Measuring Scope 3 Emissions: Taking a Smart Approach
Becoming a sustainable business starts with gaining a comprehensive understanding of a company’s greenhouse gas (GHG) emissions. Many of the world’s major companies are consistently making big improvements to the way they measure and report the emissions arising from their own operations and purchased electricity, their Scope 1 and 2 emissions. However, many are still grappling with how best to manage their Scope 3 emissions, those arising from activities in their wider value chain, from raw material sourcing to product disposal.
We continue to see an increasing amount of interest and activity in this area. Our clients are typically broadening their Scope 3 measurement and reporting activities and adding more activities to each of the 15 Scope 3 categories. This is being driven by a desire to make progress on sustainability performance and achieve improved reporting scores via respected frameworks, as well as to demonstrate progress to investors and other stakeholders.
As companies get to grips with analysing their wider carbon ecosystem, we are also seeing a great deal of innovation taking place. For example, companies in different sectors are innovating to incentivise suppliers to drive improvements, whether it’s in water use or energy efficiency, and they’re tracking these savings via their sustainability data management system.
In 2013, the GHG Protocol released a new set of guidance to help companies measure Scope 3 emissions. This provides a great deal of clarity on how to measure and calculate the emissions arising from each of the 15 Scope 3 categories. In particular, it includes more detailed calculation methods for category 1 ‘Purchased goods and services’ and for category 5 ‘Waste generated in operations, as well as extended guidance for category 15, ‘Investments.’
If your company is beginning to measure or scale up its measurement of Scope 3 emissions, we recommend firstly reading the guidance very carefully. It’s then advisable to conduct a full materiality assessment and decide which of the 15 categories are most relevant to your business. Cross-reference this with data availability to identify the areas where you’ll be likely to make the most impact. Finally, take action incrementally – don’t try to do everything at once.
Adopting smart measurement techniques
Cost-effective, efficient sustainability data collection and reporting requires a structured and systemised approach, particularly given the ever-expanding breadth and complexity of the data to be captured. Using a smart data management system in this context allows companies to put a framework in place to collect vital emissions data – this can be scaled year on year as companies increase the breadth of data gathered. Once the system is embedded as part of the data collection process, the overall reporting process becomes more straightforward and streamlined.
Using a sustainability data management system can be useful when tackling Scope 3 emissions in the supply chain, which can be complex and time-consuming to monitor. Companies can make it part of the on-boarding process or Tier 1 suppliers can even issue invites to Tier 2 suppliers, treating the system almost as a social network, with all the data stored centrally. Some companies are also opting for the ability to calculate, interpret and make recommendations on carbon reduction activities in the value chain.
Exploring some top Scope 3 measurement tips
Here, we explore some examples and lessons learned from one of the most challenging Scope 3 categories: category 6, Business travel. This can itself be divided into the following sections: air travel, hire cars and private mileage, and public transport.
This is one of the most frequently collected and reported Scope 3 impacts. Data tends to be readily available either through the corporate travel department (sometimes outsourced to a booking agency) or through expense claims. Using sustainability software, companies can calculate distances where the origin and destination are known but distance has yet to be calculated.
We also recommend tracking the class of travel. In terms of air travel, business, upper and first class all occupy a larger proportion of the cabin, and therefore a greater proportion of the carbon emissions can be attributed to that fare. Emission factors are publicly available from the GHG Protocol and also DEFRA in the UK, as well as several other local sources.
Hire cars and private mileage
We advise breaking this down into rental vehicles, vehicles owned by employees and journeys where mileage is reimbursed through expenses. Again, this is one of the more readily available data sets, with expenses being paid based on a pence-per-mile basis in many countries and many hire companies able to provide reliable ‘distance travelled’ information across the corporate contract.
The most challenging area is long-term lease cars – should these be considered as part of the companies’ Scope 1 or Scope footprint? Importantly, they should only be recorded under one, not both. Within the 15 categories of Scope 3 reporting, we suggest recording lease cars under category 8, Upstream leased assets.
Public transport and taxis
This is one of the most challenging areas of business travel emissions. The most readily accessible data is through the finance department as there tend to be separate cost codes for differing forms of transport. However, the cost of the journey has many variables, including how far in advance the ticket has been purchased and whether any discount cards have been used.
This means that the correlation between price and distance is not necessarily that strong and therefore, nor is the relationship to carbon emissions. In some cases, it is possible to amend existing expense systems to capture the origin and destination information so that the distance can be evaluated.
Managing reductions in business travel emissions
One of the most important aspects of managing a carbon footprint is demonstrating that actions and initiatives are having a demonstrable downward impact on carbon emissions. We havebeen working with several financial organisations to calculate the likely reduction impact of TelePresence activities, for example, as an alternative to travelling to a meeting. Companies are increasingly interested in calculating how much carbon they have saved in this way.
Alistair Blackmore is head of implementation for CRedit360.
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