Decoding Scope 3: The Game-Changer in Corporate Sustainability
6min. read
Hemant Joshi
Scope 3 emissions are the most-overlooked, yet the most impactful indirect emissions a business could have.
With more and more businesses aspiring to reach net zero, it’s time we talk about Scope 3 emissions.
If you’re a part of one such business, you already know about direct and indirect emissions. Scope 3 emissions are a type of indirect emissions, known to be notoriously elusive.
So, here’s all you need to know about what they are, why you should care, and how addressing Scope 3 emissions can help you manage your carbon footprint.
What exactly are Scope 3 emissions?
To put simply, they’re the carbon emissions generated by your business’s value chain. Your manufacturing partners, vendors, distributors, or even your marketers.
Yes, your business is not directly generating any of it. But it can make up to 90% of your total carbon footprint [1]. Everything that’s not directly produced by your business activities, and isn’t indirectly purchased (like electricity) counts as your Scope 3 emissions.
Scope 3 emissions are all indirect emissions (not included in Scope 2) that occur in the value chain of the company, both upstream and downstream.
What is included in your Scope 3 emissions?
The Greenhouse Gas Protocol categorizes Scope 3 emissions into 15 distinct categories. But first, let’s understand what upstream and downstream activities are:
Upstream Activities: These include emissions related to the production of goods and services that the company purchases. This can cover everything from the extraction of raw materials to the manufacturing processes used by suppliers.
Downstream Activities: These involve emissions related to the distribution, use, and disposal of the company’s products. This includes transportation and distribution of finished goods, emissions produced when customers use the products, and emissions from the disposal or recycling of products at the end of their life.
The 15 categories that count as your business’s Scope 3 emissions:
Purchased Goods and Services: Emissions from the production of goods and services bought by the company.
Capital Goods: Emissions from the creation of assets used by the company (e.g., machinery, buildings).
Fuel- and Energy-Related Activities (not included in Scope 1 or 2): This includes the emissions from the process of generating electricity, heating, or steam that a company buys for its operations. These emissions are considered indirect because they occur at the facilities of the energy provider, not at the company’s own facilities. Essentially, it’s about accounting for the carbon footprint of the energy that the company uses, but doesn’t produce.
Upstream Transportation and Distribution: Emissions from transporting and distributing products in the supply chain before they arrive at the company.
Waste Generated in Operations: Emissions from the disposal and treatment of waste generated in the company’s operations.
Business Travel: Emissions from transportation (e.g., airplanes, trains, taxis) used by employees for business-related travel.
Employee Commuting: Emissions from the transportation of employees between their homes and the workplace.
Upstream Leased Assets: Emissions from the operation of assets leased by the company but not owned.
Downstream Transportation and Distribution: Emissions from transporting and distributing products after they leave the company, up to the point of sale.
Processing of Sold Products: Emissions from the processing of products sold by the company in their next life stage.
Use of Sold Products: Emissions from the use of products sold by the company. This can be significant, especially for products with high energy consumption during use (like appliances or vehicles).
End-of-Life Treatment of Sold Products: Emissions from the disposal or recycling of products after they are no longer usable.
Downstream Leased Assets: Emissions from the operation of assets leased to others and not owned by the company.
Franchises: Emissions from franchise operations not owned or controlled by the company.
Investments: Emissions related to investments made by the company, such as investments in other companies or projects.
Managing these emissions can be challenging but it is crucial if you wish to get a hold on your organization’s carbon footprint.
Why should you care about managing Scope 3 emissions?
It’s not just about being green – it’s smart business.
Addressing Scope 3 emissions is about improving business resilience, staying ahead of regulations, saving costs, enhancing brand value, and contributing to global sustainability efforts.
Let’s get a closer look at why your business should do it:
All about seeing the full picture.
Think of it as getting the full health check-up instead of just measuring your blood pressure.
Scope 3 emissions often make up the bulk of your carbon footprint. For many companies, especially in the consumer goods sector, Scope 3 emissions can account for about 90% of their total emissions.
By managing these, you’re checking a box for environmental responsibility while getting a real handle on your company’s impact on climate change.
