Climate change has placed greenhouse gas (GHG) emissions at the heart of the concerns of companies and institutions. While an organization’s direct emissions are often well identified, those of Scope 3, covering the entire value chain, remain less clear. In this article, discover the different Scope 3 emissions in detail and their impacts on companies’ overall environmental strategy.
Scope 3: indirect emissions not related to the organization
Scope 3 is part of the GHG Protocol, which is an internationally recognized set of standards used for the assessment of an organization’s emissions. Scope 3 focuses on indirect emissions, which are not directly related to the organization’s core business, but nonetheless result from its overall activities.
These emissions are often referred to as the “value chain” because they take into account the emissions generated throughout the life cycle of a product or service, from the extraction of raw materials to the end of the product’s life. Scope 3 therefore encompasses a wide range of emissions.
It’s crucial to understand that while these emissions aren’t directly controlled or owned by the organization, they often account for the majority of its total carbon footprint. Thus, measuring an organization’s Scope 3 allows you to offer a complete view of its environmental impact, beyond its immediate operations.
Scope 3 emissions
Upstream emissions in Scope 3 refer to emissions that occur before products or services arrive at the organization. These emissions can be attributed to a wide range of activities associated with the production and delivery of goods or services to the business:
- Acquisition of raw materials: This includes emissions resulting from the extraction, production, and transportation of raw materials that the organization uses in its products or services.
- Production of purchased goods: These emissions are related to the manufacturing of the products that the company purchases for its operations.
- Transportation of raw materials and purchased products: This relates to the emissions produced during the transportation of raw materials to manufacturing sites and finished products to the organization. These emissions can vary greatly depending on the mode of transport (truck, plane, boat, etc.) as well as distance.
- Business travel activities: Emissions from business travel, whether it’s international flights or car trips to meetings.
- Employee travel activities (not included in Scope 1): Here, emissions resulting from employees’ daily commute to work are considered.
- Other upstream indirect emissions: This category accounts for all other upstream emissions that do not fit into the previous categories.
Under Scope 3, downstream emissions are defined as emissions generated once the product or service is sold by the organization:
- Transportation and distribution of finished products: These emissions refer to the transportation of the organization’s products to their points of sale or directly to consumers. Each step of the distribution process contributes to the generation of emissions.
- Use of products sold (post-sale impact): Once the product is in the hands of the consumer, its use continues to generate emissions.
- End-of-life of products sold: This category includes emissions from the decomposition of waste, incineration, the recycling process, or any other end-of-life treatment of the product.
- Franchised activities: If the organization owns franchises, the emissions generated by these entities should also be considered.
- Investments: Investment-related emissions refer to those generated by the companies or projects in which the organization invests.
- Other Downstream Indirect Emissions: This category includes all other sources of downstream emissions that have not been previously mentioned.
Impact of Scope 3 Emissions Accounting
Scope 3 emissions often represent a significant portion of an organization’s total carbon footprint, especially for those that have outsourced many steps in their production chain. By ignoring them, a company significantly underestimates its real impact on the climate. In addition, transparency about these emissions has become a key element for companies’ reputations, as it reflects their commitment to the environment.
Considering those emissions allows companies to identify areas of improvement in their supply chain. For a company, a good understanding and detailed accounting of its Scope 3 emissions represents a unique opportunity to rethink its sustainability strategy. For example, it can opt for suppliers that adopt greener practices, redesign its products to minimize post-sales emissions, or encourage consumers to adopt more sustainable behaviors. By integrating those emissions into its strategy, the company is not only positioning itself as an environmental leader, but also creating value for its shareholders, employees and customers.
Understanding and managing Scope 3 emissions is fundamental to an effective sustainability strategy. A proactive approach to Scope 3 not only strengthens a company’s environmental responsibility, but also provides a competitive advantage for organizations. Scope 3 accounting via the D-Carbonize tool allows companies to identify new emission challenges, as well as to establish a strategy to reduce them.