Scope 3 – What is it and how do you tackle it?

Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. Scope 3 emissions include all sources not within an organization's scope 1 and 2 boundary. Scope 3 category includes the emissions of suppliers in the manufacture and transportation of products and those of consumers in the use of products. Scope 3 emissions can account for 80 percent of the total carbon footprint for many companies and as much as 98 percent for home and fashion retailers.

The share of companies reporting on their Scope 3 emissions remains small compared to GHG reporting overall, but practitioners and researchers have developed accounting methods that facilitate the process.

A common approach to quantifying Scope 3 emissions is comparative life cycle analysis (LCA), based on average carbon emission values of the materials, services, or processes used in a product’s value chain.

While industry data facilitates the calculation of Scope 3 emissions, the LCA method uses conservative proxy values that do not reflect any actual emissions reduction undertaken.

A more precise alternative are supplier specific methods, where GHG emissions data is requested from upstream suppliers through dedicated questionnaires or other tools of data collection, using a cascading approach.

By channelling influence from the first tier of suppliers to the next and so on, companies overcome the shortcomings of using average values through actual data.

However, a lack of direct business relationships with upstream suppliers limits follow-through using this method, and can result in data gaps for both influential suppliers or supply chain areas with the highest carbon impacts.

Companies using the supplier-specific method spend a lot of time and resources on data collection but often receive substandard-quality data from their suppliers, or no data at all beyond tiers 1 and 2.

EcoVadis assessment data has shown the extreme disparity between company sizes when it comes to GHG reporting, with under 3% of small sized companies reporting on their carbon emissions in 2019.

SMEs form an integral part of many supply chains, and reporting gaps can be detrimental to quantifying corporations’ overall supply chain footprint.

There are a number of challenges

• High-visibility barriers to Scope 3 reporting and action include limited leverage over upstream suppliers and their emissions data.

• An underdeveloped relationship with individual suppliers can cause larger data gaps, or obstruct a cascading, tier-by tier reduction strategy all together.

• Many companies lack the know-how and resources to engage in GHG accounting processes, especially through complex tools such as comparative life cycle analysis (LCA).

With rapidly changing industry expectations and best practices, training skilled staff can be a challenge, over which much-needed supplier engagement might take a back seat yet again. Klean aims to solve this challenge by designing a tool which is tailor made for SME’s.