This article is a guest post by Trust Your Supplier and was originally on their website here.
The Scope 3 emissions segment of the GHG Protocol (Greenhouse Gas Protocol) are often referred to as “value chain emissions”. These are a part of the GHG Protocol’s corporate standard for greenhouse gas accounting.
These emissions are generally the most significant share of an organisation’s carbon footprint. Not only that, but they are also the most complex to manage and mitigate.
They involve activities not directly owned or controlled by the reporting company, making it trickier to nail down the numbers. Scope 3 includes both upstream and downstream emissions and encompasses a wide range of indirect emissions sources.
GHG Protocol: The Standards and the Tech for Scope 3 Emissions Reporting
The regulations and guidelines around Scope 3 emissions vary depending on the region and the specific regulatory framework. However, there are some general aspects to consider:
Voluntary vs. Mandatory Reporting
In many regions, reporting Scope 3 emissions is still voluntary but is increasingly being encouraged or required as part of broader sustainability reporting frameworks. For example, the European Union’s Non-Financial Reporting Directive (NFRD) encourages companies to report on their Scope 3 emissions.
Standards and Protocols
The GHG Protocol provides the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions, including Scope 3.
Corporate Sustainability Reporting
Companies may choose to report Scope 3 emissions as part of their sustainability or corporate social responsibility (CSR) reporting. This is often done to improve transparency, manage risks, and identify opportunities for reducing emissions in the supply chain.
Investor and Stakeholder Pressure
There is increasing pressure from investors, customers, and other stakeholders for companies to report and reduce their Scope 3 emissions. This pressure often drives more detailed and rigorous reporting and reduction strategies.
Sector-Specific Guidelines
Certain industries have specific guidelines or expectations for Scope 3 reporting. For example, the Science Based Targets initiative (SBTi) provides methods and guidance for companies to set science-based targets for reducing greenhouse gas emissions, including Scope 3.
Local and National Regulations
Some countries have specific regulations or guidelines for Scope 3 reporting. These can vary significantly and may be more or less stringent than international standards.
Integration with Broader ESG Goals
Scope 3 emissions reporting is often part of broader environmental, social, and governance (ESG) strategies and goals within organisations.
Technological Approaches for Measuring GHG Protocol Emissions
Measuring Scope 3 emissions involves complex data collection and analysis due to the broad range of indirect emission sources across a company’s value chain. Technology plays a crucial role in this process, with several key approaches.
Life Cycle Assessment (LCA) Tools
These software tools analyse the environmental impacts of products or services throughout their entire life cycle,. This can be from raw material extraction through to disposal. LCA tools can be instrumental in quantifying Scope 3 emissions related to product use and end-of-life stages.
Supply Chain Analysis Software
These platforms focus on mapping and assessing emissions within a company’s supply chain. They help identify hotspots of high emissions and opportunities for reduction by analysing supplier data and activities.
Carbon Accounting Platforms
These comprehensive tools enable companies to track and manage their carbon emissions across all scopes, including Scope 3. They often feature dashboards, reporting capabilities, and scenario analysis to support strategic decision-making.
Search and find carbon accounting platforms in our Software Finder app.
Energy Management Systems (EMS)
While primarily focused on direct energy consumption (Scope 1 and 2), EMS can also contribute to Scope 3 analysis. It can do this by providing insights into the energy use and associated emissions of leased assets, franchises, and outsourced activities.
Blockchain and IoT
Emerging technologies like blockchain and the Internet of Things (IoT) offer new ways to track and verify emissions data across complex supply chains, enhancing transparency and accuracy.
Data Sources for GHG Protocol Emissions Measurement
Scope 3 reporting platforms gather data from a variety of sources:
- Supplier Surveys and Self-Reporting: Direct communication with suppliers to collect data on their emissions and environmental practices.
- Industry Averages and Benchmarks: Utilising established databases and benchmarks to estimate emissions for common processes or products in the absence of specific data.
- Public and Proprietary Databases: Accessing government or commercial databases that provide emissions factors and environmental impact data for a wide range of activities and materials.
- Sensor and IoT Data: Collecting real-time data from sensors and IoT devices embedded in products or supply chain operations to monitor emissions.
Reliability and Approaches of Scope 3 Emissions Reporting
The reliability of Scope 3 measurement can vary significantly based on the data quality, the methodologies used, and the comprehensiveness of the analysis.
Approaches that incorporate primary data from direct suppliers and use robust, widely recognised methodologies tend to be more reliable. Especially those data sources recommended by the GHG Protocol.
However, even with the best tools and intentions, Scope 3 measurements often involve a degree of estimation and uncertainty. This is especially the case when relying on secondary data or industry averages.
Watch-Outs When Sourcing Scope 3 Reporting Software
- Data Quality and Transparency: Ensure the software supports high-quality, verifiable data collection and offers transparency about its methodologies and data sources.
- Customisation and Scalability: The platform should be adaptable to your specific industry and supply chain complexity and scalable as your business and reporting needs evolve.
- Integration with Existing Systems: The software should integrate seamlessly with your existing ERP, CRM, and other management systems to streamline data flow and avoid silos.
- Compliance and Standards Alignment: Verify that the software supports compliance with relevant regional regulations and aligns with international standards like the Greenhouse Gas Protocol.
- User Support and Training: Adequate user support, training, and resources are essential to ensure the successful implementation and ongoing use of the platform.
In conclusion, technology offers powerful tools for measuring Scope 3 emissions. However, the choice of platform and approach requires careful consideration of your company’s specific needs. Both the quality and source of the data used, and the ability to integrate and align with broader sustainability goals must be carefully evaluated.
