Understanding scope 3 carbon emissions is critical for businesses aiming to reduce their climate impact.
This article provides clear examples across industries to demystify scope 3 emissions, unveiling best practices to measure and mitigate them.
You'll get a comprehensive overview of scope 3 emissions, from definitions and reporting requirements to real-world case studies and effective reduction strategies.
Introducing Scope 3 Carbon Emissions
Understanding scope 3 emissions is key for organisations aiming to reduce their overall carbon footprint. Scope 3 refers to indirect emissions that occur across an organisation's value chain, from purchased goods and services to transportation, distribution, and product use. Unlike scope 1 and 2 emissions from owned operations, scope 3 emissions can be challenging to measure and manage. However, they often represent the majority of an organisation's total emissions, so cannot be ignored.
Demystifying Scope 1, 2, and 3 Emissions
Let's quickly recap the differences between scope 1, 2, and 3 emissions:
Scope 1: Direct emissions from owned or controlled sources, like company vehicles and on-site fuel combustion.
Scope 2: Indirect emissions from purchased electricity used in owned or controlled equipment.
Scope 3: All other indirect emissions from activities across the value chain.
Here's a helpful scope 1, 2 and 3 emissions diagram to distinguish the categories:
While organisations have direct control over scope 1 and 2 emissions, scope 3 emissions often make up over 70% of total emissions for many companies. Common examples include:
- Production of purchased raw materials
- Logistic and transportation providers
- Business travel by air or rail
- Waste management providers
Clearly identifying these emissions sources through careful measurement allows organizations to better manage and reduce their overall footprint.
Scope 3 Emissions: Going Beyond Direct Control
For small and medium-sized enterprises (SMEs), understanding scope 3 emissions can be particularly important. While SMEs may have smaller operational footprints with limited scope 1 and 2 emissions, their supply chains and distribution networks often generate substantial scope 3 emissions. Carefully tracking these sources is key to managing their overall impact.
However, scope 3 emissions can be complicated. The Greenhouse Gas Protocol defines 15 categories of scope 3 emissions based on lifecycle assessments. For SMEs new to sustainability management, navigating these categories can be challenging.
Key steps organisations can take include:
- Identifying their largest scope 3 emission sources through spend analysis or hotspot assessments
- Engaging suppliers to quantify and report emissions
- Setting scope 3 emissions reduction targets
- Communicating sustainability initiatives to customers and stakeholders
With careful scope 3 measurement and management, SMEs can transform their business models to enable sustainable growth for the future. Understanding examples of scope 3 emissions relevant to your sector is an important first step on the net zero journey.
What are Scope 3 emissions examples?
Scope 3 emissions refer to all indirect greenhouse gas emissions from sources that are not owned or controlled by a company but are related to their operations. Some common examples of scope 3 emission sources for businesses include:
Employee commuting and business travel
The transportation and accommodation emissions from employees travelling for work purposes make up a significant portion of scope 3 emissions for many companies. These can include emissions from:
- Employees commuting to and from the office
- Business flights taken by employees
- Hotel stays, rental cars, and other transport used for work trips
Purchased goods and services
The emissions that went into producing and transporting any goods or services purchased by the company are considered scope 3. For example, for a clothing manufacturer this could include emissions from:
- Producing the raw materials for clothing (e.g. cotton farming)
- Manufacturing the textiles and fabrics used in production
- Transporting materials between suppliers
Transportation and distribution
Emissions from the storage, transportation, and distribution of products sold by the company to customers are classified as scope 3. This can involve substantial emissions from freight, shipping, and logistics partners.
Use of sold products
The emissions from customers using the products sold by a company is often one of the largest scope 3 categories. For example, for an electronics manufacturer, this would include the energy used to power those products while in use by customers.
Disposal of sold products
Emissions from the transportation, waste management, and decomposition of products once disposed of by customers are considered scope 3 emissions. Proper end-of-life handling can help reduce these emissions.
What are scope 3 emissions issues?
Scope 3 emissions refer to indirect greenhouse gas emissions that occur in a company's value chain. Unlike scope 1 and 2 emissions, scope 3 emissions occur from sources not owned or controlled by the company. This makes measuring and reporting scope 3 emissions very challenging.
The data problem is a major issue for scope 3 emissions. Companies have to rely on data shared from supply chain partners or use third-party data to make estimations. This can lead to poor quality data and inaccurate carbon accounting.
