Scope 3 emissions are a crucial aspect of a company’s carbon footprint as they encompass emissions that result from activities the company indirectly influences within its value chain, rather than directly from its own operations. For most companies, scope 3 emissions will contain the most material sources of emissions.
Why Do They Matter?
Understanding and managing Scope 3 emissions is crucial for several reasons. Firstly, there is a growing expectation from regulators, investors, and customers for companies to account for and reduce their entire carbon footprint, including Scope 3 emissions. For example, the Streamlined Energy and Carbon Reporting (SECR) framework in the UK already requires certain categories of Scope 3 emissions to be reported, and this trend is expected to continue with more categories likely to be included in the future. Failing to address Scope 3 emissions could result in reputational damage and non-compliance with future regulations. Secondly, there are likely to be highly material emissions sources within a company’s scope 3 emissions, so measuring scope 3 emissions gives a fuller view of the emissions profile of a company, which can be used to identify large opportunities for impact in emissions reduction as well as cost-saving opportunities. Ignoring them means not accounting for the majority of your company’s environmental impact. These material emissions sources are also likely to be exposed to climate-related operational and supply chain risks. Companies that manage Scope 3 emissions are better positioned to mitigate risks associated with supply chain disruptions, resource scarcity, and changing regulations.
Calculating Scope 3
Calculating Scope 3 emissions can be a daunting task but is essential for effective carbon management. Companies can start by taking a broad approach using spend-based calculations to estimate emissions across different categories. Once the material sources of emissions are identified, they can then delve deeper into supplier-specific calculations or activity-based data to get a more accurate picture of their emissions. By understanding where the bulk of their emissions lie, companies can prioritise areas for improvement and set emission reduction targets accordingly.
Managing Scope 3
To effectively manage Scope 3 emissions, companies should focus on collaborating with their material suppliers to drive emissions reductions throughout the value chain. This can involve setting emission reduction targets with suppliers, incentivising them to adopt more sustainable practices, and providing support and resources to help them transition to low-carbon operations. Additionally, companies can also consider sourcing from low-carbon suppliers or investing in suppliers that demonstrate a commitment to reducing their environmental impact.
By working together with suppliers and making sustainable choices in sourcing, companies can make significant strides in managing and reducing their Scope 3 emissions, contributing to a more sustainable future for all.