- Scope 3 emissions definition
- Scope 3 emissions data
Scope 3 Emissions Definition
What are Scope 3 emissions?
Greenhouse gas emissions are categorised into three groups (or "Scopes") by the Greenhouse Gas Protocol (GHGP). The GHGP standard has been adopted by several influential organisations such as the CDP (formerly Carbon Disclosure Project). As such, the terminology is being quickly adopted into sustainability and environmental social governance (ESG) business circles.
It is important to recognise that your Scope 3 emissions include your suppliers' Scope 1, 2 and 3 emissions. As such, it is important to understand all three groups of emissions when leading a Scope 3 emissions measurement or reduction initiative.
Nestlé's total GHG emissions by scope illustrate the significance of Scope 3 emissions for consumer packaged goods (CPG) businesses.
Scope 1, 2 and 3 emissions diagram
GHGP have produced one of the most widely used diagrams to illustrate the different emission scopes. Importantly it highlights that Scope 3 extends both "upstream" within the supply chain and "downstream" to the reporting organisation's customers.
Scope 3 Emissions Categories
Scope 3 emissions are categorised by the GHG Protocol into 15 Scope 3 categories:
- Category 1 - Purchased goods and services
- Category 2 - Capital goods
- Category 3 - Fuel- and energy-related activities (not included in Scope 1 or Scope 2)
- Category 4 - Upstream transportation and distribution
- Category 5 - Waste generated in operations
- Category 6 - Business travel
- Category 7 - Employee community
- Category 8 - Upstream leased assets
- Category 9 - Downstream transportation and distribution
- Category 10 - Processing of sold products
- Category 11 - Use of sold products
- Category 12 -End-of-life treatment of sold products
- Category 13 - Downstream leased assets
- Category 14 - Franchises
- Category 15 - Investments
BASF's Scope 3 Inventory illustrates that Category 1 Purchased Goods and Services emissions produced by your suppliers manufacturing your product commonlyare the largest source of Scope 3 emissions.
What are Scope 3 supply chain emissions?
Your Scope 3 supply chain emissions are typically the combination of your Category 1 Purchased Goods and Services, and Category 4 Upstream Transport and Distribution.
These can be the most difficult to measure and reduce due to the complexity and scale of the modern supply chain. For example, the typical consumer packaged goods (CPG) supply chain has between 100 and 10,000 companies within its supply chain. In theory, accurately measuring your Scope 3 emissions would mean collecting data from all of these businesses on an annual basis.
Why are Scope 3 emissions important?
Tackling climate change
A significant cut in greenhouse gas emissions is required by CPG companies if they are to:
- Maintain growth at the expected rate
- Reduce emissions in line with the Paris Agreement on climate change
The supply chain is critical to achieving this cut as most of the environmental impact associated with the consumer sector is embedded in the supply chain:
Source: McKinsey Starting at the source
Therefore, businesses can have a significantly greater impact in reducing their greenhouse gas emissions by focusing on supplier collaboration.
Sustainability and financial performance
Recent research by Supply Pilot has shown that becoming more sustainable has a significant impact on a business's financial performance. Of all of the factors that impact how the commercial performance of a business, sustainable practices account for 19%.
The research also looked at the different sustainable practices that businesses were adopting and how they in turn impacted firm performance. Supplier collaboration was found to have the most influence on business performance.
Our research supports McKinsey's findings that businesses can have the greatest impact by focusing on reducing Scope 3 emissions rather than Scope 1 and 2 emissions. In doing so, a business can play their part in tackling climate change and maximise their company's financial performance.