Some examples of common data issues with scope 3 emissions include:
- Incomplete or missing emissions data from suppliers and vendors
- Use of industry averages that may not reflect actual operations
- Difficulty tracking emissions from complex global supply chains
- Reliance on self-reported data from partners
Lack of standardized methods is another problem for scope 3 emissions. Unlike scope 1 and 2 calculations, there are no consistent protocols for measuring scope 3 emissions. Companies take different approaches to model emissions based on spend data, production data, fuel usage data, and more. This makes it difficult to get an accurate and consistent system-level view across a value chain.
Improving the quality and availability of supply chain emissions data is an essential step for companies to better understand their overall carbon impact. Investing in digital tools and partnering across industries can help address current data gaps and issues with scope 3 carbon accounting.
What is an example of upstream emissions scope 3?
Scope 3 emissions refer to all indirect emissions that occur in a company's value chain. Upstream scope 3 emissions specifically refer to indirect emissions that occur before a company's own operations.
Here is an example of upstream scope 3 emissions for a cleaning products manufacturer:
Raw Material Extraction
The extraction and processing of raw materials like petrochemicals, minerals, metals, and other ingredients would likely generate substantial greenhouse gas emissions. The manufacturer relies on these materials being supplied to them, but does not control the extraction process. So these emissions would be categorized as upstream scope 3.
Inbound Transportation
The transportation of raw materials and ingredients to the cleaning products factory would also generate emissions from the fuel burned. Whether by truck, rail, ship or plane, the manufacturer is dependent on others to transport these items, classifying it as an upstream activity.
Focusing measurement and reduction efforts on upstream scope 3 emissions can enable companies to influence sustainability improvements further up their value chain. Gaining visibility here is an important part of managing a comprehensive carbon footprint.
Is water a scope 3 emission?
Heating water in homes and businesses makes up a significant portion of scope 3 emissions. Here's a quick look at how water factors into carbon accounting:
What are scope 3 emissions?
Scope 3 covers all indirect emissions across a company's value chain. This includes activities not owned or controlled by the company, like:
- Transportation and distribution
- Processing of sold products
- Use of sold products
- End-of-life treatment of sold products
Where does water fit in?
Activities related to heating water can generate downstream emissions. For example:
- An office providing hot water to employees
- A manufacturing plant heating water for operations
- Homes using natural gas or electricity to heat water
So water isn't a direct emission source. But activities linked to heating water do contribute to overall scope 3 emissions.
Tracking water use and finding efficiencies helps trim carbon footprints. Smart water management also saves money by reducing utility bills!
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Scope 3 Emissions and Your SME: Why They Matter
Scope 3 emissions refer to all indirect emissions that occur across a company's value chain. While scope 1 and 2 emissions from owned operations and purchased energy are relatively straightforward to measure, scope 3 emissions encompass a much broader range of activities. For small and medium-sized enterprises (SMEs), understanding scope 3 emissions is becoming increasingly important due to evolving regulations and stakeholder pressures.
The Rise of Scope 3 Disclosure Requirements
Regulators and reporting frameworks like the GHG Protocol are emphasizing scope 3 emissions disclosure to capture a company's full carbon impact. Major markets including the EU, UK, and US have either implemented or announced mandatory scope 3 reporting for certain companies. As an example, the proposed US SEC climate disclosure rules would require public companies to disclose scope 3 emissions if material.
Investors are also ramping up requests for scope 3 data through initiatives like CDP's requests for companies to disclose value chain emissions. Failure to measure and disclose scope 3 emissions could negatively impact access to capital as sustainability becomes a bigger investment criteria.
For SMEs selling to larger corporations, having robust scope 3 data is becoming key to remaining in procurement selection processes. As large companies come under increasing pressure to reduce supply chain emissions, they require suppliers at all tiers to provide emissions information. Get ahead of these expanding requirements by understanding your scope 3 footprint now.
The 15 Scope 3 Categories Unveiled
The GHG Protocol delineates scope 3 carbon emissions into 15 categories spanning operations, supply chain processes, delivery channels, and product end-of-life. While not every category may apply, assessing relevancy across the categories is an important first step.
For example, typical hotspots include purchased goods & services, fuel & energy activities, transportation & distribution losses, and product end-of-life treatment. However, usage of sold products can also represent over 50% of total emissions for companies selling energy-intensive equipment.
This example scope 3 emissions diagram simplifies the relationships:
See the GHG Protocol for detailed category guidance. An accurate assessment combines activity data across operations with verified emissions factors. EcoHedge's automated data integrations, customisable calculators, and reporting dashboards simplify this entire process.
Accurately assessing scope 3 emissions is a complex task, but brings strategic advantages. Get started now before disclosure requirements expand further across markets and business relationships. EcoHedge's carbon accounting software provides the tools SMEs need to efficiently track scope 1, 2 & 3 emissions.
