A company’s carbon footprint is calculated across 3 scopes. Although it currently is not yet mandatory for many companies to map all scopes, it is interesting to do so. Scope 3 is full of insights and opportunities.
As a company, it is too short-sighted to see scope 3 as something separate – later on it becomes clear why. In many manufacturing companies, at least 80% of CO2 emissions are scope 3. So, it is definitely worth doing this exercise.
A quick refresher
According to the Greenhouse Gas Protocol, scope 3 includes all indirect emissions that are not included in scope 2 and that occur throughout the value chain of the company or organisation. This means that, as a company, you do not limit yourself to the island in which you yourself have a direct impact, but you also consider where the impact of your stakeholders lies. To create an initial structure in scope 3 emissions, you can split them into upstream and downstream emissions. Tip: It is useful to visualise the value chain of your products by means of a flow chart. This also facilitates data collection afterwards.
Logically, some examples of upstream emissions are:
· Purchase of raw materials for the production process
· Goods and services necessary for the office
· Transporting the purchased raw materials to your company
And of downstream emissions:
· The waste generated during the production process
· The transport of goods to your customers
· The consumption of your product at an end customer (think, for example, of the electricity consumption of a washing machine)
· The end-of-life treatment of your product after an end customer discards it
The why of scope 3
As a company, mapping out your entire value chain provides insight into your operations. Insight that can be understood as a kind of risk analysis. Because CO2 emissions carry a certain risk for a company. For instance, if many emissions are linked to the basic raw material from which products are made, this could lead to an increase in costs in the near future. In addition, this could also have an impact on sales because, for example, an alternative product comes on the market that performs better in that area.
Thanks to the insight into your scope 3 emissions, you can also pinpoint targeted opportunities as a company. Can we adapt our product or organise ourselves differently so that the CO2 footprint of our products goes down? Can we develop a new production line that allows us to respond to tomorrow’s needs?
In addition, fully understanding your CO2 footprint will also be important for investors, banks and the government due to possible new regulations.
And vice versa: not mapping scope 3 can lead to misinterpretation of a company’s situation and thus to the wrong decisions. The standard GHG protocol also emphasises this.
The legislative framework
Today, as a company, you are still given room to decide what to include in scope 3 and what not. One motivation may be that certain emissions are too far removed from day-to-day operations or that the data is very difficult to collect in a relatively accurate form. For example, what do you do with the emissions that customers create to come to you to discuss a project?
Certain limits are set within scope 3, with the company itself deciding what it wishes to include from scope 3 and what not. What is important here is that, as a company, you communicate transparently about what is included. Yet it is advisable to look as broadly as possible the first time the CO2 footprint is determined, because that way you certainly cannot exclude large emission sources.
Today, a number of large companies are already required to report on their progress towards sustainability (NFRD). In the next few years, more companies will fall under the obligation (we will go from about 12,000 to 50,000 European companies) and with higher requirements: the CSRD or Corporate Sustainability Reporting Directive. Today, the draft version of the reporting standard already includes a concrete reduction plan of the CO2 footprint of organisations, covering scope 1, 2 and 3. This way, the entire chain will be presented with the question, including your company.
This content was provided by Tim Vancouillie, founder of E-luse, a consultancy working with the Carbon+Alt+Delete software. Our carbon accounting software allows mapping a company’s entire scope 1, 2 and 3, in line with the Greenhouse Gas Protocol and the ISO 16064 standard.