Identifying and calculating scope 3 emissions
I have written GHG Protocol standards before and about scope 3 emissions, too. This one digs deeper into guiding documents and especially the nine process steps. Moreover, what are the required actions and considerations for each step to build a comprehensive scope 3 emission inventory.
GHG Protocol guides for scope 3 emissions
There are two key documents for scope 3 emissions:
GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (‘Scope 3’), here, and
Technical Guidance for Calculating Scope 3 Emissions ('Technical guidance'), here.
Scope 3 categories
The standard divides scope 3 emissions into ‘upstream’ and ‘downstream’ emissions and groups them into 15 categories. 1-8 categories are ‘upstream’ and 9-15 categories are 'downstream' emission categories:
Upstream Emissions: 1. Purchased goods and services, 2. Capital goods, 3. Fuel- and energy-related activities (not included in scope 1 or scope 2), 4. Upstream transportation and distribution, 5. Waste generated in operations, 6. Business travel, 7. Employee commuting, and 8. Upstream leased assets.
Downstream Emissions: 9. Downstream transportation and distribution, 10. Processing of sold products, 11. Use of sold products, 12. End-of-life treatment of sold products, 13. Downstream leased assets, 14. Franchises, and 15. Investments
9 steps in scope 3 accounting and reporting
Scope 3 standard provides steps to follow and requirements in each step:
Step 1. Define business goals
The organisation should identify, assess and evaluate risks and opportunities associated with value chain emissions; identify GHG reduction opportunities, set reduction targets, and track performance; engage and cooperate with value chain partners in GHG management; and report findings according to the principles.
Step 2. Review accounting & reporting principles
All the GHG Protocol standards and guides embrace the following principles: relevance, completeness, consistency, transparency and accuracy.
Step 3. Identify scope 3 activities
The organisation should map its value chain to list the following:
Each of the scope 3 categories and activities included,
A list of purchased goods and services and a list of sold goods and services, and
A list of suppliers and other relevant value chain partners.
The activities can be identified by using the following criteria: size, influence, risk, stakeholders, outsourcing, sector guidance and other. Additionally, the organisation should consider various consolidation approaches: equity share, financial control and operational control.
Step 4. Set the scope 3 boundaries
Next, the organisation needs to become aware of the minimum boundaries for each category and consider time boundaries. If applicable, it should justify exclusions and why it is not disclosing particular categories.
Step 5. Collect data
This is the most crucial and demanding step of them all. Scope 3 guides to develop a data management plan to keep things manageable. It provides also a checklist and quality assurance/quality control procedures for assistance.
Scope 3 also provides four process steps for collecting and evaluating data:
Prioritizing data collection efforts,
Select data,
Collect data and fill the gaps, and
Improve data quality over time.
Some important matters to consider in this step are:
Types of data: primary vs secondary,
Levels of data: Product-level data, Activity-, process- or production line-level data, Facility-level data, Business unit-level data and Corporate-level data
Data quality indicators: Technological representativeness, Temporal representativeness, Geographical representativeness, Completeness and Reliability,
Criteria to evaluate the data quality indicators: Very good, Good, Fair and Poor,
For each calculation method:
Activity data needed,
Emission factors needed,
Data collection guidance,
Calculation formula (Technical guidance – Appendix D), and
Example(s).
Use of GHG calculation tools and public databases,
Global warming potential (GWP) values, Activity data and Emission factors,
Quantification methods:
GHG = Emissions data x GWP, and
GHG = Activity data x Emission factor x GWP.
Prioritizing suppliers based on contribution to the company’s total spend (80%),
A calculation method and a decision tree of each category. The most common ones are:
Supplier-specific method,
Hybrid method,
Average-data method, and
Spend-based method.
Some commonly known challenges and guidance for collecting primary data from value chain partners:
A large number of suppliers,
Lack of supplier knowledge and experience with GHG inventories and accounting,
Lack of supplier capacity and resources for tracking data,
Lack of transparency in the quality of supplier data,
Confidentiality concerns of suppliers, and
Language barriers.
Step 6. Allocate emissions
The allocation is the process of partitioning GHG emissions from a single facility or other system (e.g., activity, vehicle, production line, business unit, etc.) among its various outputs.
Step 1. Avoid allocation, if possible,
Step 2. Consider physical allocation, and
Step 3. If data is not available, consider another method.
Allocation factors are: mass, volume, energy, chemical, number of units and other factors.
Step 7. Set a target (optional) & track emissions over time
When companies choose to track performance or set a reduction target, companies shall:
Choose a scope 3 base year and specify their reasons for choosing that particular year,
Develop a base year emissions recalculation policy that articulates the basis for any recalculations, and
Recalculate base year emissions when significant changes in the company structure or inventory methodology occur.
Considerations when setting a GHG reduction target
Target type: absolute and intensity,
Target completion date,
Target level,
Use of offsets or credits,
Methods for accounting for GHG reductions: Inventory method and Project method, and
Actions to reduce scope 3 emissions.
Step 8. Assure emissions (optional)
There are two types of assurance: first-party assurance and third-party assurance.
Step 9. Report emissions
The organisation shall publicly report:
The scope 1 and scope 2 emissions according to Corporate Standard,
Total scope 3 emissions reported separately by scope 3 category
For each scope 3 category, total emissions of GHGs (CO2, CH4, N2O, HFCs, PFCs, and SF6) reported in metric tons of CO2 equivalent, excluding biogenic CO2 emissions and independent of any GHG trades, such as purchases, sales, or transfers of offsets or allowances
A list of scope 3 categories and activities included in the inventory
A list of scope 3 categories or activities excluded from the inventory with justification of their exclusion
Look at the full lists in the Chapter 11. Reporting more about requirements (‘shall’) and optional reporting (‘should’).
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Disclaimer: I do not work for any of the organisations mentioned in this article or the report. Additionally, I do not have any other connection to them either. I am a GRI-certified professional and have worked with enterprise risk management frameworks. Thus, I am interested in sharing best practices and sources.