Scope 3 Carbon Emissions Examples from Various Industries
Scope 3 emissions refer to the indirect greenhouse gas emissions that occur across a company's entire value chain. Unlike scope 1 and 2 emissions which come directly from a company's owned operations, scope 3 emissions happen as a consequence of the company's activities but occur at sources the company does not own or control.
Some examples of scope 3 emission sources include raw materials procurement, transportation of goods to customers, business travel, waste disposal, etc. For many companies, scope 3 emissions make up the largest portion of their carbon footprint. Effectively measuring and reducing scope 3 emissions is key for organizations aiming to achieve ambitious decarbonization goals and make meaningful contributions to climate action.
To provide more clarity on scope 3 emissions, here are some real-world examples and case studies from companies across different industries.
Scope 3 Emissions in Manufacturing: A Case Study
ABC Manufacturing Inc. is a producer of industrial equipment used in construction projects. As part of its net-zero commitment, ABC sought to measure and reduce emissions across its entire value chain. It found Scope 3 to comprise over 70% of total emissions.
Upon further analysis, ABC determined steel procurement to be the largest scope 3 category, generating close to 125,000 metric tons of CO2e annually. Transportation of sold products also contributed significantly at 45,000 tCO2e. To address these emissions, ABC engaged its steel supplier to switch to renewable energy sources and also optimized logistics to use more rail transport instead of trucks.
Within a year of targeted scope 3 reduction initiatives, ABC achieved a 12% decrease in supply chain and transport emissions. By proactively managing scope 3, companies can unlock impactful decarbonization opportunities that also make good business sense.
Retail Sector: Scope 3 Challenges and Innovations
As a retail clothing brand with global operations, XYZ Fashion faces substantial scope 3 emissions from complex supply chains and high product volumes. XYZ found 85% of total emissions came from purchasing garments produced by third-party factories. An additional 10% resulted from downstream transportation and distribution activities.
To address supply chain impacts, XYZ implements supplier sustainability scorecards covering energy use, waste management, and chemical handling. By collaborating closely with strategic vendors to reduce environmental footprints, XYZ reduced supply chain emissions by 5% last year.
On the distribution side, XYZ joined the Clean Cargo global collective to optimize transport modes and routes. These efforts helped decrease downstream logistics emissions by 3%. As consumer awareness grows, XYZ is also testing in-store garment recycling initiatives to design sustainability into the end-of-life phase.
The complex nature of scope 3 emissions means retail players have to get creative with solutions. But through multi-stakeholder partnerships and technological advances, leading brands are driving innovations to promote circularity while enabling transparency around supply chain impacts.
Strategies for Measuring and Reducing Scope 3 Emissions
Scope 3 emissions refer to all indirect greenhouse gas (GHG) emissions in a company's value chain that occur as a result of activities from assets not owned or controlled by the company. These emissions are often the largest category for small and medium-sized enterprises (SMEs), accounting for over 80% of total emissions. Effectively measuring and reducing scope 3 is key for SMEs aiming to achieve net-zero emissions.
Some examples of scope 3 emission sources include:
- Raw materials extraction and production
- Transportation and distribution
- Waste disposal
- Product use
- Business travel
- Investments
While more complex to quantify than scope 1 and 2 emissions, having robust scope 3 carbon emissions data provides significant advantages. It allows SMEs to:
- Identify emission hotspots to focus reduction efforts
- Engage suppliers and partners to lower value chain impacts
- Meet stakeholder expectations and sustainability reporting best practices
This guide covers practical strategies and real-world scope 3 emissions examples to help SMEs address this vital area of climate action.
Effective Data Collection for Scope 3 Inventory
Conducting accurate scope 3 emissions accounting starts with consistent data collection across all relevant categories. SMEs should:
- Leverage digital tools: Using carbon accounting software simplifies data gathering from multiple sources and automatizes emissions calculations.
- Prioritize material categories: Focus initial efforts on the largest scope 3 sources based on spend and operational insights to capture majority of emissions.
- Engage value chain partners: Work with key suppliers and customers to obtain activity data for materials, transport, product use, etc.
- Consider primary data vs. secondary data: Collect actual operational data where feasible, otherwise use industry benchmarks.
- Maintain organized records: Save all emissions inventory data sources for periodic reviews and assurance processes.
For example, an SME specializing in consumer packaged goods would account for key scope 3 categories like:
- Purchased goods and services - Collect spending data from procurement teams and factor associated emissions intensities for raw ingredients production based on supplier locations.
