Here's what you need to know about managing your Scope 3 emissions.
Scope 3 emissions are the most challenging to track and manage as it covers a wide range of activities in the value chain. However it still makes up the majority of many companies’ GHG emissions. According to the CDP (formerly the Carbon Disclosure Project), Scope 3 emissions typically account for 75% of a company’s GHG emissions, encompasses 90-95% of a company’s value chain for industries utilising raw materials (e.g. real estate, construction, metals and mining, agriculture commodities), and can reach close to 100% for certain industries (e.g. financial services and capital goods).
What are Scope 3 emissions?
Scope 3 emissions encompass unreported emissions from Scope 2, as well as emissions that arise within the value chain of the reporting company. This includes both upstream and downstream emissions.
Upstream emissions are linked to purchased supplies and services, capital goods, fuel and energy-related activities, waste generated during operations, transportation and distribution activities, employee commuting, and business travel.
Downstream emissions may include those resulting from processing, transportation and distribution of sold products, the use and end-of-life treatment of sold products, leased assets and franchises, as well as investments.
The GHG Protocol splits Scope 3 emissions in the following sub-categories:
Challenges of measuring Scope 3 emissions
1. Lack of reliable, accurate and specific data
In an ideal world with comprehensive reporting, companies would use emissions information from each supplier to calculate their carbon footprint. However, in reality, collecting granular data from suppliers is challenging, hence we often rely on secondary data like industry averages or spend-based emission factors.
Unfortunately, this approach can introduce inaccuracies into our estimates due to various factors stemming from broad industry coverage, boundary setting in life-cycle assessments and temporal issues. The use of spend-based factors further amplifies uncertainties as they are derived by dividing total emissions by trade value within a particular sector. Consequently, our actual estimations may exhibit uncertainties surpassing +/- 50% for industry average factors and +/- 100-150% for spend-based factors.
| Data Quality | |
| Tier 1 |
Audited emissions data or actual primary energy data |
| Tier 2 |
Non-audited emissions data or other primary data |
| Tier 3 |
Average data that is peer/(sub)-sector specific |
| Tier 4 |
Proxy data based on country or region |
| Tier 5 | Estimated data with limited support |
2. Lack of resources
Calculating value chain emissions often requires personnel possessing technical proficiency in carbon assessment, formal data management plans, and established data quality processes. However for most small and medium enterprises (SMEs), hiring consultants or manpower for this task proves daunting, given competing demands and business priorities.
Moreover, companies starting out in carbon measurement often find that data collection alone is a time-consuming and manual process, taking as much as 6-9 months for data collection, as key data owners and data sources have to be identified internally and externally.
3. Lack of standardised methodology
While the GHG Protocol Scope 3 Standard and Calculation Guidance provides direction for companies seeking to calculate their value chain emissions, businesses still face difficulties in understanding precise requirements for alignment and often require additional guidance tailored to their business needs.
Additionally, the use of supplier-specific, hybrid, average, and spend-based methodologies all come with their own assumptions and data uncertainties, and the calculation approaches selected need to be transparently disclosed to stakeholders, especially when it results in variations in emissions estimates across years.
How Terrascope helps enterprises manage Scope 3 emissions
Terrascope enables organisations to track and measure emissions across their value chain and all GHG categories. We help large enterprises make data-driven decisions, set ambitious and realistic reduction goals, and start the journey to net zero with confidence. Here’s how we make it happen:
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Comply with regulations: Many countries have set limits and targets for greenhouse gas emissions, including Scope 3 emissions. Companies can avoid penalties or fines by measuring their emissions.
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Gain consumer trust: Consumers are gravitating towards enterprises that are mindful of their carbon footprint. Companies that invest in sustainability, including in measuring and reducing scope 3 emissions, can improve their brand image among consumers, vendors they sell to, and other stakeholders.
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Build investor confidence: As consumers make more sustainable purchases, businesses that have a lower carbon footprint will gain a competitive advantage. Investors increasingly scrutinise a a company’s sustainability metrics when evaluating investments.
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Optimise future costs: Organisations can potentially achieve cost savings through changes in their supply chain
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Manage the largest source of emissions: Scope 3 often contributes ~85% of an enterprise’s overall emissions*, and offers the biggest opportunity to reduce carbon footprint
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Future-proof supply chains: Decarbonisation is a multi-year journey and reducing Scope 3 emissions is an important part of it. Enterprises that track their Scope 3 emissions will move ahead of the curve and gain an early mover advantage when businesses inevitably pivot to a low-carbon economy.
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Reduce carbon tax liability: Tax on carbon emissions may get more prevalent as countries commit to decarbonisation targets. Enterprises can lower their carbon risk by reducing their Scope 3 emissions.
Tracking and reducing Scope 3 emissions is a crucial challenge for companies in their pursuit of environmental sustainability. These emissions form a significant portion of a company's carbon footprint, but it is difficult to measure and manage them due to data reliability issues, resource limitations.
At Terrascope, we help companies navigate this landscape by tracking their emissions across the value chain and reducing their carbon footprint, while positioning them as leaders in the journey towards a low-carbon economy.
