The Greenhouse Gas (GHG) emissions in your value chain are often the most difficult to measure and control, but they are a crucial part of any credible net zero strategy. Phil Richards at BiU explains.
UK businesses are becoming increasingly aware of the importance of Scope 3 emissions within a net zero strategy and for setting any associated science-based targets. They are the GHGs that come from sources connected to a business, such as suppliers, service providers and distributors, rather than directly from the business itself. That’s why they’re often known as “value chain emissions”.
Why Scope 3 matters
Scope 3 emissions make up a surprisingly high percentage of total emissions for many businesses and depending on the nature of the business, are often the largest portion of the total. When food giant Kraft mapped out the sources of its own emissions, it found that over 90% of total emissions associated with the company were under Scope 3. This isn’t untypical; the best estimates place Scope 3 emissions somewhere between 80% and 97% of total emissions for a large business.
So, while many businesses do focus solely on Scope 1 and 2, this means only tackling a small percentage of the emissions linked to your business. Ignoring the emissions in your scope 3 emissions and specifically your value chain means that you will never get a grip on your company’s true carbon footprint.
Setting an emissions reduction target without Scope 3 also won’t meet the standards of any recognised scheme. For example, the Science-Based Targets initiative’s new Corporate Net-Zero Standard requires participating companies to do a “complete scope 3 inventory”, to identify emissions hotspots, reduction opportunities, and areas of risk up and down the value chain.
Many businesses also find that because tackling Scope 3 involves engaging more closely with your value chain, this means building stronger relationships with stakeholders and recognising opportunities to work more efficiently together, which in turn drives innovation. More and more businesses are learning that their value chain is at different stages of combatting climate change and therefore a very pragmatic approach needs to be applied for understanding Scope 3 emissions impacting their business.
Types of Scope 3 emissions
The concept of the three scopes is set out in the Greenhouse Gas (GHG) Protocol, which is the internationally recognised standard for measuring greenhouse gas emissions. The GHG Protocol splits Scope 3 emissions into two broad categories: upstream (from your suppliers) and downstream (from whoever buys your company’s goods or services). These are further divided into 15 distinct categories by the GHG Protocol.
Scope 3 emissions – Upstream
1. Purchased goods and services
2. Capital goods
3. Fuel and energy use
4. Upstream transport and distribution
5. Waste generated in company operations (if you don’t own or control the waste management facilities)
6. Business travel
7. Employee commuting
8. Upstream leased assets
Scope 3 emissions – Downstream
1. Downstream transport and distribution
2. Processing of sold products
3. End-use of sold goods and services
4. Waste disposal and treatment of products
5. Downstream leased assets
6. Operation of franchises
7. Operation of investment
Measuring Scope 3 emissions:
where to start
First you need to identify the emissions sources in your company’s value chain, both upstream and downstream, then decide which of the 15 categories set out by the Greenhouse Gas Protocol they fall into. Then you can start measuring the energy use and calculating the associated emissions.
This high-level screening should identify which Scope 3 categories of emissions are most significant to your business operations. For example, if your company relies heavily on materials that are imported by suppliers from overseas, upstream transport and distribution may be the Scope 3 category to look at first.
All this is a lot easier said than done, despite the detailed and helpful guidance from the GHG Protocol. The best way to start measuring your company’s Scope 3 emissions is to seek expert help.
Experts like the team at BiU will start by mapping your company’s unique emissions profile, showing exactly where emissions are being generated in its value chain, using industry recognised guidance such as GHG protocol and sector based specific guides.
Some businesses, rather than engaging outside help straight away, will do the work of gathering information and transposing it into the right format in-house, but then ask a specialist organisation to verify their calculations. The feedback given by this process is particularly valuable if you’re concerned you may have fallen into bad practices or if a reporting requirement is new to your business.
If you’d like advice on reporting and reducing your Scope 3 emissions, get in touch with BiU on firstname.lastname@example.org