- Product distribution - Gather actual weight and distance data from logistics partners to accurately assess transportation emissions.
- Product end-of-life treatment - Use product material composition data alongside waste disposal rates and methods for the target consumer markets.
Regularly updating this scope 3 emissions data minimizes uncertainty while enabling SMEs to continually refine climate strategies.
Engagement and Collaboration: Mitigating Scope 3 Emissions Together
Beyond their own operations, SMEs can drive significant scope 3 emission reductions by collaborating with partners across their value chain. Some examples include:
Raw material producers:
- Encourage adoption of renewable energy sources
- Fund low-carbon equipment upgrades
Product manufacturers:
- Improve production efficiency through resource and energy optimization
Transportation providers:
- Utilize alternative fuels like renewable diesel or electrified fleets
Waste management partners:
- Expand recycling programs to reduce landfill impacts
Early supplier engagement is key. By clearly communicating ambitions to decrease scope 3 emissions and presenting the business case, SMEs can secure buy-in for shared investments and pilot projects to address hotspots.
For example, partnering with key packaging suppliers to trial innovative low-carbon materials can accelerate development of more sustainable product delivery methods. Results and lessons learned can then be scaled across the supply base.
Taking a collaborative approach to tackling scope 3 not only mitigates risks and enhances resiliency, but can uncover novel solutions through shared expertise.
Best Practices in Communicating Scope 3 Performance
Communicating scope 3 emissions data and reduction efforts effectively to stakeholders is key for small and medium-sized enterprises (SMEs) on the path to net-zero. As scope 3 often makes up the largest portion of an SME's carbon footprint, transparency and stakeholder engagement around addressing these indirect emissions are vital.
Transparency in Reporting: The Key to Stakeholder Trust
Being transparent in reporting scope 3 emissions builds trust with stakeholders. Some best practices include:
- Align with established frameworks like the Greenhouse Gas Protocol and CDP: Follow their guidance on calculating and disclosing scope 3 emissions by category. This makes data more comparable across companies.
- Contextualize the data: Explain what scope 3 activities contributed the most emissions, challenges in obtaining accurate data, and uncertainty levels. This demonstrates the rigor behind the numbers.
- Set scope 3 reduction targets: Committing to reducing scope 3 emissions shows stakeholders concrete actions towards driving down value chain impacts. Track and report progress over time.
- Get independent assurance: Third-party verification of scope 3 inventory and progress lends credibility and identifies areas for refinement.
Stakeholder Engagement on Scope 3 Emissions
Engaging stakeholders across the value chain is key to tackling scope 3 emission reduction. Tactics include:
- Educate consumers on the lifecycle impacts of products through eco-labels, sustainability marketing content, and product reviews. Encourage sustainable behaviors.
- Collaborate with suppliers to quantify emissions for purchased goods/services, set science-based targets, and develop solutions to decarbonize operations. Offer incentives.
- Dialogue with investors and policymakers to share scope 3 reduction goals, roadblocks faced, and policy needs. Demonstrate the business case for tackling emissions across the value chain.
Communicating scope 3 emissions credibly and driving collaborative solutions across the value chain will bolster an SME's leadership position on sustainable business practices with both external and internal stakeholders.
Harnessing the Power of Scope 1, 2 & 3 Emissions Examples
Consolidates the learning points from the article, reinforcing the importance of understanding and acting upon scope 1, 2 & 3 emissions examples for a comprehensive approach to carbon management.
A Recap of Scope 3 Emissions Management
Scope 3 emissions often form a major part of an SME's carbon footprint. However, their indirect nature makes them harder to measure and manage compared to scope 1 and 2 emissions.
Looking at scope 3 carbon emissions examples across various sectors and business activities is crucial to develop a sound understanding of where these emissions stem from, and how to account for and reduce them.
Here is a quick recap of some key strategies discussed in this article:
- Map your value chain to identify emissions hotspots. For example, an apparel firm's scope 3 emissions may be dominated by purchased fabrics and upstream transportation.
- Engage suppliers & service providers to obtain emissions data. Collaborating across the value chain is vital for calculating scope 3 footprints accurately.
- Real-world scope 3 emissions examples serve as handy benchmarks to estimate your own scope 3 emissions when supplier data is lacking.
- Prioritize the biggest scope 3 categories and emission sources for measurement and reduction efforts based on examples from your industry.
- Disclose and report scope 3 emissions to demonstrate climate action leadership to customers and stakeholders.
In summary, leveraging insights from scope 3 carbon emissions examples paves the path for SMEs to fully account for and manage emissions across their value chain - a key step on the journey towards net-zero.
