Newtral.io

Mastering Scope 3 Emissions: A Guide for Value Chain Partners

Newtral

Newtral

May 15 2024

Mastering Scope 3 Emissions: A Guide for Value Chain Partners

Scope 3 emissions, often referred to as value chain emissions, represent the largest portion of most organizations' carbon footprint. These indirect emissions occur upstream and downstream in a company's value chain and can account for over 70% of a business's total greenhouse gas emissions. As pressure mounts from regulators, investors, and consumers to address climate change, understanding and managing Scope 3 emissions has become crucial for businesses of all sizes.

Understanding Scope 3 Emissions

Scope 3 emissions are indirect greenhouse gas emissions that occur in a company's value chain, both upstream and downstream. The Greenhouse Gas Protocol categorizes Scope 3 emissions into 15 categories:

Upstream categories:

1. Purchased goods and services

2. Capital goods

3. Fuel and energy-related activities

4. Upstream transportation and distribution

5. Waste generated in operations

6. Business travel

7. Employee commuting

8. Upstream leased assets

Downstream categories:

9. Downstream transportation and distribution

10. Processing of sold products

11. Use of sold products

12. End-of-life treatment of sold products

13. Downstream leased assets

14. Franchises

15. Investments

Why Scope 3 Emissions Matter

Addressing Scope 3 emissions is crucial for several reasons:

- Comprehensive impact assessment: They often represent the largest portion of a company's total emissions.

- Risk management: Understanding Scope 3 emissions helps identify and mitigate supply chain risks.

- Innovation opportunities: Addressing these emissions can drive product and process innovations.

- Stakeholder expectations: Investors, customers, and regulators increasingly expect companies to manage and report on Scope 3 emissions.

- Competitive advantage: Companies that effectively manage their Scope 3 emissions can differentiate themselves in the market.

Challenges in Measuring Scope 3 Emissions

Measuring Scope 3 emissions presents unique challenges:

- Data complexity: Gathering data from numerous suppliers and downstream partners can be difficult.

- Limited control: Companies have less direct control over these emissions sources.

- Double counting: Emissions may be counted multiple times across different companies' inventories.

- Calculation complexity: Each category may require different calculation methodologies.

- Data quality: The accuracy of data from external sources can vary significantly.

5. Steps to Measure and Manage Scope 3 Emissions

a. Conduct a Scope 3 screening:

- Identify relevant Scope 3 categories for your business.

- Perform a hotspot analysis to prioritize the most significant categories.

b. Set organizational boundaries:

- Determine which parts of your value chain to include in your Scope 3 inventory.

c. Collect data:

- Engage with suppliers, customers, and other value chain partners to gather necessary data.

- Use primary data where possible, supplemented by secondary data and industry averages.

d. Calculate emissions:

- Apply appropriate emission factors to activity data.

- Use tools and methodologies provided by the GHG Protocol and other reputable sources.

e. Analyze and validate results:

- Review calculations for accuracy and completeness.

- Consider third-party verification for added credibility.

f. Set reduction targets:

- Establish science-based targets that include Scope 3 emissions.

g. Implement reduction strategies:

- Collaborate with suppliers on emission reduction initiatives.

- Redesign products for lower lifecycle emissions.

- Optimize logistics and transportation.

h. Monitor and report progress:

- Regularly update your Scope 3 inventory.

- Report progress to stakeholders and in sustainability reports.

Best Practices for Value Chain Partners

a. Supplier engagement:

- Educate suppliers on the importance of emissions data.

- Provide tools and resources to help suppliers measure and report their emissions.

- Include emissions performance in supplier selection and evaluation criteria.

b. Customer collaboration:

- Work with customers to understand and reduce emissions from the use and disposal of your products.

- Provide transparent product carbon footprint information.

c. Data management:

- Implement robust data collection and management systems.

- Use digital platforms to streamline data gathering from value chain partners.

d. Innovation focus:

- Invest in research and development to create low-carbon products and services.

- Explore circular economy principles to reduce lifecycle emissions.

e. Transparency and communication:

- Clearly communicate your Scope 3 emissions strategy to all stakeholders.

- Be transparent about challenges and progress in your reporting.

Tools and Resources

- GHG Protocol Scope 3 Calculation Guidance

- CDP Supply Chain Program

- Science Based Targets initiative (SBTi) guidance on Scope 3 target setting

- Industry-specific guidance (e.g., Apparel and Footwear Sector Science-Based Targets Guidance)

- Life Cycle Assessment (LCA) databases

Future Trends

Discuss emerging trends in Scope 3 emissions management, such as:

- Increased regulatory focus on Scope 3 emissions

- Advancements in data collection and analysis technologies

- Growing importance of product carbon footprinting

- Integration of Scope 3 emissions into financial risk assessments

Conclusion

Mastering Scope 3 emissions is a journey that requires collaboration, innovation, and persistence. By effectively managing these emissions, companies can not only reduce their environmental impact but also drive efficiency, foster innovation, and create long-term value for their stakeholders.

This comprehensive guide provides a roadmap for value chain partners to understand, measure, and manage their Scope 3 emissions effectively. Remember, the goal is continuous improvement – start with what you can measure and refine your approach over time.

⁠About Newtral

Newtral AI Platform- Enterprise ESG Platform for Corporates and Supply Chain

We help organizations automate their ESG metric measurements, tracking and reporting across company as well as their supply chain. Our platform solves for all corporate sustainability reporting and carbon accounting needs.

Schedule Exclusive Demo

Learn how Newtral helps sustainability teams. The only tool sustainability teams need to measure, track, and improve ESG metrics, ensuring global compliances within budget.

Book a demo


share
Book Demo

Empower your Sustainability Team with the right tools

Streamline your team's sustainability efforts with intuitive, collaborative tools that simplify compliance and accelerate your progress towards your company's Sustainability goals.