Overview
Reducing greenhouse gas (GHG) emissions is one of the greatest challenges facing humanity today. The Paris Agreement guides global efforts to limit increases in the global average temperature and the emission reduction actions needed to achieve this goal.[1]
These actions require collective societal effort, including organisations of different scales, and in the public, private and non-profit sectors.
The first step for any organisation wanting to reduce their carbon emissions is to start measuring these emissions – a task easier said than done.
There are a number of reporting frameworks that can be used to guide this measurement processes, such as the GHG Protocol,[2] Task Force on Climate-Related Financial Disclosure (TCFD),[3] International Financial Reporting Standards (IFRS),[4] Global Reporting Initiative (GRI),[5] and CDP.[6]
What are the three Scopes used for measuring emissions?
All of these frameworks separate emissions into three scopes – Scope 1, Scope 2, and Scope 3.
Scope 1 includes greenhouse gases emitted as part of an organisation’s direct operations, such as fuel for a car fleet or on-site equipment, and can be calculated based on usage data such as litres of fuel purchased.
Scope 2 includes greenhouse gases emitted during the generation of the electricity purchased by an organisation, and can be calculated based on electricity consumption data.
Scope 3 includes all other greenhouse gases emitted as a result of an organisation’s operations such as those emitted by its suppliers. These are much harder to measure since they require information from outside the organisation.
Scope 3 assessments:
why are they challenging?
Challenges with assessing and calculating Scope 3 emissions abound. The key challenge in quantifying an organisation’s Scope 3 emissions is obtaining data, given that these emissions are occurring outside of the organisation’s operations (also known as its boundary). The data required to measure these emissions may not be readily available, assuming that the data is being captured to start with.
Two approaches to measuring Upstream Scope 3 emissions
There are two approaches that can be taken by an organisation in order to measure its Upstream Scope 3 GHG emissions, both of which have data and resource implications and limitations:
- A supplier-specific approach. This requires the reporting organisation to map out its supply chain and then engage with each supplier to obtain data from them about their own Scope 1 and 2 emissions. These upstream Scope 1 and 2 emissions become the Scope 3 emissions of the reporting organisation. This approach can be labour intensive since it requires engagement with each supplier and may not be comprehensive if the suppliers are unable or unwilling to share this information with the reporting organisation.
This challenge is compounded at each tier of the supply chain, since it becomes progressively harder to identify and engage with suppliers as one delves further into the supply chain, requiring significant effort to establish the trust required to enable the data sharing process.
Moreover, upstream suppliers may not have the capacity, or willingness, to collect and share their emissions data, since this is not yet a legal requirement in many countries.
A full supply chain approach. This involves obtaining the organisation’s procurement spend data and allocating it to the relevant industry sector within the global economy. Information on the carbon emissions associated with each industry sector, and the supply chains that support them, can then be used to calculate the full supply chain emissions associated with the procurement spend data. This approach is less labour intensive than the supplier-specific approach since it relies only on procurement data, but it can introduce uncertainties in the allocation of expenditure to the relevant industry sector.
This approach is most effective when it incorporates emissions data from all the countries and sectors implicated in the organisation’s supply chain. The use of emissions factors by industry for one country can be helpful in identifying some of the Scope 3 emissions associated with an organisation’s operation, but this approach is unlikely to be comprehensive if the supply chains that support the organisation are global in nature.
Fair Supply’s award-winning proprietary Integrated Assessment Engine employs the full supply chain approach, allowing us to calculate, evaluate, and assess both the upstream and downstream supply chain impacts that are linked to our clients’ business activities.
Our Integrated Assessment Engine is capable of assessing approximately 40 billion supply chains represented in more than 1.8 billion monetary transaction values. It draws information from more than 200 economic source data sets, across 200 industry sectors in more than 200 countries, and can assess supply chain impacts on GHG emissions, biodiversity, modern slavery, and water use.
Our Integrated Assessment Engine utilises state-of-the-art methods to offer full visibility of supply chain impacts without a system boundary, with a special focus placed on the first 10 tiers of the supply chain.
