Scope 3 refers to a certain type of greenhouse gas emissions, as defined by the Greenhouse Gas Protocol (GHG).
In short, Scope 3 emissions are the type of emissions that are not controlled or owned by a company itself, but rather all indirect emissions that occur across the value chain, both upstream and downstream (meaning from sourcing the materials to distribution of products to customers).
In the GHG Protocol, there are 3 scopes in total: Scope 1, Scope 2, and Scope 3. Generally speaking, given the all-encompassing nature of Scope 3, this group of emissions typically account for the largest share of emissions a company is responsible for.
As such, assessing Scope 3 emissions is a complex and multifaceted process that requires comprehensive data gathering across the entire value chain.
At CEMAsys, we’ve developed a state-of-the-art cloud-based system that gathers, manages, and analyzes your ESG data, including Scope 3 emissions. The system is tailored to each company’s needs and enables independence and continuity in tracking your sustainability performance.
Interested in learning more?
Explore our system solutions here.
What are Scope 3 emissions?
As mentioned, Scope 3 emissions refer to the type of indirect emissions that occur throughout the value chain of a business, both upstream and downstream. Upstream refers to emissions occurring before products reach a company, and downstream refers to emissions that occur after the products leave the company.
Common examples of Scope 3 emissions include:
- Purchased goods and services
When a company purchases goods and/or services, those goods/services have emitted greenhouse gases themselves, be it through the extraction or production process.
The coffee you drink at the office has at some point emitted a certain amount of greenhouse gases. Scope 3 accounts for that amount.
- Capital goods
Similar to Purchased Goods and Services, capital goods refer to equipment, buildings, or machinery purchased by a company. These items have also emitted a given amount of greenhouse gases.
- Upstream transportation
Getting products delivered to your company will also entail a certain amount of GHG emission. This is called upstream transportation and is accounted for by Scope 3.
- Downstream transportation
Delivering your company’s products to the customers will likewise emit greenhouse gases.
- Investments
Scope 3 also accounts for emissions related to investments made by your company.
- Etc.
Given the indirect nature of Scope 3, the list of items capable of being categorized here is almost endless. For many companies, it becomes a real challenge to identify, monitor, and disclose them.
That’s why we’ve developed a carbon accounting software that can help you accurately measure, effectively manage, and efficiently report your business impact.
Learn more about our carbon accounting software.
What is upstream and downstream?
We’ve briefly touched upon the distinction between upstream and downstream. It’s a cornerstone of how to think about Scope 3 emissions, as the distinction allows for a more granular and accurate understanding of how much greenhouse gas emissions a company really is accountable for.
From a financial and operational standpoint, the terms upstream and downstream refer to specific areas or steps in the overall supply chain.
Upstream activities include everything related to sourcing and production before a given company takes ownership of goods and/or services.
Downstream activities include everything related to the product/service after the product leaves the company.
This distinction is also used in the GHG framework and Scope 3 emissions, where it simply accounts for the amount of emissions taking place at either of the stages of the supply chain.
What are Scope 1 and 2 emissions?
The GHG protocol consists of 3 types of emissions, where we’ve defined and discussed Scope 3. But what are Scope 1 and 2 emissions?
Scope 1 refers to direct emissions from sources directly owned or controlled by an organization or company. If your company has a fleet of vehicles, the emissions from these are defined as direct emissions and thus fall under Scope 1.
Scope 2 refers to indirect energy emissions from purchased electricity, heating, or cooling used by a company. The electricity used to light up your office space falls under Scope 2 for example.
Read more about carbon accounting standards and global frameworks here.
How can you reduce Scope 3 emissions?
Reducing Scope 3 emissions can be very challenging for an organization, as they are hard to identify and measure, and difficult to reduce given their indirect nature.
As such, reducing Scope 3 emissions requires a holistic, data driven approach and expert knowledge about the GHG Protocol.
This is where CEMAsys can help you. Our expert consultants and holistic software makes us the ideal candidate for businesses and organizations that wish to increase their focus on ESG and Scope 3 assessments.
Reducing emissions at the supplier level
One way of reducing Scope 3 emissions starts at the supplier level. By assessing the level of GHG emissions a given supplier has, you can begin setting targets for them in order to foster a longer term collaboration.
You can also begin looking for alternative suppliers that have better ESG metrics, which in turn will improve your own Scope 3 metrics.
Using the CEMAsys platform and the supply chain control (SCC) solution, you can track and manage your suppliers with ease using our intuitive tools that support full control and transparency across your supply chain.
Improve your supply chain oversight today.
Reducing emissions at the operational level
Set targets for employees’ emission of greenhouse gases resulting from business travels, commutes, and other logistics. You can set clear emissions reduction targets throughout your company and thereby improve your Scope 3 metrics.
This also requires you to have data on the amount of emissions that activities at the operational level entails, which might prove challenging to obtain and standardize. A structured carbon accounting system, like the one we’ve developed here at CEMAsys, can help you achieve this.
Explore our carbon accounting system.
Reducing emissions at the customer and product level
Downstream activities at the customer and product level is also worth looking at. This part of the value chain can represent a large share of the total Scope 3 emissions, and understanding the true numbers of it requires a deep understanding of how your products are used, transported, and potentially how they’re discarded.
Our suite of tools and advisory services can assist you in gaining these insights and turn them into clear goals and reports for stakeholders and customers alike.
Reducing emissions at the investment level
Companies dealing with financial activities and investments can reduce their Scope 3 emissions through responsible investment strategies. This includes shifting capital toward low-carbon and ESG-aligned funds, and assessing the potential climate risks associated with certain investment strategies.
At CEMAsys, we can help you map and monitor financed emissions in accordance with standards like the GHG Protocol and PCAF (Partnership for Carbon Accounting Financials).
Frequently asked questions about GHGP
What are the 3 scopes of GHG emissions?
The 3 scopes of GHG emissions are:
- Scope 1: Direct emissions from sources that are owned or controlled by the company itself.
- Scope 2: Indirect emissions from purchased electricity, heating, or cooling used by the company.
- Scope 3: Indirect emissions from across the value chain, accounting for both upstream and downstream activities.
Why is scope 3 so difficult?
Scope 3 emissions are difficult to track as well as manage, as they are, per definition, indirect sources of emissions outside a company’s control. Still, they typically account for the largest part of a given company’s total emissions, so they are crucial to understand and work with.
What is the difference between GHG scope 2 and scope 3?
Scope 2 emissions come from the energy a company buys and uses, like electricity or heating. In other words, the company doesn’t produce the energy but rather controls use of it. Scope 3 emissions come from across the value chain, such as suppliers, transportation, product use, and waste. These are much harder to track and reduce because they fall outside the company’s direct control.
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