Organisations need to be aware of their carbon emissions to reduce them effectively. Quality reporting is essential to understand where an organisation’s emissions come from and how best to reduce them.
Emissions reporting is becoming more common and more stringent, as businesses face increasing pressure to reduce their environmental impact. By now, most businesses are versed in reporting emissions sourced from their direct activities and energy. Soon, however, businesses will need to report the carbon emissions occurring outside of their direct control – also known as Scope 3 emissions.
By following best practices and using the latest technologies, organisations can ensure that they are reporting accurately and efficiently. This will help them meet their compliance obligations and make meaningful progress towards reducing their carbon footprint.
What are the different scopes of carbon emissions?
The Greenhouse Gas Protocol categorised emissions into three groups, known as scopes.
Scope 1 emissions come from the direct activities of your company. In other words, these emissions are sourced from assets owned or controlled directly by your organisation. The fuel that you burn from your company’s fleet of vehicles is an example of this.
Scope 2 emissions come from purchased electricity for your own use. Although scope 2 emissions physically occur at the facility where they are generated, they are accounted for in an organisation’s greenhouse gas inventory because they are a result of the organisation’s energy use.
Most businesses will target scopes 1 and 2 emissions reporting in their carbon reduction plan. This is often to adhere to legal frameworks which demand that emissions reporting also includes carbon emissions (and energy consumption) alongside their financial accounts.
Businesses now need to prepare and prioritise scope 3 emissions reporting, according to regulations relevant to both international and domestic regulations.
What are scope 3 emissions?
Scope 3 emissions are emissions that occur externally from you, as the result of the purchasing of goods or services offered by your company, as well as business travel, employee commutes, and waste management.
What sources of emissions are included in scope 3 emissions? They are broken down into 15 categories, including:
Upstream Scope 3 emissions
- Purchased goods and services (by your company)
- Capital goods
- Fuel and energy use
- Upstream transport and distribution
- Waste generated in company operations (if you don’t own or control the waste management facilities)
- Business travel
- Employee commuting
- Upstream leased assets
Downstream Scope 3 emissions
- Downstream transport and distribution
- Processing of sold products
- End-use of sold goods and services
- Waste disposal and treatment of products
- Downstream leased assets
- Operation of franchises
- Operation of investment
Source: Corporate Value Chain (Scope 3) Standard, GHG Protocol
How do businesses calculate and report scope 3 emissions?
The reporting of greenhouse gas (GHG) emissions has become an increasingly critical issue for companies as the global community seeks to act on climate change. There are several established reporting protocols, such as the GHG Protocol Corporate Standard, which provide guidance on how companies can calculate and report their emissions. These protocols typically involve conducting assessments of organisational and operational boundaries, as well as identifying relevant categories of emissions. This process can be complex, but it is essential for companies to have a clear understanding of their emissions to develop effective strategies for reducing them. Digital technology solutions facilitate the process by calculating a company’s global energy consumption and linked carbon emissions.
Why is scope 3 emissions reporting important?
Scope 3 emissions reporting is important for two reasons. The first, as mentioned before, is a matter of compliance. The requirement to disclose scope 3 emissions will reach an increasing number of companies as different jurisdictions – such as the – settle the operability of the scope 3 requirements relevant to their needs.
Second, businesses can only account and act to reduce their carbon emissions across their operations if they include scope 3 into their plan. In other words, gathering complete scope 3 emissions data will enable businesses to build a total carbon reduction strategy.
For businesses across several sectors, scope 3 emissions comprise up to 70 percent of their carbon footprint. Oil and gas companies can expect their scope 3 emissions to be up to 90 percent of their carbon footprint. If companies can methodically reduce their scope 3 emissions, their overall climate impact will likewise be reduced.
What are the benefits of reporting scope 3 emissions?
The three key drivers of the scope 3 reporting are regulatory pressure, consumer expectation, and investor preference. Companies as a result are now faced with the challenge of commencing a complex reporting process. While there are challenges, the reporting requirements will result in a cross-sector cooperation for carbon accounting, through which companies will measure their climate impact, and will therefore have the opportunity to collaborate and reduce their emissions simultaneously.
Reducing your Scope 3 emissions and including them in net zero carbon targets can deliver substantial business benefits as well as the potential to mitigate climate change’s worst impacts. Companies avoid risks within their value chains, unlock new innovations that provide a better understanding for how much environmental damage they’re doing (and what solutions exist), which helps with accurate reporting.
This is all done to further efforts toward reducing operating costs while also preparing you for future climate regulations from governments or regulatory bodies, who likely will implement tighter restrictions on fossil fuels use. There is an excellent opportunity for companies to understand wider climate impact throughout their value chain in scope 3 reporting. This process will not only identify GHG emissions hotspots, it will also enable companies to develop decarbonisation strategies in collaboration with their suppliers.
What are the challenges to reporting scope 3 emissions?
The challenge for businesses looking to reduce their climate impact has been the ability to capture data on scope 3 emissions. Pinpointing all external sources of emissions and receiving reliable data consistently from such sources are onerous tasks for businesses.
Gaps in the data make it difficult for businesses to get a complete picture of their climate impact and then take action to reduce it.
How to reduce scope 3 emissions
Because scope 3 emissions are the most difficult to account, they are seen as the most difficult to reduce. However, it is possible through careful planning and consideration. Your company can choose which materials or vendors they rely on for production, make informed transportation decisions, and encourage suppliers to reduce their own environmental impact. All of these will contribute towards the lowering of your business’ overall carbon footprint. Sustainability consultancy teams can help businesses identify opportunities for more sustainable supply chain decisions.
How to start scope 3 emissions reporting
However, the only way to start reducing emissions is to identify, calculate, and report them. There are some ways that businesses can overcome these challenges and accurately capture data on their scope 3 emissions.
One way is to work with an outside organization that specializes in tracking and reporting environmental data. This can help businesses to fill in any gaps in their own data and get a more accurate picture of their climate impact.
Another way is to put systems in place internally to track and report data on scope 3 emissions. Energy/carbon management platforms kitted with powerful big data, AI, and machine learning technologies are making emissions monitoring and reporting far more streamlined and accessible than ever before. It is an effective way to get accurate data on all aspects of the business’s climate impact.
By taking these steps, businesses can overcome the challenge of accurately capturing data on their scope 3 emissions and take action to reduce their climate impact.
ClearVUE.Zero – making emissions reduction planning and reporting as easy as 1, 2, 3
ClearVUE.Business understands how difficult it can be to maintain sustainability strategies when you’re under pressure from your company’s stakeholders and the ever-changing regulatory landscape. It’s why we created our Scope 3 Accounting feature for the Carbon module of ClearVUE.Zero.
Businesses like yours will have the capability of automating data collection and calculation for scopes 1, 2, and 3. Your progress can be documented with the platform’s one-click reporting tools. This facilitates faster and easier carbon reporting compliance and reduction progress tracking. The Carbon module allows you to generate compliance ready SECR reports for your business, which are required by law.
If you’re interested in the new software feature, sign up to our beta trial.