What are Scope 3 Supply Chain Emissions & Why Companies Need to Include them?

Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. Scope 3 emissions include all sources not within an organization's scope 1 and 2 boundary. Scope 3 emissions are important as they usually represent the greatest share of an organisation's carbon footprint by a significant margin. It is estimated that supply chain emissions may account for over 80% of a company's greenhouse gas (GHG) emissions. Some Benefits of Measuring Scope 3 Emissions:

  • Assess where the emission hotspots are in the supply chain
  • Get ahead of impending legislation around Scope 3 disclosures
  • Identify which suppliers are leaders and which are cause for concern when it comes to sustainability performance
  • Identify energy efficiency and cost reduction opportunities
  • Engage suppliers and assist them to implement sustainability initiatives
  • Avoid Greenwashing
  • Support your supply chain and its journey to Net Zero

Current Legislation & Scopes

The Science Based Targets Initiative (SBTi) targets currently dictate that companies should have a minimum 80% engagement with supply chains and the inclusion of both near-term and longer-term targets to reach Net Zero For example, Public Procurement Notice (PPN) 06/21 (the standard required for the NHS and other UK Government contracts valued at £5m+), companies are required to disclose Categories 4,5,6,7 and 9. Whilst the Streamlined Energy & Carbon Reporting (SECR) dictates that companies must calculate and disclose emissions relating to Categories 3 and 6. The inclusion of Scope 3 emissions in mandatory disclosures is poised to grow at an exponential rate as we approach 2050 deadlines.

Without Scope 3, there is no Net Zero!

In order for companies to take a lead in achieving Net Zero and drive change throughout the value chain, it is vital for companies to measure and report on scope 3 emissions to understand their full impact on climate change Companies need to explore Scope 3 to implement a Net Zero decarbonisation plan. Without Scope 3, there is no Net Zero!

Get in touch with the team to find out more about how we can help you explore your Scope 3 Supply Chain emissions and get your business to Net Zero!

Scope 3 Emissions – 15 Categories

  • Purchased Goods & Services

    Category 1 includes the emissions associated with producing goods and services (cradle to gate) you purchase as a company. This category typically accounts for a large percentage of all scope 3 emissions.

  • Capital Goods

    Includes the emissions associated with the production of capital goods purchased within the reporting period, these are also cradle-to-gate emissions..

  • Fuel & Energy Related Activities

    The emissions related to the production of fuels and energy purchased and consumed by the reporting company in the reporting year are not included in scope 1 or scope 2..

  • Upstream transportation and distribution

    Category 4 includes the emissions from transport and distribution of products, if paid for by the reporting company but not owned or operated by the reporting company. Emissions may arise from the following transportation and distribution activities throughout the value chain: Air, rail, road transport and marine transport.

  • Waste Generated in Operations

    Includes the emissions related to third-party disposal and treatment of waste that is generated in your company in the reporting year. Includes solid and wastewater.

  • Business Travel

    Includes the emissions from vehicles owned or operated by third parties that transport your company's employees during business related activities. Emissions from business travel may arise from: air, Rail, bus, automobile (business travel in rental cars or employee-owned vehicles other than employee commuting to and from work).

  • Employee Commuting

    The emissions from the transportation of your company's employees between home and their work sites.

  • Upstream Leased Assets

    Category 8 includes the emissions from the operation of assets leased from a third-party company, which are not included in the reporting company's scope 1 or 2.

  • Downstream transportation and distribution

    Includes emissions from transportation and distribution of products sold by the reporting company between the company’s operation and the end consumer, if not paid for by the reporting company, in vehicles and facilities not owned or controlled by reporting company.

  • Processing of sold products

    HIncludes the emissions from the processing of intermediate products sold in the reporting year, by downstream third-party companies, after your company sold the products to them. Emissions for this category may occur in the future. Intermediate products are inputs to the production of other goods or services; they require further processing, transformation, or inclusion in another product, before use by the end consumer. Intermediate products are not consumed by the end-user in their current form.

  • Use of Sold Products

    Category 11 includes the emissions from the use (by end-users Scope 1 and Scope 2) of goods and services sold by the reporting company in the financial year, over the expected lifetime of the product. The minimum boundary for this category is the direct use-phase emissions of sold products over their expected lifetime. In other words, the minimum boundaries of category 11 are the scope 1 and 2 emissions of end-users of the product sold.

  • End-of-Life treatment of sold products

    Includes the emissions from waste disposal and treatment of products sold by your company within reporting year. End of life treatment

  • Downstream leased assets

    Includes the emissions from the operation of assets that are owned by your company (acting as the lessor) and leased to other entities in the reporting year.

  • Franchises

    Category 14 includes the emissions from the operation of franchises (by franchisees) not included in the reporting company’s scope 1 and 2.

  • Investments

    Category 15 includes the emissions associated with your company's investments in the reporting year. Not included in scope 1 or 2 already. This category is applicable to investors and companies that provide financial services.

"Following the successful quantification and verification of Phoenix Natural Gas Limited’s (PNGL) Energy Use and Scope 1 and 2 Carbon Emissions, PNGL extended the engagement with CarbonFit to perform a full Scope 3 supply chain analysis. This involved working closely with PNGL and all our suppliers specifically on Scope 3 emissions associated to Purchased Goods and Services, a notoriously challenging area to quantify. CarbonFIT were able to identify PNGL’s top emitters and worked closely with all of them to gather actual Scope 3 emissions data using a variety of quantification methods. The next phase in this joint engagement is to work with PNGL’s principal emitters to identify realistic and achievable means for reducing scope 3 emissions."

Gareth Wright
Head of Compliance & Support Services
Phoenix Natural Gas

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