, such as fuel combustion in boilers, furnaces, vehicles. Scope 2 refers to indirect emissions resulting from the purchase and use of electricity, heat, steam, and cooling.  Scope 3 includes all other indirect emissions that are a consequence of an organization’s activities, but are not directly owned or controlled by the company. So, scope 3 emissions capture the broader impact of our actions beyond just what we do directly. They’re a way to understand and account for the full environmental footprint of our lifestyles and consumption patterns.
In essence, scope 3 requires a company to estimate the scope 1 emissions of all direct and indirect suppliers and customers. These emissions are often referred to as ‘supply chain emissions’ or ‘embodied carbon’ as they occur in the value chain of a company in activities like upstream and downstream transportation, business travel, and product disposal.

Why should you care about Scope 3 Emissions? 

Over 90 percent of a company’s emissions may fall under Scope 3—along with most opportunities to decarbonize. The bulk of a company’s GHG emissions are generated by assets they neither own nor control- in fact, the CDP reporting standard uncovered that for most firms, scope 3 emissions will account for 5.5 times more emissions than their scope 1 and 2 emissions combined. On average, about 75 percent of a company’s GHG emissions fall under Scope 3, so yes- it’s imperative that organizations understand the importance of scope 3 emissions, and consider climate impacts beyond their direct sphere. 

Companies often engage in greenwashing behavior by avoiding the impacts of their upstream counterparts and suppliers, since they are not directly associated with their own onsite processes. The addition of Scope 3 to the GHG emissions accounting process helped address the disproportionate skew of emissions responsibility towards only a handful of companies.

Who’s using Scope 3?

Companies that use the GHG Protocol are required to report Scope 1 and 2 emissions, while reporting Scope 3 is voluntary but recommended. However, depending on firm size, certain regulatory bodies worldwide do mandate the disclosure of scope 3. Despite challenges, Scope 3 value chain emissions are being reported now amongst corporations that want to decrease their negative environmental impacts and stay competitive where consumers are turning to greener brands. Scope 3 emission reporting can help advance a company’s sustainability strategy and encourage informed decision making across procurement, development and logistic teams. Investors are also shifting their resources to sustainable brands that are not only responsible in terms of their individual on-site production but engage with low emitting or net zero suppliers and customers as well. 

So how should I start? 

For the time being, defining which scope 3 emissions are most relevant (largest emitters, highest risk exposure, critical stakeholders, and potential reductions) might be a best practice instead of expending effort to gather comprehensive data from every single source in the supply chain. Corporates new to GHG accounting should begin with reliable scope 1 and 2 data and integrate scope 3 later on when better accounting standards are introduced or supply chain valuation data becomes available to you. Do not rely on opportunistic and unreliable scope 3 reporting based on inaccurate industry average data. 

How can WatchWire by Tango Help? 

Gathering scope 3 data is more difficult than scope 1 or 2: To satisfy the extent of Scope 3 emissions, producers would need to report their own performance, as well as the performance of all suppliers, buyers, subcontractors, and other contributors to the product. Gathering accurate data from the fragmented production steps of multiple suppliers, locations, and downstream customers is an enormous task. There are inconsistencies across reporting frameworks and constantly shifting boundaries that can result in rampant data inaccuracies. 

Services like WatchWire provide full-service carbon accounting, tracking Scope 1, 2, and 3 emissions, renewable energy credits (RECs), global warming potential, and more. To discover more about WatchWire and its capabilities, you can visit our website, blog, or resource library, request a demo, or follow us on LinkedIn, Instagram, or Twitter to keep up-to-date on the latest energy and sustainability insights, news, and resources.

More About WatchWire

WatchWire by Tango is a market-leading, energy and sustainability data management platform that uses cloud-based software to collect, automize, and analyze utility, energy, and sustainability data metrics. WatchWire streamlines, automates, and standardizes your sustainability reporting process by integrating directly and/or providing reporting exports to ENERGY STAR Portfolio Manager, LEED Arc, GRESB, CDP, SASB, GRI, and more. The platform provides customizable dashboards, which allow asset managers, sustainability managers, engineers, and more to monitor individual key performance indicators (KPIs) and create custom views for specific use cases.

To learn more about WatchWire and its capabilities, you can visit our website, blog, or resource library, request a demo, or follow us on LinkedIn, Instagram, or Twitter to keep up-to-date on the latest energy and sustainability insights, news, and resources.