The Greenhouse Gas Protocol identifies three categories of emissions that combine to define a corporation’s total emissions footprint: Scope 1, 2, and 3 Emissions. Scope 1 Emissions are from sources directly owned by the organization, like the company’s vehicles or factories. Scope 2 Emissions are from energy purchased for the company’s use. Scope 3 Emissions are more complex. Stemming from various points along the company’s value chain, these indirect emissions are challenging to track yet constitute up to 90% of the organization’s total carbon footprint. In this article, we will discuss Scope 3 Emissions, how they are measured, and how they relate to current policies surrounding greenhouse gas emissions.
"...these indirect [Scope 3 Emissions] are challenging to track yet constitute up to 90% of the organization’s total carbon footprint."
Overview of GHG Protocol scopes and emissions across the value chain
What are Scope 3 Emissions?
Scope 3 Emissions encompass all indirect emissions along an organization’s value chain produced by assets it does not own or control. Examples include emissions generated from raw ingredient production, material and finished product transportation and end-of-life disposal processes. Scope 3 Emissions consider every aspect of material creation, distribution, and end-use throughout an organization’s entire supply chain. As a result, they represent the most extensive portion of an organization’s environmental impact.
The Greenhouse Gas Protocol clearly divides Scope 3 Emissions sources into fifteen categories. The most important categories include purchased goods and services, transportation and distribution, business travel, employee commuting, use of sold products, and end-of-life treatment of sold products. Calculating each of these fifteen sources of emissions is complicated and takes time. Companies assessing their carbon footprint are encouraged to determine which of the fifteen categories to prioritize for their organization.
"Generally, a Scope 3 category is deemed relevant to an organization’s operations if it contributes to more than 5% of the company’s total emissions."
To determine which categories an organization should prioritize for Scope 3 calculations, it should consider relevance to the company’s operations, the potential for emissions reduction in each category, and stakeholder interest. Generally, a Scope 3 category is deemed relevant to an organization’s operations if it contributes to more than 5% of the company’s total emissions. For example, a remote-working company may omit data from employee commuting. However, if a company sells assembled products, such as footwear or electronics, it may want to consider purchased goods and services as a significant part of its emissions sources. This method allows each organization to determine its unique operational boundaries.
Prioritizing emissions sources helps organizations identify the most impactful areas in their value chain. These emissions calculations inform supplier performance and create opportunities for supplier portfolio consolidation. Due to different climate goals and calculation methodologies, comparing emissions reports between companies is not always productive. Instead, emissions accounting helps understand baseline performance, which companies can compare themselves to year after year.
How is data collected for Scope 3 Emissions?
A key challenge in calculating Scope 3 Emissions is finding reliable data. Scope 3 Emissions data can be collected by reviewing internal activity data and surveying suppliers. Some Scope 3 Emissions data, such as business travel and commuting records, is readily available internally within an organization; however, most data is not. Fortunately, suppliers can provide information on the environmental impact of purchased goods and services, such as raw material production, manufacturing processes, finishing treatments, or finished goods. This is why it is necessary to establish a trusting, collaborative relationship with suppliers to acquire the most accurate data.
To extrapolate the quantity of emissions per unit of activity, emissions factors must be used. For example, according to the EPA, the emissions factor for combusting one MMBtu of natural gas releases 53.06 kg of carbon dioxide into the atmosphere. Emissions factors may develop through statistical sampling; however, accuracy varies greatly by activity and geographic location. In other words, the same activity might produce a lower quantity of carbon in one region but a higher quantity in another. The more specific an emissions factor is, the more accurate the calculations will be. Using more generalized emissions factors can lead to less reliable calculations.
Collecting data for Scope 3 Emissions is more complex than for Scope 1 or 2. Organizations typically have the relevant data for Scope 1 and 2 calculations readily available within internal documents. However, Scope 3 reporting requires extensive collaboration and data sourcing from various external suppliers. The biggest challenges with calculating Scope 3 Emissions come from using generalized information and having limited control over data from external sources. As a result, organizations typically prioritize providing Scope 1 and 2 reporting. However, a company’s environmental footprint is notably incomplete without Scope 3 reporting.
Why is Greenhouse Gas Reporting Important?
The need for comprehensive greenhouse gas reporting will steadily increase as more countries pass regulations mandating carbon accounting. Since 2008, the United States has required companies emitting at least 25,000 metric tons of CO2e annually to complete a Mandatory Greenhouse Gas Reporting Program. Also, different US states have developed their own greenhouse gas reporting programs with even lower emissions thresholds. The United States requires over 8000 large GHG emission sources, including energy suppliers and CO2 injection sites, to report their emissions.
Most recently, the EU passed the Corporate Sustainability Reporting Directive (CSRD), which will require companies in the EU to report Scope 1, 2, and 3 Greenhouse Gas Emissions beginning in 2025. This directive will first apply to over 11,000 of Europe’s largest companies and will eventually expand to include non-EU parent companies that pass a certain earnings threshold. This new regulation is one of the most comprehensive policies around greenhouse gas reporting to be passed. As more countries adopt similar practices, improving consistency and accuracy in greenhouse gas emissions calculations will become increasingly important.
How Rheom Materials can mitigate your greenhouse gas impact.
At Rheom Materials, our mission is to universalize sustainable, bio-based material solutions through collaboration. To meet that mission, we assess our products using recognized standards that accurately calculate the carbon footprint of our products.
This year we completed a preliminary Life-Cycle Assessment* (LCA) of our bio-based leather replacement, SHORAI™. This methodology provides the necessary transparency and accountability to determine our impact verses alternatives. That is why we feel confident in saying SHORAI™ uses 80% less CO2e emissions than that of synthetic leather when considering uptake and biogenic factors. We always look for ways to improve our material and are currently working to drive that number further down for our next version of SHORAI™. We plan on completing an updated LCA for our next version of SHORAI™ later this year. Join us on our journey to build a cleaner, greener world!
*The LCA was completed using ISO14044:2006 - Environmental management — Life cycle assessment — Requirements and guidelines https://www.iso.org/standard/38498.html.
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