Understanding Scope 3

Understanding Scope 3

Scope 3 (or value chain) emissions are greenhouse gas emissions which an organisation typically has influence on (but does not have absolute control over).

Examples include carbon emissions associated with the production and procurement good and services, business travel, commuting, waste and financed emissions such as investments.

Because these ‘indirect’ emissions have presented many calculation challenges, this is an area which is the past has not been addressed – or organisations have just calculated the l part of scope 3 where the data is readily available (such as business travel).

Experience has shown that in many sectors and organisations, scope 3 emissions can represent the majority of an organisation’s total annual footprint and in these days of crucial climate action, can no longer be ignored.

Why is calculating scope 3 important?

Many organisations are choosing to implement carbon reduction targets aligned with the UN Paris Agreement (so called ‘science-based targets’ with many being externally validated by the Science Based Targets Initiative (SBTi). The SBTi’s target-setting criteria state that if an organisation’s scope 3 emissions are 40% or more of total emissions, setting a specific scope 3 target is mandatory.

This is more often than not the case, for example some global companies: The LEGO Group scope 3 = 98% of carbon footprint, Glaxo Smithkline scope 3 = 92%,  Amazon scope 3 = 77%.

An example of how to calculate scope 3 emissions – procurement

The broad principle of carbon accounting (as set out in the Greenhouse Gas Protocol) – is to take activity data (such as kilowatt-hours energy consumed, or tonnnes of product consumed or size of a financial investment) and then multiply that by an established emission factor – to get a result in kg or tonnes of carbon dioxide equivalent.

One problem is that it can be difficult to get accurate activity data and sometimes even more difficult to find the right emissions factor.

A key scope 3 category is that for procured goods and services. Many organisations have a long list of suppliers – and knowing where to start is difficult.

One of the most accessible forms of activity data is the spend-based approach – which uses the monetary value of purchased goods and services multiplied by an emission factor (emissions per unit of money spent) to estimate emissions.

Accounts teams will have the amount spent on goods and services on their purchase ledger – and there are established databases for spend-based emissions factors out there – so easy, right?

However, this approach has limitations:

  • Limits capacity for action: by only using spend, what would be the solution to reduce your emissions (e.g. to meet a scope 3 target)? You will need to either start buying cheaper products or reduce your expenses every year.
  • Inaccurate allocation: Spend-based calculations can include emissions that should belong to different categories, leading to inaccurate results. For example, using spend for a contractor servicing facilities ignores their mileage and waste data, resulting in overestimation.

Spend based calculation does have a place – often for the ‘long-tail’ of procurement- that long list of goods and services with a relatively low impact

So, how can we improve our procurement calculation?

Moving away from a spend-based approach is possible but depends on supplier engagement to increase the accuracy of the data. There are other options to calculation procurement emissions.

  • Supplier/Product specific calculation: Collects product-level life-cycle assessment data from suppliers (e.g. such as an ‘Environmental Product Declaration’), where a model has been used to calculate the specific life-cycle carbon footprint of a product.
  • Average data approach: Uses industry-average emission factors for commonly available goods and materials (e.g. construction materials, textiles, plastics etc.) – widely available in online data-bases.
  • Hybrid approach: Combines supplier-specific activity data (where available) with industry averages data and spend-based calculation to fill the gaps.

Case Study: Ocean Outdoor

Ocean Outdoor, a leader in out-of-home media and advertising needed to improve the accuracy of their calculated scope 3 as part of their efforts to reach net zero by 2040.

Initially, using spend-based method (although complete in terms of their scope 3) led to overestimation in scope 3 emissions associated with the procurement and installation of digital screens.

Watts Sustainability has worked closely with them to transition to a more accurate approach:

  • Technical data collection: We collected materials data from their suppliers to calculate the embodied carbon associated with the digital outdoor screens. Embodied carbon refers to the emissions generated during extraction, production, and transportation of materials. In other words, this is the carbon footprint of the material or product before it is used.
  • Installation emissions calculation: We gathered technical data from their installation contractors such as material usage (e.g. concrete, steel), to assess the embodied carbon of the screen installation structure, and energy/fuel data from their mobile plant equipment.
This improvement work allowed Ocean Outdoor to have a clearer view on their screen installation emissions and how to reduce them.

Improving your scope 3

The large number of stakeholders in the value chain (suppliers, distribution partners, banks/financial institutions, waste providers etc.) makes data collection challenging.   

Often a useful first exercise is to screen using the spend-based method described above – and then use those insights to determine where to focus on data improvement,

This is a fast moving are and over-time, people are getting more to grips with new calculation methods and an expanding body of knowledge on scope 3.

Watts Sustainability can support you on this challenge working with you to improve your scope 3 emissions calculations – and most important reduce that part of your carbon footprint.

Remember, the organisations in your value chain are most likely also learning, and it is through collaboration that you can learn to improve your scope calculations and ultimately reduce them.

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