Knowing how to calculate scope 3 emissions is a critical step towards meeting your climate goals and, potentially, complying with the requirements of investors and regulators. This hefty effort can be broken down into four steps.
As businesses and organizations take on the urgent responsibility of decarbonization, they often start close to home by measuring and reducing scope 1 and 2 emissions – from their own operations and electricity use. This is an excellent beginning.
But what about scope 3?
Scope 3 encompasses indirect greenhouse gas emissions generated by an organization’s value chain, outside its operational boundaries. This is a potentially huge emissions category for most businesses, as it includes everything from purchased goods, business travel, and waste disposal to the use of (and emissions from) products sold. In fact, CDP estimates that 75% of corporate emissions fall under scope 3 on average, though it varies by sector.
Source: CDP Technical Note: Relevance of Scope 3 Categories by Sector
Yet few companies publicly report detailed scope 3 data. Why is that?
Organizations of every size and industry are keen to tackle scope 3, but often run into difficulties in measuring these emissions. The vast amount of data that fall into scope 3 are spread out across stakeholders, and not always reliably collected, making it daunting to know where to start.
The following four steps should, at a high level, explain how to calculate scope 3 emissions, so you can start the process without getting overwhelmed by or stuck in the numbers.
For more complete instructions, consult the GHG Protocols’ Corporate Value Chain (Scope 3) Standard and the accompanying Scope 3 Calculation Guidance.
Four Steps to Measuring Scope 3 Emissions
1: Involve the right people.
Perhaps the most important step in beginning an assessment is understanding who to involve. The breadth of scope 3 stakeholders is likely to be wider than the other two scopes and might include:
- Suppliers
- Employees
- Financiers
- Franchisees
- Customers
Ideally, these groups would regularly collect and report emissions data using standardized measurement practices. This might take the form of annual employee surveys, detailed supplier invoices, or engaging suppliers to measure and disclose their own emissions. Many suppliers will be at the very beginning of their own sustainability path and may not have extensive records to date. But building buy-in with dialogue around the importance of capturing this information can’t begin soon enough.
2: Establish your scope 3 boundaries.
It’s critical to establish clear boundaries for what scope 3 emissions are for your organization. While the GHG Protocol identifies 15 different categories of scope 3 emissions, only some will be relevant to you. Understanding where your emissions are greatest (as well as your risk) will help focus your efforts. Organizations can look for additional guidance from peers, industry and reporting bodies, while recognizing that as methods become more sophisticated, your boundaries may expand in the future. Transparency around the categories you include and exclude are critical.
Source: GHG Protocol Corporate Value Chain (Scope 3) Standard
3: Collect data from the right sources.
Use the appropriate methodology to estimate your organization’s scope 3 emissions. This will mean both primary and secondary data sources. The gold standard for precise data is primary source data, which will include:
- Verified supplier data
- Bills and invoices
- Supplier surveys
- Facility and employee surveys
- Product lifecycle assessments
Less precise but still important, secondary source data will include:
- Industry averages from government or third-party organizations
- Scientific literature or any proxy data used to extrapolate
4: Keep your data clean.
Next is reviewing and organizing collected data. Your sustainability team may want to use a platform that enables centralized tracking and reporting, and standardizes the varying units, quality, and precision of your data. The team will also want to periodically review this process for accuracy and opportunities for improvement.
Why measure scope 3 emissions?
Calculating scope 3 emissions presents a legitimate challenge to most organizations and a significant commitment of resources and time. However, when companies report scope 3 data, their transparency and credibility increase for stakeholders who increasingly expect to see a full report of any group’s environmental footprint. (It also satisfies organizations that require such reporting, such as the Science Based Target initiative’s Net Zero standard.) Future regulations may also require some form of scope 3 reporting, and organizations can get ahead of that by starting today.
Arguably more important, taking inventory of scope 3 emissions offers perspective on an organization’s hotspots within its own value chain, allowing the organization to target the largest areas of emissions and realize the most positive impact.
Finally, assessing scope 3 necessarily fosters collaboration with your suppliers, customers, and other value chain partners, driving collective action beyond what your organization can do by itself. While measurement may be a challenging and imperfect process, it’s a hugely important step toward understanding how to better mitigate emissions for a sustainable future.
