What are Scope 3 emissions?
These are indirect emissions that take place outside an organisation’s own walls.
What are Scope 3 emissions?
What are Scope 3 emissions? They are indirect greenhouse gas emissions resulting from the organisation’s operations. They also can be described in value chain terms as upstream and downstream activities. Examples of upstream Scope 3 emissions sources are; business travel by means not owned or controlled by an organisation, waste disposal and purchased goods & services. Examples of downstream Scope 3 emissions sources are; processing of sold products, use of sold products and the end-of-life treatment of sold products. This is simplified in the following diagram:
How Scopes 1, 2 and 3 sit in a manufacturer’s value chain. Scope 3 emissions are not currently included in the Streamlined Energy and Carbon Emissions Reporting.
Business travel by means not owned or controlled by your organisation:
- Air travel
- Business mileage using private vehicles
- Underground and Light rail e.g. the “Tube”
- Taxis, including mini-cabs and Uber
Business travel is difficult for most organisations to report with any degree of accuracy.
Waste Generated in Operations
What are Scope 3 emissions relating to waste? This generally relates to waste sent to landfill and wastewater treatment. Emissions from waste disposal relate mainly to CH4 and N2O emissions from landfill or solid waste disposal sites. Emissions from wastewater treatment relate to the energy used to supply the water, in the treatment process. Emissions from waste water treatment as a result of the biological breakdown of the waste. These emissions are classed as Scope 3 as they are not operated or controlled by the organisation. CH4 and N2O are powerful greenhouse gases causing more potential damage than CO2.
Purchased Goods and Services
The emissions specifically related to purchases made from suppliers, fall into Scope 3. In fact for many organisations, this embodied carbon causes the greatest environmental impact; e.g. sheet steel used to manufacture white goods. Understanding the emissions from different suppliers can inform an organisation’s choices.
What are Scope 3 emissions where employee commuting is concerned? The emissions resulting from travel to and from work will depend of on the organisation’s geographic location. An urban or rural location, proximity to public transport, the size of its catchment area and its culture: all will impact emissions from commuting. Incentives to use public transport, car sharing and management’s attitude to home working, can all help reduce emissions.
Transportation and Distribution – upstream and downstream
Transportation and Distribution occurs in both upstream and downstream elements of the value chain. Upstream applies to suppliers of the organisation. Downstream, to the organisation’s customers. The term covers the emissions from the movement of goods by land, sea and air. It also includes emissions from third-party warehousing along the supply chain.
The inclusion of investments is designed mainly for financial institutions, but can be relevant to organisation. Although not as difficult to report as business travel the process can be quite complex. Investment portfolios are not usually static. They can change in both composition and value throughout the reporting period. Often a fixed point is chosen within the accounting period to be the reporting date. For purposes of GHG accounting investments fall into four types:
Managed investments and client services.
The emissions reported are based on the percentage of the overall investment that the organisation controls.
Use of Sold Products
Use of sold products applies to those products sold to consumers not other businesses. The greenhouse gas emissions resulting from how products are used varies considerably.
The emissions from manufacturing a bottle of shampoo are insignificant compared to those resulting from taking a hot shower.
The emissions from using an iPhone could take months or even years to equal those produced in making it.
Whereas there are no CO2e emissions from using a screwdriver. It will come as no surprise that many organisations shy away from reporting emissions from the use of the products they sell.
Reporting greenhouse gas emissions is intended to encourage organisations to reduce their products’ in-use emissions.
End-of-life treatment also applies to products sold to consumers. It is to be reported in a similar fashion to “waste generated in operations”. However, understanding how consumers will deal with waste-disposal is difficult. People (and Local Authorities) in different regions view waste-disposal in different ways.
Organisations need to determine the total mass of products sold and its associated packaging. They then need to estimate how to divide up the waste into different streams, e.g. landfill, incineration and recycling.
End-of-life treatment is designed to encourage organisations to produce recyclable products and packaging. Therefore minimising waste to landfill and incineration.
There are assets leased by the reporting organisation (upstream) and assets to other organisations (downstream). The treatment of leased assets is complex and the emissions can be included in Scope 1 or Scope 2. It depends on:
The type of lease (operating lease or finance lease)
How the organisational boundaries are defined (operational control or equity share)
The method of calculating the emissions will also depend on these factors. It is easier to calculate the emissions from upstream leases as the information needed is more easily obtained.
A franchise is a business that is licensed to sell or distribute another organisation’s goods or services within a specific location. Examples include most McDonalds burger outlets and Hilton Hotels & Resorts. The franchisor, the organisation granting the license, should report the the Scope 1 and Scope 2 emissions of franchisees.
The emissions can be calculated using either:
The Franchise-specific method based on information collected on each site, or
The Average-data method that estimates the emissions for each franchise based on a factor like size, location etc.
Book a time to talk about what Scope 1 and Scope 2 emissions mean to your organisation. Bring your concerns to our experienced consultants.