Scope 3: A Business Guide to Cracking Your Largest Scope Emissions

Society has made a pivotal shift towards sustainable practices, supporting global sustainability goals. To achieve this effectively, carbon reduction frameworks have been developed and adopted to unify efforts to address climate change. The most prominent framework is the Greenhouse Gas (GHG) Protocol, with its Scope emission reporting.

In the UK, under the Companies Act 2006, large companies are legally required to report their Scope 1 and Scope 2 emissions. Scope 1 covers a business’s direct emissions, such as those from company vehicles or other sources owned or controlled by the organisation. Scope 2 covers indirect emissions associated with the purchase of electricity, steam, heat, or cooling.

While reducing these emissions is crucial, they often account for only a small fraction of a business’s total carbon footprint. With increasing emphasis on global sustainability targets, another category of emissions needs to be integrated into business carbon reduction strategies – the Corporate Value Chain Standard, also known as Scope 3.

What Are Scope 3 Emissions?

Representing over 90% of a business’s total GHG emissions, Scope 3 is the largest part of a business’s sustainability footprint. Its reduction is vital to achieve sustainability goals like Net Zero. But what exactly is Scope 3? Defined by the GHG Protocol, Scope 3 emissions are all the indirect emissions that occur across a business’s value chain. These are divided into upstream emissions (occurring before the product or service reaches the company) and downstream emissions (occurring after the product or service leaves the company’s control). These are further broken down into 15 categories for clarity and guidance.

These categories provide a framework to help businesses better strategise and organise their approach to reducing emissions across their corporate value chain. This approach necessitates greater collaboration with value chain partners and a full lifecycle analysis of products and services. Scope 3 illustrates how interconnected businesses and industries are in the fight against climate change.

Examples of Scope 3 Emissions

• Upstream: When a company buys products from a manufacturer, it must analyse the carbon footprint associated with those products. This includes emissions from raw materials, production processes, and distribution. These activities contribute to the buying company’s Scope 3 emissions.
• Downstream: After a product is used, calculating the emissions associated with its disposal helps understand its impact across its entire lifecycle. This includes emissions from waste treatment, recycling, and final disposal processes.

Business Benefits of Addressing Scope 3

Although not yet mandatory in the UK, addressing Scope 3 emissions offers forward-thinking businesses a strategic advantage by aligning with emerging legislation and consumer expectations.

• Regulatory Readiness: Tackling Scope 3 emissions reduces climate risks and future-proofs businesses against potential regulatory changes. For example, the EU’s Corporate Sustainability Reporting Directive (CSRD) mandates Scope 3 reporting for large companies from 2025-2028, signalling a global shift towards comprehensive carbon accountability.
• Value Chain Collaboration: Scope 3 fosters deeper collaboration across the value chain. By engaging suppliers and improving operational visibility, businesses can enhance supply chain resilience, reduce disruptions, and strengthen partnerships.
• Consumer Trust: Transparency in Scope 3 reporting appeals to investors and eco-conscious consumers alike. With sustainability becoming a priority for 82% of UK consumers, addressing Scope 3 emissions positions businesses as leaders in a growing green marketplace, building trust, enhancing reputation, and securing a competitive edge.

Challenges with Scope 3

While businesses have made strides in reporting and reducing Scope 1 and 2 emissions, tackling Scope 3 requires significant planning, communication, and a holistic approach. Common challenges include:

• Data Reliability: Scope 3 relies heavily on accurate data. However, many industries struggle to quantify and manage the sheer volume of data required. Inconsistent data collection across industries further complicates benchmarking.
  • Solution: Collaborate with suppliers to establish reliable data collection processes, adhering to standards like the GHG Protocol. Invest in technology to streamline data collection and analysis.
    
    
• Supplier Engagement: According to a 2022 CDP report, only 16% of organisations could share details of their supply chain engagement. A lack of supplier involvement often stems from suppliers not tracking their emissions.
  • Solution: Communicate the importance of Scope 3 metrics and encourage suppliers to adopt emission tracking frameworks. Share best practices to support their efforts.
    
    
• Complex Value Chains: Scope 3 requires businesses to examine their entire value chain, making it resource-intensive to track, quantify, and update emissions data.
  • Solution: Prioritise engagement with the largest players in your supply chain. Gradually expand to other areas, and consider investing in tools and expertise to manage the process.

Starting Your Scope 3 Journey

Now that you understand the basics, benefits, and challenges of Scope 3, it can still feel daunting to embark on such a comprehensive carbon reduction strategy. Here’s how your business can take meaningful first steps:

1. Screen the 15 Categories: Begin by reviewing the 15 categories outlined by the GHG Protocol and identifying which are most relevant and impactful for your business.
2. Break It Down: Focus on identifying the major sources of Scope 3 emissions within your operations. Every business is unique, so prioritise the areas that matter most to you. For example, a facilities management company might assess emissions linked to cleaning product manufacturers, while a retail business may examine waste-related emissions. According to the CDP, the most common emissions for businesses are from sold products (57%) and purchased goods and services (17%).
3. Engage Your Suppliers: After pinpointing the largest sources of Scope 3 emissions, communicate your strategy with suppliers and collaborate with them. Start with your largest suppliers and work down the chain, encouraging them to adopt frameworks for tracking emissions.
4. Data Collection: Gather data internally and across your value chain. Document calculations and sources for audit purposes. Use this data to create a database that tracks major emission areas and informs a robust reduction plan.
5. Supplier-Specific Emission Data: Work with key suppliers to obtain precise emission data. Request full lifecycle analyses and compare these against industry averages to ensure accuracy.
6. Strategise for Reduction: With the data in hand, develop a strategy for reducing Scope 3 emissions. Focus on areas like logistics optimisation, waste minimisation, adoption of sustainable materials, and ensuring accountability for the full lifecycle of products.
7. Continuous Improvement: Regularly review your strategies as new data and insights emerge. Engage with industry collaborations to share best practices and foster collective progress towards reducing emissions.

By taking these steps, businesses can confidently tackle Scope 3 emissions, positioning themselves as leaders in sustainability while future-proofing their operations against emerging regulations and market expectations.

Conclusion

Addressing Scope 3 emissions is crucial for businesses aiming to meet global sustainability targets and ensure long-term success. While it presents challenges in terms of data reliability and supplier engagement, the benefits of tackling Scope 3—such as regulatory readiness, enhanced value chain collaboration, and strengthened consumer trust—far outweigh the obstacles. By taking proactive steps, from screening the 15 categories to engaging suppliers and developing effective reduction strategies, businesses can play a key role in the fight against climate change and secure their position in an ever-changing market.