Scope 3 Emissions: what they are and how to calculate them

When a company embarks on a sustainability journey, one of the most challenging obstacles it encounters is calculating its Scope 3 emissions. In this article, we will explore why calculating them is so complex and what solutions can be adopted to overcome this issue.

Greenhouse gas emissions are classified according to the GHG Protocol, one of the most widely used measurement standards. This standard divides emissions into three categories:

Scope 1: direct company emissions, meaning emissions resulting from manufacturing processes related to the product, such as processing and packaging.

Scope 2: indirect company emissions, i.e., emissions generated by the production of purchased energy used by the company’s manufacturing operations.

Scope 3: all other indirect emissions originating from sources outside the company’s direct control; these are emissions generated by upstream and downstream activities within the product’s value chain, including those produced during the extraction and production of raw materials.

Scope 3 emissions generally represent the largest share of a company’s carbon footprint. They may include, for example, emissions from the supply chain, transport, distribution or the disposal of goods and services after they reach the consumer.

They are also referred to as value chain emissions and they are the ones that give companies the most trouble.

Scope 3 emissions are classified into four categories according to the ISO 14064 guidelines:

These are emissions resulting form manufacturing processes related to the product, such as processing and packaging. This category also includes emissions form activities such as:

• Upstream transportation and distribution: also known as upstream, this refers to the transfer of raw materials or semi-finished goods from suppliers to the company. In this case, emissions depend on the type of transport used and the distance traveled.
• Production of purchased materials and goods: includes emissions from the production of components, raw materials and other inputs used in company processes.
• Business travel
• Commuting: travel between home and work

This category, on the other hand, includes all activities carried out after the product or service has been manufactured and distributed by the company. These may involve:

• Downstream transportation and distribution: emissions resulting from transporting finished products from the production site to distributors, retail locations or directly to customers.
• Product use: emissions generated during the use of the product by the end customer.
• End-of-life treatment: emissions associated with waste management, recycling, disposal and distribution of the product

This category includes emissions associated with the products and services offered by the company:

• Processing of sold products
• Use and consumption of products and services
• End-of-life management of sold products
• Leased asset concessions
• Franchises and investments

These are emissions occurring upstream and downstream in the product’s manufacturing industry, including those generated during the production of raw materials.

In this case, it refers to specific emissions that do not fall into the other categories and it is the company’s responsibility to identify and define the scope of this category.

But why are Scope 3 emissions considered difficult to calculate? One of the main reasons is that it is not easy to precisely define the boundaries of the data to include. In other words, the complexity lies in identifying which emission categories to report, which suppliers to consider and what type of data to collect within each category.

Let’s consider the agricultural sector: in this case, it would be necessary to account for emissions related to purchased goods and services (fertilizers, seeds or agricultural machinery), as well as the processing of sold products (such as prepackaged goods or processed cereals).

If, instead, we take the manufacturing sector as an example (consider a company that produces components for the automotive industry), regarding the use of the sold product, one would consider the gear that contributes to the car’s operation and estimate its impact on the vehicle’s fuel efficiency.

Although Scope 3 emissions are outside an organization’s direct control, they typically represent the largest share of greenhouse gases produced. For this reason, the measurement process can be particularly complex.

After identifying the emissions most relevant to the company, these emissions are quantified using a formula that multiplies primary data (i.e., measurements provided directly by the company, such as the mass in kg of purchased products) by emission factors (coefficients that convert primary data into equivalent CO2 emissions).

Subsequently, depending on the type of information available, different methodologies are applied.

This first method uses monetary inputs obtained from the company’s accounting records for the fiscal years as primary data. It is one of the simplest methods for calculating Scope 3 emissions, although the emission factors used are generic, which reduces the accuracy of the calculation.

This method is based on emission factors derived form literature studies and uses the quantity of purchased material as primary data, expressed in wight or units. It provides greater accuracy because it requires a more precise collection of primary data.

The calculation is based on emission factors provided directly by suppliers and specific to the purchased products. However, only a small portion of products available on the market have such detailed information.

It is a combination of the “Average” method and the “Supplier-specific data” method: its adoption depends on the predominance of the type of data used. If supplier-specific data are used primarily, the result will be greater precision and accuracy.

At Ecoloop, we can help you calculate your CO2 equivalent emissions following the GHG Protocol and ISO 14064 standards. Through a through analysis, we identify the emissions most relevant to your company, allowing for an accurate calculation of Scope 3 emissions.