Originally published by spendedge: Scope 3 Emissions – How it is evolving?
The Greenhouse Gas (GHG) Protocol establishes globally recognized guidelines for quantifying greenhouse gas emissions, dividing them into three distinct scopes.
What are the sources of Scope 1, 2, and 3 emissions?
Scope 1 emissions and GHG Protocols in the US and EU
Categorizing emissions into different scopes is critical within the GHG Protocol. Governments worldwide are increasingly adopting these standards due to the widespread impact of climate change.
These standards were developed through an extensive collaborative process involving contributions from businesses, government agencies, NGOs, and academic institutions worldwide. Initiated in 2008, the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD) led a three-year effort to establish these guidelines. A steering committee of 25 experts provided strategic guidance, while technical working groups, comprising over 207 members from diverse sectors, drafted the initial standards by 2009. In 2010, 60 companies, including major names like 3M, DuPont, and PepsiCo, field-tested the standards, offering feedback on their practicality and effectiveness. Additionally, a stakeholder advisory group of over 2,300 participants provided feedback on successive drafts of the standards.
Current Situation in the UK
Today, government bodies and environmental organizations, such as the EPA in the US, recognize the significance of Scope 3 emissions. They aid businesses in assessing, measuring, and mitigating these emissions. Recently, the SEC introduced a climate disclosure rule that includes Scope 3 emissions, compelling many US-listed companies to disclose their GHG emissions and evaluate potential climate-related risks.
Current Situation in the US
In the European Union (EU), the Carbon Border Adjustment Mechanism (CBAM) imposes tariffs on carbon-intensive imports, covering Scope 1, Scope 2, and certain Scope 3 emissions. Starting from October 2023 for specific products, CBAM will expand to include additional industries by 2030, such as cement, aluminum, and steel.
Expert Consultation
Benefits of Assessing and Measuring Scope 3 Emissions for Companies
Assisting companies in identifying emission hotspots across their value chains and prioritizing reduction strategies
Categorizing suppliers based on their sustainability performance, distinguishing leaders from laggards
Enabling informed decision-making across procurement, product development, and logistics teams to achieve significant emission reductions
Encouraging innovation to develop more sustainable and energy-efficient products
Advancing strategies that contribute measurably to decarbonization goals, thereby supporting the pursuit of Net Zero targets
Engaging employees positively to reduce emissions from business travel and commuting
Prioritizing decarbonization efforts and identifying areas where the greatest impact can be made
Collaborating with suppliers to reduce emissions and demonstrating community-level benefits from supply chain decarbonization
Communicating a comprehensive footprint and progress to stakeholders, promoting transparency and accountability
Focus on Procurement
Organizations are integrating decarbonization into procurement processes through measures such as mandatory carbon reporting, including carbon reduction requirements in tender proposals, and incorporating carbon reduction clauses into supplier contracts. They are also utilizing peer benchmarking and supplier forums to share best practices and drive decarbonization efforts.
Rewards and Enforcement
Companies are incentivizing decarbonization efforts by offering financial rewards for achieving emission targets. Enforcement measures include financial penalties for non-compliance with decarbonization targets, ensuring accountability among suppliers.
Examples from Signify N.V. and IBM
Signify N.V. (formerly Philips Lighting N.V.) has reported significant reductions in GHG emissions, including Scope 3 emissions, surpassing targets set by the Paris Agreement. IBM includes Scope 3 emissions related to purchased goods and services in its reporting, aligning with IPCC recommendations aimed at limiting global warming to 1.5°C.
Thirty-four companies implemented the GHG Protocol Scope 3 Standard in 2010, providing valuable feedback on its practical application. Their participation demonstrated the feasibility of conducting Scope 3 inventories annually, contributing to ongoing improvements in emission reporting standards.
While the classification of emissions into Scope 1, 2, and 3 is not legally mandated, it aligns with existing environmental regulations and has become a widely accepted practice among companies. Many voluntarily adopt these norms to effectively manage GHG emissions according to their sources.
Governments and companies worldwide are increasingly recognizing and preparing for decarbonization based on this classification, anticipating its universal adoption in the near future.
