What are scope 3 emissions and why are they important?
Scope 3 emissions is the third emission category of the GHG protocol. The GHG protocol (Greenhouse Gas Protocol) is the most used standard for measuring and reporting greenhouse emissions, where emissions are divided into three different categories: scope 1, scope 2 and scope 3.
A large part of the company’s climate impact consists of greenhouse gas emissions, of which the most significant are carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) emissions. Reducing greenhouse gas emissions and sustainable development are increasingly central goals for companies around the world. Companies operating in the EU region are also obliged by various directives, according to which companies must report on the environmental impacts caused by their business activities annually.
What do Scope 3 emissions include?
Scope 3 emissions cover all indirect greenhouse gas emissions that occur because of the company’s operations, but the emission sources are not directly owned or controlled by the company. These emissions include, for example, emissions caused by the supply chain, emissions from transport, emissions from the use of sold products and emissions from waste treatment.
These emissions are the broadest and most complex part of the calculation of greenhouse gas emissions, and the emission sources can vary significantly between different companies depending on their industry and operating models.
The emissions therefore consist of indirect greenhouse gas emissions from the company’s value chain. These emission sources can be divided into upstream and downstream emission sources, depending on where they are located in the production chain – before or after the company’s own operations.
Upstream emission sources include all indirect emissions that occur in the company’s value chain up to the moment of handing over one’s own product or service.
The GHG protocol divides these emission sources into eight different categories:
- Purchased products and services
- Fixed assets
- Activities related to fuels and energy that have not been taken into account as part of the scope 1 & 2 calculation
- Upstream transportation and distribution
- Handling of waste generated in operations
- Business trips
- Property leased by the company
Downstream emission sources include all indirect emissions that occur after the product or service is delivered to the customer.
The GHG protocol divides these emission sources into seven different categories:
- Downstream transportation and distribution
- Processing of sold products
- Emissions from the use of sold products
- Emissions from the final processing of sold products
- Downstream leased property
- Franchise Business Emissions
- Emissions from investment activities
Monitoring and reporting of Scope 3 emissions
Monitoring and reporting of Scope 3 emissions is important because it provides a comprehensive picture of the company’s climate impacts. Although a company can quite easily manage and reduce its direct (scope 1) and indirect emissions related to energy consumption (scope 2), scope 3 emissions typically make up a significant part of the company’s total emissions.
Monitoring and reporting help companies identify the most significant sources of emissions and set appropriate goals to reduce emissions in the entire value chain.
Challenges and opportunities of Scope 3 emissions
Calculating and reporting Scope 3 emissions is a challenge for companies, as determining scope 3 emissions requires cooperation with the entire value chain and data collection from several different actors. In addition, estimating emissions can be complex when considering different industries and different geographical areas.
However, the investigation of Scope 3 emissions offers opportunities for companies. Their effective management can lead to cost savings, improved resource efficiency, better value chain cooperation and the discovery of new business opportunities. For example, evaluating the environmental impacts during the products’ life cycle and eco-design can help reduce environmental impacts in the supply chain.
Scope 3 emissions are a significant part of companies’ environmental impact
Monitoring and reporting of Scope 3 emissions is an important part of companies’ sustainable development strategy. Although scope 3 emissions can be challenging to manage, they also offer opportunities to improve efficiency and find new business opportunities. Companies can take advantage of expert help and cooperation with various actors in the value chain to achieve their goals.
Ecobio’s team of experts will be happy to help you with all questions related to greenhouse gases and their monitoring and reporting.