Let’s talk risk management.
Managing Scope 3 emissions is basically future-proofing against environmental regulations that might pop up.
Consumers are growing conscious, and rightly so — they want products that are as eco-friendly as they are high-quality. And let’s not forget about investors. They’re increasingly putting their dollars into companies that are proactive about sustainability. So, staying on top of your Scope 3 emissions means staying ahead of the game.
Building brand and saving costs.
A good rep is worth its weight in gold.
Companies that are actively reducing their carbon footprint, especially those tricky Scope 3 emissions, get a gold star in the public eye. Customers trust them, which means more loyalty and a stronger, more responsible brand.
And, when you dig into reducing these emissions, you’ll likely find ways to make your operations more efficient. Which I think is a win-win situation for any business.
In a nutshell: Managing Scope 3 emissions is not just good for the planet — it’s great for business.
But how do you go about managing Scope 3 emissions?
The challenge in managing Scope 3 emissions lies predominantly in their indirect nature.
You cannot control what you cannot measure.
Identifying and calculating these emissions naturally becomes your first step. But it is also a daunting task for many organizations.
A breakdown of how you can approach Scope 3 emissions management:
Assess and Identify: Start by understanding where your Scope 3 emissions are coming from. This means diving into your value chain – from how your products are made, to how they’re used and disposed of. Tools like life cycle assessments can help you pinpoint the major sources of emissions.
Engage with Suppliers: Often, a large chunk of Scope 3 emissions comes from the production of goods and services you purchase. Engaging with your suppliers to understand and reduce their emissions is key. You might consider creating sustainability criteria for supplier selection or working with them to improve their practices.
Set Clear Goals: Just like with any business initiative, setting clear, measurable goals for emission reduction is crucial. These should be ambitious yet achievable, and aligned with broader industry benchmarks or global standards like the Science Based Targets initiative (SBTi).
Implement Reduction Strategies: Depending on where your emissions are heaviest, your strategies will vary. This might include redesigning products for efficiency, shifting to renewable energy sources, optimizing logistics to reduce transportation emissions, or even investing in carbon offset projects.
Enhance Transparency and Reporting: Be transparent about your Scope 3 emissions and progress in reducing them. This not only builds trust with stakeholders but also helps you stay accountable. Regular reporting, aligned with frameworks like the Greenhouse Gas Protocol, is essential. Tools like Sprih’s Exchange can help you remain transparent.
Collaborate and Innovate: Tackling Scope 3 emissions often requires new ideas and approaches. Collaborating with industry peers, joining sustainability consortia, or partnering with NGOs can lead to innovative solutions.
Educate and Involve Employees: Your employees can be powerful advocates for sustainability. Educate them about the importance of reducing emissions and involve them in brainstorming and implementing solutions.
Respond to Consumer Needs: If your emissions are largely tied to product use or end-of-life, consider how you can influence consumer behavior. This might involve designing more sustainable products, offering recycling programs, or educating consumers on sustainable product use.
Continuous Improvement: Sustainability is a journey, not a destination. Regularly review your performance, seek feedback, and be prepared to adjust your strategies as needed.
The Danish company that’s all set to reach net zero by 2030
TDC NET, a digital infrastructure company, is the first in the world to be officially assigned a net zero emissions target of 2030.
They identified Scope 3 emissions management as a launch pad for achieving net-zero targets. It has more than 3,500 suppliers across the world, contributing 80% of the total Scope 3 emissions [2].
TDC NET has established a supplier engagement program to segregate its suppliers into 2 categories – high and low emitters.
It’s engaging with high emitters first to align them with sustainability targets before moving on to the low emitters. Other steps taken by the company include:
Conducting regular on-site sustainability audits
Using a sustainability screening tool to choose the best suppliers
Establishing a hybrid workplace to reduce employees’ carbon footprint
Discover how Sprih’s solutions can revolutionize your approach to Scope 3 emissions management. Businesses can Measure, Benchmark, Plan, Report, and Exchange, taking a holistic approach to sustainability to stand out in the market. This improves access to customers and drives real-world outcomes.
