For companies, accounting for and reducing their pollutant emissions is a major challenge. This is particularly true for indirect emissions, also known as Scope 3 emissions. These emissions make up a significant part of a company’s carbon footprint. What exactly qualifies as Scope 3, and how can companies achieve their sustainability goals by reducing these emissions?
What Are Scope 3 Emissions?
The Greenhouse Gas Protocol (GHG Protocol) is the most widely used standard for preparing greenhouse gas reports. The GHG Protocol classifies greenhouse gas emissions into three scopes. Scopes 1, 2, and 3 categorize the various types of direct and indirect greenhouse gas emissions a company produces throughout its entire value chain.
Scope 3 emissions refer to a company’s indirect greenhouse gas emissions that lie outside its own activities and over which it consequently has no direct influence. These emissions occur in the upstream and downstream processes of the value chain.
Scope 3 emissions often make up the largest share of a company’s total carbon footprint, with possible exceptions being energy-intensive sectors, such as the steel industry.
Difference from Scope 1 and Scope 2 Emissions
The other two scopes are defined as follows:
- Scope 1 emissions: all direct emissions from the company’s own sources, such as those caused by the company fleet or production processes
- Scope 2 emissions: indirect emissions from the consumption of purchased electricity, heat, cooling, or steam for the company’s internal use
Scope 3 Emissions: Categories and Examples
The main distinction among Scope 3 emissions is whether they originate from upstream or downstream activities.
Scope 3 Emissions from the Upstream Value Chain
These emissions stem from the following processes and factors:
- Purchased goods and services; for example, the mining and processing of raw materials
- Capital goods purchased by the company, such as machinery, buildings, or vehicles (which obviously must first be produced)
- Operational waste that is disposed of or processed by third parties
- Employee business travels
- Employees commuting
- Activities that cause fuel- and energy-related emissions and do not fall within Scope 1 or 2, such as the extraction, production, and transportation of fuels used by the company
- Rented or leased assets
- Upstream transportation and distribution by service providers
Scope 3 Emissions from the Downstream Value Chain
Downstream emissions stem from the following processes and factors:
- Further processing of sold products by third parties prior to their use by end consumers
- Use of sold products by consumers, such as the power consumption of electrical appliances
- Disposal of sold products
- Franchising
- Investments
- Rented or leased properties
- Downstream transport and distribution by service providers
One Party’s Scope 1 and 2 Emissions Are Another Party’s Scope 3 Emissions
A closer look reveals that: none of the emission types can be assigned to just one scope. A company’s Scope 3 emissions, which are part of its corporate carbon footprint, consist primarily of its suppliers’ and customers’ Scope 1 and 2 emissions. For instance, when a customer processes purchased products further, the supplying company’s Scope 1 and 2 emissions become the purchasing company’s Scope 3 emissions.
When it comes to emissions from external logistics services, for example, a company will record these under Scope 3 because the logistics service provider is directly responsible for the pollutant emissions generated when operating its vehicles, not the company itself. In turn, the logistics provider records these emissions under Scope 1 – while upstream emissions related to vehicles as capital goods are assigned to Scope 3 by the logistics provider.
So, everything is somehow connected to everything else. Thus, it’s clear that the challenges of sustainable management can only be overcome together.
Why Scope 3 Emissions Are Important for the Ecobalance
According to the GHG Protocol, only Scope 1 and 2 emissions are mandatory. These emissions are also much easier to record than Scope 3 emissions. After all, these are direct emissions for which companies have all the necessary internal data. So why deal with Scope 3 at all?
It’s also about corporate responsibility. Scope 3 emissions are essential to a comprehensive climate protection strategy because they typically account for the largest portion of a company’s ecological footprint. Additionally, partner companies, investors, and consumers increasingly expect transparency regarding sustainability. Reporting on Scope 3 emissions can strengthen a company’s environmental reputation and demonstrate a commitment to sustainability. This allows companies to position themselves as responsible players in the frame of the larger ecological picture.
