Scope 3 Issues

Indirect Emissions Are Key

For most industries, 92% of a company's emissions come from scope 3 (indirect emissions) - meaning that only 8% of GHG emissions account for scopes 1 and 2 of emissions. The equation is explicit: for companies to reduce their emissions, they must set their efforts on scope 3 emissions and their entire supply chain. But since organisations do not control suppliers directly, how can companies measure their supplier's emissions to then be able to reduce them?

New business practices now require companies to set emissions reduction targets throughout their value chain (scope 3). This process is only achievable with solid supply chain engagement. Nevertheless, businesses that do not engage suppliers in climate action will lose competitiveness and resilience, resulting in lower costs, better reputations and, ultimately, the ability to survive in an uncertain and unpredictable environment.

Complexity Of Supply Chain Emissions

Although this approach seems logical is anything but straight forward. In fact it is unlike to be a feasible and inherently this approach will result in multiple counting of emissions because of the complexity of supply chains.

To simplify the data collection process, The GHG protocol allows companies the option to use industry and regional averages, rather than measure the specific emissions produced by their actual suppliers, distributors and customers. Allowing companies to use average rather than specific and traceable data fundamentally undermines the integrity of Scope 3 measurements.

Therefore companies are put into a quandary regarding whether or not to report their Scope 3 emissions as it will continue to be voluntary up to 2025.

GHG Protocol Discourages Accurate Reporting

For companies that do report scope 3 emissions, it may be just a form of greenwashing. The ability to use secondary to guesstimate scope 3 emissions is a gift for companies that want to take credit for their competitors' GHG-reducing innovations without having to change their own product design and procurement processes. Unscrupulous companies can therefore report progress on their scope 3 emissions without actually reducing their emissions. This is compounded when those advantages are also reported by their customers as the products move along the supply chain.

By setting the bar low for companies to report their scope 3 emissions, the GHG protocol has has prevented any new superior accounting method from being used because companies who are benefitting from the greenwashing advantages of industry-average data will not voluntarily move to a tougher and more accurate system.

Science-Based Targets

To improve the accuracy of carbon emission reporting, many companies are embracing science-based targets.