Since 2001, as a means of gauging a full picture of a company’s carbon footprint, the Greenhouse Gas Protocol has divided greenhouse gas (GHG) emissions into 3 different Scopes. Scope 1 consists of GHG emissions generated during the course of the company’s main business operations (such as the emissions associated with a vehicle’s assembly line). Scope 2 emissions are the GHG emissions incurred by a firm through the purchase of the electricity required for its operation. Finally, Scope 3 emissions account for indirect emissions generated by suppliers, partners, and customers along a company’s value chain.
This definition of Scope 3 emissions is intentionally broad, which means that it usually consists of more than 70% of a company’s total emissions profile. Despite the significance of this figure, Scope 3 emissions reporting is lagging far behind that of the other scopes. According to the WWF, this relative scarcity of Scope 3 reporting is due to several unique challenges that arise from the fact that, by design, Scope 3 emissions lie outside the direct management of a company’s leadership. This does not mean that companies have no influence over their Scope 3 emissions. In fact, these challenges represent a unique opportunity for businesses to engage with value chain partners, rethink their business operations, and streamline their emissions reporting methodology.
In this white paper by the Centre for Sustainable Finance, doctoral researcher Nicolas Romero and Professor David Veredas shed light on how to measure Scope 3 emissions and they take a closer look at what companies are currently reporting, by category as well as by sector.