How should your organisation report its Scope 3 emissions?

What are Scope 3 emissions?

According to the Greenhouse Gas Protocol, Scope 3 emissions are “all indirect emissions… that occur in the value chain of the reporting company, including both upstream and downstream emissions.”

Scope 3 emissions are estimated to represent over 90% of any organisation’s total greenhouse gas (GHG) emissions.

But because they occur outside your own organisation’s activities, they can be challenging to report and therefore reduce.

Why measure Scope emissions?

Accurate reporting of all GHG emissions forms a vital part of carbon accounting. Carbon accounting plays a vital role in helping your organisation quantify – and then reduce or remove – its emissions.

Doing so could give your organisation a competitive edge. Stakeholders – from clients or customers to colleagues – see value in organisations that are committed to sustainability. So, as well as helping your efforts to decarbonise, it could also play an important part in maintaining or enhancing your reputation.

It will support risk management and the resilience of your value chain, helping to identify emissions hotspots. It can also help you produce baseline comparisons to show how your drive towards net zero is progressing.

Regulatory frameworks are changing

But Scope 3 reporting is not just desirable. It could also become a legal requirement for any organisation that wants to do business. This is already happening in some areas such as Australia, EU, Singapore and the US. Other jurisdictions are sure to follow suit.

How to measure Scope 3 emissions

You’ll need to measure emissions across:

Your value chain

You will need to engage with your suppliers about their carbon accounting and emissions reduction strategy. Their Scope 1 and 2 emissions fall within your Scope 3 emissions reporting. So, you need to engage actively with the partners and suppliers who make up your value chain.

Your employees’ commute

You’ll need to find out how your colleagues get to work and how much carbon their journeys emit. A survey of their mileage and fuel use should help you to do this.

Your organisation’s business travel

Sometimes business travel is essential. In terms of the carbon emissions it's responsible for, we should account for all such travel.

What methodologies can you use to calculate scope 3 emissions?

As with all carbon accounting, there are several methodologies you can choose from. The most popular are:

• Spend-based methodology: This uses industry averages of emissions from various types of activity to create a multiplier that is applied to your spend in these activities. The result is an estimate of the total emissions for which your organisation is responsible.
• Activity based methodology: This uses granular data from actual activities to quantify your organisation’s emissions. For Scope 3, this data would mainly come from your business partners and suppliers, so it may be more difficult to access than if you were looking for such data in house.
• Hybrid methodology: This applies a combination of both techniques, using a blend of hard data and spend-based estimates. Many organisations find that this is an effective way to approach quantifying their Scope 3 emissions.

How to collect supplier data for Scope 3 reporting

You’ll need to work with your partners and with suppliers to gather the data you need for your Scope 3 carbon accounting. Ideally, they’ll be able to give you their primary data, but they may only be able to give you estimates based on spend-based multipliers.

No matter what method they adopt, you’ll want to make sure that the data you receive from your suppliers is transparent and consistent. It should:

• be timely (within three years or less)
• report its region of origin
• be sector specific
• provide details of where you sourced the data

You’ll also need to ensure that the process can be repeated. This way, you can make baseline comparisons to measure progress in years to come.

Although your emissions will be made up of many different GHGs, your reports should include only carbon dioxide equivalents (CO2-eq). This is a process that expresses the global warming potential of gases in comparison to CO2. By reporting in this way, you can ensure all your accounts use the same approach. There are many online converters available to help you with this.

Selecting reduction targets and strategies

Once you have accurate measurements of your Scope 3 emissions, you can start to develop emission reductions targets for your supply chain. These could range from a hybrid workplace strategy, reducing the need for colleagues, to commute to electrifying your distribution network. You could also set up task forces with your suppliers and partners to help them reduce their Scope 1 and 2 – and therefore your Scope 3 – emissions. The key point is that once you’ve measured your emissions, you can start to manage them.

Communication is key

As Scope 3 emissions reporting becomes more common – or is required by law – it will come to be regarded as an important measure of an organisation’s commitment to sustainability.

That means your stakeholders are going to want to know about your organisation’s performance. So you’ll need to communicate with them in a clear and transparent way – reporting progress consistently. It’s all part of working together to reach net zero.