Unlocking Decarbonization: Understanding Which Scope 3 Categories are Relevant for Your Company
Understanding and addressing Scope 3 or “value chain” emissions has become an important aspect of any comprehensive decarbonization strategy. Scope 3 emissions cover most upstream activities like the procurement of raw materials to downstream activities such as product end-of-life processing and disposal.
Navigating the Scope 3 Complexity
As companies are starting to recognize the need to account for their entire carbon footprint, identifying and prioritizing relevant Scope 3 categories will be the guiding point to start understanding which categories your company will need to measure and report.
Understanding the Scope 3 Categories
Scope 3 emissions are categorized into 15 distinct groups according to the WRI’s Greenhouse Gas (GHG) Protocol, the gold standard for corporate carbon accounting. These categories span a spectrum of activities, from purchased goods and services to transportation and distribution, and are defined to be mutually exclusive in order to avoid double counting emissions among the categories.
Upstream Scope 3 Emissions:
1. Purchased Goods and Services:
Emissions associated with goods and services purchased by the reporting company. Crucial for companies aiming to make informed, sustainable procurement decisions by understanding the embedded carbon footprint in the supply chain. This category is typically the largest or one of the top three for any company producing a physical good.
2. Capital Goods:
Emissions from the production of capital goods such as machinery and equipment, and even the purchase or construction of buildings. Category 2 is sometimes combined with Category 1 to simplify reporting under the category of “procurement.”
3. Fuel and Energy-Related Activities:
Emissions from the extraction, production, and transportation of the energy consumed by a company.
4. Upstream Transportation and Distribution:
Transportation-related emissions occurring upstream in the value chain, such as the transportation of raw materials to the company. Companies with extensive supply chains must assess the impact of transportation emissions. Companies work with their suppliers and logistics partners to address these emissions such as by changing the timing of deliveries and encouraging transportation partners to phase out older vehicles and plan to invest in electric fleets.
5. Waste Generated in Operations:
Emissions associated with the disposal and treatment of waste generated during a company's operations. Implementing waste reduction and recycling initiatives can contribute to emissions reduction.
6. Business Travel:
Emissions arising from employee travel for business purposes, whether by air, rail, road, or other means. Companies that depend on air travel for conferences and strategic partnerships will soon be able to select airlines that are taking steps to reduce emissions, such as by using sustainable aviation fuel.
7. Employee Commuting:
Emissions resulting from employees commuting to and from work. Strategies for reducing emissions in this category may include incentivizing telework, use of public transportation, or carpooling. Companies that are opening new offices or facilities can take into account the location and availability of public transportation or prepare to provide shuttles in order to address this source of emissions.
8. Upstream Leased Assets:
Emissions from assets leased by the company, including buildings and equipment. Assessing and mitigating emissions associated with leased assets broadens the scope of sustainability efforts, fostering environmentally conscious choices in leasing decisions.
Downstream Scope 3 Emissions:
9. Downstream Transportation and Distribution:
Emissions related to the transportation of products from the company to end-users. Optimizing downstream transportation processes reduces emissions, enhances efficiency, and aligns with sustainable distribution practices.
10. Processing of Sold Products:
Emissions related to the processing and manufacturing of products sold by the company. Addressing emissions in product processing contributes to sustainable product life cycles and supports responsible manufacturing practices.
11. Use of Sold Products:
Emissions resulting from the use of products sold by the company. Implementing product design and usage guidelines that promote energy efficiency and responsible use can mitigate emissions associated with product consumption.
12. End-of-life Treatment of Sold Products:
Emissions associated with the disposal and treatment of products at the end of their life cycle. Implementing sustainable disposal practices, recycling initiatives, and product design for easier end-of-life management can contribute to emissions reduction in this category.
13. Downstream Leased Assets:
Emissions from company-owned assets that are leased out for use, such as buildings or equipment. Companies can influence downstream emissions by setting energy efficiency requirements and lower both companies’ environmental impact via green purchasing policies.
14. Franchises
Emissions associated with the operation of franchise locations. Similarly to Category 13, companies can collaborate with franchisees to implement sustainable practices, energy-efficient operations, and responsible waste management.
15. Investments
Emissions associated with the companies or projects in which the organization invests. Prioritizing investments in environmentally responsible initiatives and advocating for sustainable practices within invested entities supports a holistic approach to emissions reduction.
Prioritizing Relevant Categories: A Strategic Approach
While all 15 Scope 3 categories are standardized, not all of them will be equally relevant to every company. A strategic approach involves identifying and prioritizing categories based on their significance to the business and their potential for emissions reduction.
Assessing Significance:
Evaluate the significance of each category by considering its contribution to the overall carbon footprint. Categories with higher emissions or those aligned with corporate goals and values should be prioritized.
Engaging Stakeholders:
Consider input from key stakeholders, including customers, investors, and employees. Aligning Scope 3 efforts with stakeholder expectations enhances corporate transparency and strengthens relationships.
Leveraging Technology:
Utilize technology and data analytics to gather comprehensive information about the value chain. This enables accurate measurement and monitoring of emissions, facilitating targeted interventions.
Setting Reduction Targets:
Once relevant categories are identified, set ambitious yet achievable reduction targets. These targets should align with broader sustainability objectives and contribute to the company's overall decarbonization strategy.
Conclusion: Charting Your Scope 3 Journey
Understanding and addressing Scope 3 emissions is a strategic imperative for companies committed to sustainable and responsible business practices. By navigating the complexity of Scope 3 categories, businesses can chart a meaningful course toward comprehensive decarbonization, contributing to a greener and more sustainable future.
In upcoming posts, we'll dive deeper into specific Scope 3 categories, providing actionable insights and best practices for emissions reduction. Stay tuned for a more in-depth exploration of each category and the role it plays in your company's sustainability journey.
The Uplift Agency
Uplift builds strategies, programs, and communication campaigns that advance ESG in workplaces, supply chains and communities.
We know how to navigate the road ahead because we’ve already been down it – 90 percent of our team has led environmental or social programs in corporations or nonprofits. Because ESG is all we do, our services are more comprehensive and integrated than most firms.