As the demand for sustainability grows, so do the requirements. It is very challenging to precisely determine and balance greenhouse gases produced along a company’s complex value chain but outside its control. After all, numerous players are involved, from raw material producers to consumers, as well as numerous processes.
Benefits of Measuring Scope 3 Emissions for Companies
Corporate sustainability is a value in itself. However, there are practical benefits for companies that know their Scope 3 emissions:
- Emission-intensive areas in the supply chain are revealed.
- This allows for identifying chances to boost energy efficiency and cut costs.
- These improvements enhance the energy efficiency of products and services.
- The measurement also identifies which suppliers and processors stand out in terms of sustainability and which ones need to improve.
- Motivating these partners to increase sustainability also positively impacts the company’s own ecobalance.
Scope 3 Emissions from Logistics
Examining the Scope 3 emissions categories highlights the importance of logistics in Scope 3 reporting. Transportation and logistics are the only factor in both the upstream and downstream links of the value chain. Whether raw materials are being delivered to an upstream producer or finished products reach an end customer: transport logistics processes and services, warehouses, distribution centers, etc., are always involved.
A company’s overall carbon footprint is significantly impacted by the extensive network of logistics services and activities. The scope of this impact depends on how many logistics processes the company relies on for its operations. In any case, it’s clear how important it is to have a sustainable logistics partner.
Logistics is at the Beginning and the End
By the way, we always talk about the value chain, which is actually a closed-loop system. After all, a mining company needs vehicles and machinery at the beginning of the chain. These items must be transported between production sites and the company. Thus, individual chains are interlinked, and transportation and storage logistics are involved in every case. So, it’s no wonder that the carbon footprint of logistics is correspondingly large.
However, being large also means having great savings potential. Therefore, it is crucial for companies to review their transportation strategies and collaborate with sustainable logistics partners to implement effective solutions that reduce the environmental impact of their transport and logistics processes.
How to Calculate Scope 3 Emissions
It is complex to measure Scope 3 emissions along the entire value chain. The GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard provides companies with a standardized framework. The standard contains guidelines for data collection, calculation methods, and reporting practices to ensure accurate and consistent reporting of Scope 3 emissions.
The guidelines of the standard help companies to determine the full extent of their Scope 3 emissions in the value chain. With the help of defined procedures and principles, they can create detailed Scope 3 reports and establish consistent and transparent public reporting on their Scope 3 emissions.
Because this is all still very demanding, specialized service providers support companies with reporting. DHL Freight customers who use GoGreen Plus services benefit from GoGreen Plus Automated Reporting when it comes to logistics-related emissions. There is also the helpful DHL GoGreen Dashboard. Both are innovative, automated reporting systems for corporate carbon reporting.
How You Can Benefit from GoGreen Plus
Climate change is the greatest challenge of our time – and it affects all of us. However, it is not equally easy for every industry and every company to reduce their respective ecological footprint. With GoGreen Plus, we offer you the opportunity to reduce emissions in a simple way thanks to insetting – exactly where they occur. Your investment goes 100% into the use of green technologies within our network.
Reducing Scope 3 Emissions Together with DHL Freight
One thing is clear: sustainable logistics services are one of the most effective levers for reducing Scope 3 emissions. To achieve this, companies depend on logistics partners who take on their sustainable responsibilities. As pioneers in green logistics, DHL Group and DHL Freight can significantly reduce companies’ carbon footprints.
DHL Freight implements alternative drive solutions and uses emission-reducing fuels. The company also employs intermodal transport concepts and relies on intelligent route planning. Additionally, DHL Freight maintains holistically sustainable buildings. Through carbon insetting, we reduce emissions directly within our network. Our GoGreen Plus services help us achieve this goal. The additional costs of these services go entirely and directly into green technologies, thereby reducing our customers’ corporate carbon footprint.
