What Are Scope 3 Emissions?

Tracking, reporting, and reducing greenhouse gas emissions that cause climate change and various environmental problems are of critical importance to achieving sustainability goals. Scope 3 emissions, which involve many activities and occur outside of directly controlled areas, are the emissions that cause the largest carbon footprint. Calculating this emission, which is associated with multi-layered supply chains, can require a detailed and complex process. To establish an effective strategy in the combat against climate change, Scope 3 emissions must be reduced and accurately calculated.

What is the GHG Protocol and Why is it Important?

In order to reduce greenhouse gases that increase global warming by trapping heat in the atmosphere, emissions must first be accurately measured and reported. The GHG (Greenhouse Gas) Protocol is a comprehensive and widely used standard for greenhouse gas emission calculation and reporting. This internationally recognized standard defines a set of guidelines for public and private sector organizations to measure and manage their emissions.

Since climate change is a global problem, it is important for businesses operating in the global economy to adopt a common, consistent, and aligned approach. Effective climate policies and emission reduction strategies can be established based on standardized carbon emission data. Standardized data also ensures transparency and accountability in measuring the effectiveness of emission reduction policies implemented as part of the fight against climate change. Standard measurements also allow for comparisons across different companies, sectors, regions, and countries.

The GHG Protocol Corporate Standard divides GHG emissions into three scopes. These three scopes can be defined as follows:

Scope 1 Emissions: Direct emissions coming from owned or controlled sources. For example, emissions resulting from natural gas used in a company's office or exhaust gases from company vehicles fall under this scope.

Scope 2 Emissions: Indirect emissions from purchased and consumed energy. For example, emissions arising from energy sources purchased by a company such as electricity, steam, heating, and cooling fall under this scope.

Scope 3 Emissions: All indirect emissions that occur in the value chain, including both upstream and downstream emissions. For example, consider an aircraft manufacturer. Emissions resulting from the energy used to produce the steel for making airplanes or from the exhaust of cars used by workers to commute to work are included in Scope 3.

Scope 3 Emissions: How Do Upstream and Downstream Emissions Occur?

Scope 3 emissions are the result of activities stemming from sources not owned or controlled by the organization, but which the organization indirectly influences within its value chain. Within the scope of actions carried out to reduce and eliminate the effects of climate change, emissions not arising from direct activities, namely Scope 3 emissions, must also be reduced.

Scope 3, which includes all emissions that are not within the boundaries of Scope 1 and Scope 2, includes both upstream and downstream activities. Upstream emissions cover emissions arising during the procurement of products or services required for a company's operations. Downstream emissions, on the other hand, are emissions that occur during the stages of delivering the products or services produced by the company to customers and their usage by customers. Upstream and downstream emissions, which describe different phases in the life cycle of a product, play an important role in sustainability reporting and tracking greenhouse gas emissions.

Upstream emissions arise in processes such as raw material supply, manufacturer activities, and transportation. Downstream emissions, on the other hand, occur in post-production processes such as distribution, sales, consumption, and waste management. For example, the greenhouse gas emissions that occur during the production of plastic materials purchased by a food company to package its products is an example of upstream emissions. Conversely, the electrical energy used by the customer when cooking products produced by this food company could be an example of downstream emissions.

How Can Scope 3 Emissions Be Reduced?

Scope 3 emissions typically account for more than 70% of a business's carbon footprint. Since Scope 3 emissions stem from areas that cannot be directly controlled, reducing these emissions requires the determination of new business strategies. In addition to this, replanning business processes may also be necessary. This process can be managed more effectively in collaboration with suppliers, customers, and other stakeholders.

While emission reduction practices mitigate environmental impacts, they can also provide businesses with various financial advantages. Some of the methods that can be effective in reducing Scope 3 emissions include:

• Sustainability criteria can be integrated into procurement processes. Companies can choose suppliers that adopt sustainable practices and produce low-emission products and services. Similarly, working with logistics companies that use electric or low-emission vehicles can ensure a reduction in fuel consumption.

• Recyclable or reusable packaging can be preferred to ensure that products generate less waste.

• By manufacturing products suitable for long-term use, products can be prevented from becoming unusable and discarded in a short period of time.

• Emissions from fossil fuels can be reduced by turning to the use of renewable energy sources such as solar, wind, hydroelectric, or geothermal energy.

• By utilizing virtual meetings and video conferences, the number of business meetings requiring travel can be reduced, thus preventing the generation of travel-related emissions.

• To reduce the environmental impact of employees' commutes between home and work, incentives can be provided for using public transport, which is a low-emission option, or flexible working opportunities can be granted for suitable positions.

Accurately Calculating Scope 3 Emissions

In order to fully determine the environmental impact of an organization's activities, Scope 3 emissions, which are indirect emissions originating from supply chains, must be calculated accurately. To identify the main sources of Scope 3 emissions, where the emissions come from needs to be analyzed in detail at all stages from the supply chain to the usage of the products.

The GHG Protocol's "Technical Guidance for Calculating Scope 3 Emissions" offers companies practical information on calculating Scope 3 emissions. The 15 categories under Scope 3 emissions defined by the GHG Protocol are as follows:

• Purchased goods and services,

• Capital goods,

• Fuel- and energy-related activities (not included in scope 1 or scope 2),

• Upstream transportation and distribution,

• Waste generated in operations,

• Business travel,

• Employee commuting,

• Upstream leased assets,

• Downstream transportation and distribution activities,

• Processing of sold products,

• Use of sold products,

• End-of-life treatment of sold products,

• Downstream leased assets,

• Franchises,

• Investments.

Accounting and reporting principles for these 15 sub-categories are explained in the GHG Protocol. Multiple calculation methods are presented in the GHG Protocol, and necessary information is detailed to select the calculation methods that will satisfy the decision-making needs of users inside and outside the company.

Challenges Faced in Calculating Scope 3 Emissions

Calculating Scope 3 emissions is a more complex process as it does not only cover the organization's own activities. For example, if a correct evaluation is not made during the determination of which category emissions belong to, the resulting data may drift away from the correct result. Choosing a calculation method in line with the GHG Protocol that is not suitable for the company's activity and needs can also bring along erroneous results.

Since the sources of Scope 3 emissions are highly diverse, the obtained data needs to be complete and accurate. For instance, if a supplier does not perform emission calculation, the integrity of the calculation will be disrupted as the desired data cannot be obtained. If the data received from suppliers and service providers is incomplete, the emission results will also be calculated incorrectly in this case.

The fact that Scope 3 emissions involve numerous layers can also make it difficult to clearly track and determine environmental impact. For example, the fact that a company's suppliers also import materials from other firms can complicate emission measurement by increasing the number of data points to be calculated.

Take Advantage of QuickCarbon's Practical Calculation and Reporting Services!

By utilizing QuickCarbon's professional support during the emission reporting process, you can develop effective strategies for emission reduction. Thanks to the corporate carbon footprint calculation and reporting processes we offer under the ISO 14064-1:2018 Standard and GHG Protocol, you can achieve your sustainability goals more easily. To get detailed information about QuickCarbon and to request a demo, you can contact us immediately.