Challenges of Scope 3 Emissions

When it comes to mitigating a company's Scope 3 greenhouse gas emissions, supply chain managers are faced with a formidable challenge. Scope 3 emissions constitute a significant portion (65-95%) of most companies' carbon impact and are indirect in nature, resulting from activities beyond direct control. Estimating, tracking, and reporting these emissions can appear excessively intricate. For instance:

One case involved a multinational consumer goods corporation wherein their supply chain comprised thousands of suppliers and tens of thousands of stock-keeping units (SKUs). For accurate assessments of their Scope 3 emissions, the company considered not only the production process of each SKU but also its usage, longevity, and eventual disposal.

In another instance, a financial institution accounted for Scope 3 emissions linked to multiple loans provided to different operations and activities of an oil and gas company across various global locations, encompassing the entire value chain.

Fortunately, although attaining flawless data can be challenging, especially for suppliers beyond Tier 1, obtaining useful and actionable data is feasible. In many cases, an incremental data collection approach can alleviate the burden. Our experience has shown that as much as 80% of an organization's supply chain emissions are concentrated within just one-fifth of its purchases. For instance, a public-sector agency identified that 20 suppliers were accountable for 94% of its Scope 3 emissions. Essentially, by focusing on these 20 suppliers, the agency could potentially halve its Scope 3 supply chain emissions within a decade.

In situations where companies are unable to obtain direct information from suppliers, the Greenhouse Gas Protocol permits the use of industry averages, proxies, and other relevant sources to calculate Scope 3 emissions. Numerous third-party data providers, as well as the International Energy Agency and various government agencies, offer assistance in this regard.

However, calculating Scope 3 emissions using incremental and third-party approaches presents challenges. Let's explore four common challenges that we have helped organizations address:

Time and resource-intensive data collection and reporting: When heavily relying on third-party sources, companies may lack a thorough understanding of their own Scope 3 footprint, hindering efforts to improve it.

Detailed Scope 3 modeling approaches: Certain modeling approaches, such as those based on product spend with a specific supplier, may lack the necessary granularity.

For more information on this topic, please refer to relevant studies and publications, such as the Greenhouse Gas Protocol, reports from third-party data suppliers, the International Energy Agency, and government agencies.