In recent years, businesses have increasingly recognized the importance of reducing their carbon footprint and overall environmental impact. While many companies have focused on improving their internal operations and supply chains, there is a growing recognition that a significant portion of a company’s environmental impact occurs outside of its direct control. This is where Scope 3 emissions come into play.
What are Scope 3 emissions?
Scope 3 emissions refer to the indirect greenhouse gas emissions that occur in a company’s value chain, including both upstream and downstream activities. This can include emissions from the extraction and production of purchased goods and services, transportation of products, use of products by customers, and disposal of products at the end of their life. In short, Scope 3 emissions encompass all emissions that occur outside of a company’s own operations.
Why do Scope 3 emissions matter?
While Scope 1 and 2 emissions (direct emissions from a company’s own operations and electricity consumption, respectively) are important to address, Scope 3 emissions often make up the majority of a company’s overall environmental impact. In fact, according to the Greenhouse Gas Protocol, Scope 3 emissions can in some sectors account for up to 80% of a company’s total carbon footprint.
Addressing Scope 3 emissions is therefore crucial for businesses looking to reduce their overall environmental impact and achieve sustainability goals. By working to reduce emissions across their entire value chain, companies can not only reduce their carbon footprint but also drive positive environmental and social outcomes.
How can businesses address Scope 3 emissions?
Addressing Scope 3 emissions can be a complex and challenging task, as it requires engagement and collaboration with a wide range of stakeholders. However, there are several key steps that businesses can take to start addressing their Scope 3 emissions:
- Identify and prioritize emissions: The first step in addressing Scope 3 emissions is to identify and prioritize the emissions sources that are most significant for your business. This will vary depending on the industry and specific company, but may include areas such as transportation, raw materials, and waste.
- Engage suppliers and partners: Since many Scope 3 emissions occur outside of a company’s own operations, it is important to engage with suppliers and partners to understand and address emissions in the value chain. This can involve setting emissions reduction targets for suppliers, working with partners to develop more sustainable products and services, and collaborating on transportation and logistics to reduce emissions.
- Innovate and invest in low-carbon solutions: To reduce emissions across the value chain, businesses may need to innovate and invest in low-carbon solutions. This could include developing more sustainable products, investing in renewable energy, or exploring new transportation options.
- Communicate and report on progress: Finally, it is important for businesses to communicate and report on their progress in addressing Scope 3 emissions. This can help build trust with stakeholders and demonstrate the company’s commitment to sustainability. Businesses have to stay attentive to correctly report Scope 3 emissions. It all depends on actual ownership – if company owns electricity generation and distribution facilities, all electricity emissions including emissions from transfer and distribution losses are accountable as Scope 1 emissions. In the purely opposite case, when a company doesn’t own any part of the electricity generation and provision system, electricity emissions are reported under Scope 2 (using emission factor for generated electricity) and emissions from transfer and distribution losses under Scope 3 (using T&D loss factor).
In conclusion, while Scope 3 emissions may be complex and challenging to address, they are crucial for businesses looking to reduce their overall environmental impact and achieve sustainability goals or public recognitions (e.g. Science Based Targets initiative label). By engaging with suppliers and partners, investing in low-carbon solutions (either technical or behavioral ones), and communicating on progress, businesses can work towards a more sustainable future for all.