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Thoughts from the Field

Sustainserv is a global CSR and sustainability consultancy. This blog will serve to communicate some of our ongoing thoughts and perspectives on the work that we do.

The Scoop on Scope 3 Emissions

Posted by on in Carbon and Energy Management
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The practice of greenhouse gas (GHG) accounting has rapidly evolved in recent years as more and more companies recognize and pursue the business benefits gained from managing their carbon footprint. Time and again, smart carbon management has been shown to reap cost savings, risk mitigation, and improved competitive advantage.

However, GHG inventories can be complex and yield unexpected results depending on how they are structured, with few topics presenting as many challenges and surprises as scope 3 emissions.

As defined by the Greenhouse Gas Protocol Corporate Standard, “Scope 3” refers to indirect GHG emissions which are a consequence of your business activities but occur from sources not owned or controlled by your company:

ghg scopes

Figure of GHG accounting scopes, with expanded examples of scope 3 (blue arrows) along the corporate value chain.  (GHG Protocol)

As you can see from the figure, scope 3 emissions include emission sources both upstream (purchased goods and services, business travel) and downstream (product transportation and distribution, consumer use) from the company itself.  Scope 3 is often considered a catch-all category for those emissions which may be the furthest from your company’s control, and for this reason, it has been a slippery subject for many companies. 

Addressing scope 3 emissions forces a company to take the leap from measuring data which may be easily available, such as your utility bills and fuel use records, to examining the entire value chain of your operations.  In essence, you need to take a life cycle approach toward your company’s carbon footprint- starting with resource extraction of raw materials and finishing with end-of-life treatment of your sold products. 

In theory this may seem like a straightforward process, but it opens up many questions, most notably, where do you draw the boundaries of your assessment and how accurate are your estimates?  What sources are worth calculating versus those which are high effort / low carbon impact?

Although there are no clear-cut answers to these questions, companies are moving forward with estimating and reporting their scope 3 emissions.  Some of the more notable examples of scope 3 stories include Stonyfield Farm and Dell.

Stonyfield Farm is a company known for its organic yogurt and other dairy products.  When Stonyfield expanded their carbon footprint beyond their production facilities, they came to the startling conclusion that most of their emissions arose not from manufacturing or transporting their products, but from the methane produced by the cows back at their suppliers’ farms! 

Dell, a world-wide name in computing and IT equipment, was harshly criticized a few years ago when the company proclaimed that it had achieved carbon neutrality (net zero GHG emissions), because they failed to include scope 3 emissions such as downstream consumer use of their products (i.e. from the electricity used to run all of the computers, servers, and other equipment they sold).  In my opinion, Dell may have been unfairly targeted as the science of scope 3 accounting was then, and still is, a very new and poorly articulated process, not to mention that scope 3 is considered an “optional” category according to most reporting programs! 

Both of these stories demonstrate that investigating scope 3 emissions must be done in a cautious and structured way, so that stakeholders are correctly informed and to ensure that the company is concentrating on only those scope 3 sources which are most relevant to your business:

  • Large relative to the company’s scope 1 and 2 emissions
  • Contribute to GHG risk exposure
  • Raised as critical issues by stakeholders
  • Can potentially be influenced by company

While accounting for scope 3 emissions can be challenging, we do encourage all companies to at least screen for their highest impact sources.  This will better enable the company to address stakeholder questions, establish plans for further analysis, and find areas for future innovation.  The GHG Protocol is in the final stages of developing its Scope 3: Corporate Value Chain Accounting and Reporting Standard, which will hopefully lend some much needed clarity to the topic.  Interest in scope 3 won’t be waning anytime soon, and in fact, will continue to grow with the sophistication of corporate environmental accounting in general.

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Guest Monday, 21 July 2014