Insights

Understanding Scope 3 Emissions

What Are Scope 3 Emissions?

Scope 3 emissions refer to indirect greenhouse gas (GHG) emissions that occur in the value chain of the reporting company, including both upstream and downstream activities. These emissions are a crucial part of a company’s overall carbon footprint, as they often constitute the majority of total emissions, despite being less directly controlled by the company compared to Scope 1 and Scope 2 emissions.

Scope 1 emissions are direct GHG emissions from sources that are owned or controlled by the company, such as emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.

 

Scope 2 emissions are indirect GHG emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.

 

Scope 3 emissions encompass a wide range of activities. They can be broadly categorised into upstream and downstream activities.

Upstream Scope 3 Emissions

Upstream scope 3 emissions might include:

 

  • Purchased goods and services
  • Capital goods
  • Fuel- and energy-related activities not included in Scope 1 or Scope 2
  • Upstream transportation and distribution
  • Waste generated in operations
  • Business travel
  • Employee commuting
  • Leased assets

Downstream Scope 3 Emissions

Downstream scope 3 emissions might include:

 

  • Downstream transportation and distribution
  • Processing of sold products
  • Use of sold products
  • End-of-life treatment of sold products
  • Downstream leased assets
  • Franchises
  • Investments

Sources of Scope 3 Emissions

The sources of Scope 3 emissions encompass a broad range of activities both upstream and downstream of a company’s direct operations. These sources are integral to the company’s value chain but occur from entities and processes that are not owned or directly controlled by the company. Here are the key sources of Scope 3 emissions:

Upstream Scope 3 Emissions

  • Purchased Goods and Services: Emissions from the production of goods and services that the company purchases.
  • Capital Goods: Emissions associated with the production of capital goods (e.g., machinery, buildings).
  • Fuel- and Energy-Related Activities: Emissions from the production of fuels and energy purchased by the company that are not included in Scope 1 or Scope 2.
  • Upstream Transportation and Distribution: Emissions from the transportation and distribution of goods and services purchased by the company, including inbound logistics.
  • Waste Generated in Operations: Emissions from the disposal and treatment of waste generated in the company’s operations.
  • Business Travel: Emissions from employee travel for business purposes (e.g., flights, car rentals, hotels).
  • Employee Commuting: Emissions from employees commuting to and from work.
  • Upstream Leased Assets: Emissions from the operation of assets leased by the company (not included in Scope 1 and 2).

Downstream Scope 3 Emissions

 

  • Downstream Transportation and Distribution: Emissions from the transportation and distribution of sold products, including retail and warehousing.
  • Processing of Sold Products: Emissions from the processing of intermediate products sold by the company to downstream companies.
  • Use of Sold Products: Emissions from the use of goods and services sold by the company.
  • End-of-Life Treatment of Sold Products: Emissions from the disposal and treatment of products sold by the company at the end of their life cycle.
  • Downstream Leased Assets: Emissions from the operation of assets owned by the company and leased to other entities.
  • Franchises: Emissions from the operation of franchises not included in Scope 1 or Scope 2.
  • Investments: Emissions associated with the company’s investments, including equity and debt investments.

Summary: Scope 3 Emissions

Addressing Scope 3 emissions is often complex due to the need for detailed data collection and the involvement of various stakeholders throughout the value chain. However, these emissions typically represent the largest portion of a company’s total greenhouse gas emissions, making their management critical for comprehensive sustainability strategies.

 

These emissions are challenging to measure and manage because they require data from a variety of sources, many of which are outside the direct control of the reporting company. Nevertheless, understanding and addressing Scope 3 emissions is essential for a comprehensive approach to reducing a company’s overall carbon footprint and for achieving long-term sustainability goals.