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What are Scope 3 emissions and why are they so important?

GHG emissions that are anthropogenic (human-made or influenced) in nature, drive climate change and its impacts on communities across the world has been increasing.

In the midst of the COVID-19 pandemic, there has been a decrease in GHG emissions as businesses came to a halt and people were confined in their homes with less commuting and travelling.

However, this was an unintentional temporary change and does not address the problem of the rate of increasing GHG emissions. Business action to reduce their emissions still makes good business sense in order to drive a green and sustainable post-COVID-19 economic recovery.

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In addressing GHG emissions, companies are able to identify opportunities, reduce risks and explore competitive advantage.

Furthermore, the South African government has recently implemented policies and regulations such as the GHG mandatory reporting regulations and the Carbon Tax Act 15 of 2019 to drive significant reductions in emissions and direct economic growth towards a low carbon trajectory.

The Scope 3 emissions of your business

In order for companies to respond effectively to their GHG impact, they have to understand their GHG impact through a GHG inventory.

In the development of the GHG inventory there are three types of GHG emissions sources; namely; Scope 1 emissions which are from operations that are directly owned or controlled by the company; Scope 2 emissions which are from the use of purchased or acquired electricity, steam, heating or cooling by the company; and Scope 3 emissions which are indirect or other emissions not included in Scope 2 as a shown on the diagram below.

Source: WRI/WBCSD Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

According to the GHG protocol, Scope 1 and 2 emissions quantification and reporting are compulsory while Scope 3 emissions are not. 

Until recently, most companies have been focusing more on emissions from their operations (Scope 1 and 2), however, in recent times stakeholders have raised concerns related to the company’s activities of the value chain and the full understanding of the GHG impact of operations (Scope 3).

Scope 3 emissions are activities from assets not owned or controlled by the company that is reporting it GHG emissions.

It is important to note that the Scope 3 emissions for one organisation can be the Scope 1 and Scope 2 emissions of another organisation and occur from sources owned or controlled by other entities.

Scope 3 emissions can be grouped into upstream and downstream.

Upstream Scope 3 emissions (which include purchased goods and services, capital goods, fuels and energy-related activities not included in Scope 1 and 2, upstream transportation and distribution, waste generate din operations, business travel, employee commuting and upstream leased assets).

Downstream Scope 3 emissions (which include downstream transportation and distribution, processing of sold products, franchises, investments, end of life treatment of sold products, use of sold products and downstream leased assets).

Data collection on emissions

Collecting data for Scope 3 emissions quantification can be a challenging exercise which requires a lot of resources. To address the challenges associated with the collection of Scope 3 emissions companies should respond as follows:

  1. Define the reporting scope and boundaries of your Scope 3 emissions;
  2. Identify both the upstream and downstream Scope 3 emissions that are applicable for the industry;
  3. Start small and focus on the low hanging fruit such as upstream Scope 3 emissions e.g. employee commuting and business travel;
  4. Engage with all the Scope 3 stakeholders on the intention to expand or build on your Scope 3 and highlight the benefits of doing this; and
  5. Have a system (preferably online) in place that will enable frequent and effective data collection;
  6. Set targets and monitor performance to demonstrate a commitment to all stakeholders; and
  7. Assurance will ensure that the inventory is complete, accurate and transparent.

As the focus in Scope 3 emissions grow and more companies start to measure these sources of emissions, the next step will be to build a strategy to reduce emissions from Scope 3 emissions.

This can also be challenging as the reduction in Scope 3 emissions is often dependent on third parties and partners. However; quantifying and managing these emissions is key for the following reasons:

(a) Helps with proactively managing risks and opportunities related to the value chain emissions;
(b) Gives the company opportunities to engage with its value chain on all sustainability issues
(c) It enhances the GHG inventory and improves completeness in the public reporting process, and
(d) Contributes to the reputation of the company

About the author
Lungile Manzini is a Corporate Sustainability expert and has more than ten years’ experience in the field of Sustainability; with an MBA from Gordon Institute of Business Science (GIBS) and an MSc from the University of Johannesburg (South Africa) and Wageningen University (Netherlands). Ms Manzini is currently a Ph.D. candidate in sustainability studying with the University of Johannesburg.

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The views expressed in this article by the author are not necessarily those of the publishers and/or association partners. While every effort is made to ensure accuracy, the publisher and editors cannot be held responsible for any inaccurate information supplied and/or published.