Guide 8 steps to the product carbon footprint
A product carbon footprint (PCF) shows how many greenhouse gas emissions a product is responsible for over its life cycle and the resulting measures for climate protection.
An overview for companies
Scope 3 Emissions in Greenhouse Gas Accounting
Carbon acconting for greenhouse gas (GHG) emissions has become an integral part of corporate activities for many organizations. While some companies are already making progress in measuring and reducing their direct and indirect emissions (Scope 1 and Scope 2), Scope 3 emissions still pose a challenge for many companies.
Our expert Sabire Seyma Evli gives you an overview of the topic and shares advice from her consulting practice on what to look out for when collecting and managing Scope 3 data.
What are Scope 3 emissions?
Scope 3 emissions include all indirect GHG emissions that do not fall under Scope 1 (direct emissions) and Scope 2 (indirect energy-related emissions). These are emissions that arise along a company’s upstream and downstream value chain. They include, for example, emissions from purchased goods, transportation, the use and disposal of products, as well as business trips and employee commuting.
„Carbon accounting for Scope 3 emissions is a complex but indispensable part of a holistic climate protection strategy. In addition to transparency regarding climate impacts, there are various ecological and economic advantages for companies that should be taken advantage of.”
Sabire Seyma Evli, Consultant at ÖKOTEC Energiemanagement GmbH
This definition follows the Greenhouse Gas Protocol (GHG Protocol), the globally recognized and publicly available standard for carbon acconting. The GHG Protocol provides clear guidelines for companies in all sectors to help them systematically record and manage their total emissions. To do this, the sources of emissions are divided into 15 Scope 3 categories, which include emissions from purchased goods and services, business travel and the disposal of sold products.
Benefits of Scope 3 carbon accouting
Scope 3 emissions typically account for more than 70 percent of a company’s total emissions. There are a number of advantages to collecting data and carbon acconting:
- Holistic understanding of climate impact: Capturing Scope 3 emissions provides a comprehensive picture of the climate impact of business activities. This is essential for identifying key activities and taking action to reduce emissions.
- Compliance and risk management: Regulations and standards such as the Corporate Sustainability Reporting Directive or Science Based Targets Initiative underscore the relevance of Scope 3 emissions. Furthermore, climate-related and financial risks can be identified and mitigated at an early stage by taking them into account.
- Competitive advantage: Companies that reduce their Scope 3 emissions and position themselves as pioneers in climate protection. This strengthens customer trust.
- Improved supplier relationships and innovation potential: In addition to reducing greenhouse gas emissions, close cooperation with suppliers can increase efficiency in the supply chain and trigger innovation projects – for example, the development of more climate-friendly products and processes.
- Cost savings and access to sustainable financing: By reducing emissions, companies can lower their operating costs, for example, by using resources more efficiently. Transparent and comprehensive reporting on progress also makes companies more attractive to investors, which facilitates access to favorable financing.
Dealing with challenges in carbon acconting for Scope 3 emissions
Scope 3 emissions arise along the entire value chain and relate to collaboration with many suppliers, customers, partners and even consumers. In many industries, value chains are highly interconnected and distributed globally. This makes tracking emissions more difficult and requires an in-depth analysis of the various processes and supply chain levels. It can be challenging to obtain accurate data. You should plan enough time for a suitable categorization, for example of the purchased goods, and the search for suitable emission factors.
Emissions in Scope 3 can vary rapidly due to market changes, product innovations and changing supply chain structures. For example, new suppliers, changing production methods or new materials can alter the sources of emissions. Organizations must therefore regularly update their accounting methodologies (ideally annually) to ensure that the data remains accurate and covers all relevant emissions.
Furthermore, many companies themselves often do not yet collect data on certain categories, such as employee commuting or the emissions that occur during the use phase of the products they sell. However, the latter in particular can be relevant quantities that can significantly influence the overall result of the balance.
To meet the challenges of Scope 3 carbon acconting, we recommend that you:
- Benefit from standards and methodologies: Using internationally recognized standards and protocols, such as the Corporate Value Chain (Scope 3) Standard of the GHG Protocol, helps ensure consistency and comparability in your carbon acconting.
- Involving suppliers: Raising awareness among suppliers and working closely with them is essential to collect primary emissions data and promote sustainable practices. Training and regular data collection with suppliers helps to create a more sustainable supply chain and increase the accuracy of the carbon acconting.
- Using secondary databases: If suppliers are unable to provide specific emission factors, secondary databases offer a valuable alternative. These databases contain sector-specific or generally recognized emission factors that you can use to fill gaps in data collection. This ensures that your balance remains meaningful even without complete primary data.
- Transparency & communication: Communicate the assumptions and estimates on which the data collection was based, as well as the results of the Scope 3 carbon acconting. This strengthens stakeholder trust and can contribute to further improvements along the value chain..
- A step-by-step approach: When starting your carbon acconting, focus on identifying the most important and largest sources of emissions. You can fill in these categories with precise data, while you pragmatically complete the remaining scope categories with estimates and assumptions. Possible criteria for prioritizing the emission categories can be the estimated magnitude or volume of the emissions, the degree of influence on the polluters or the possibility of reducing emissions, given industry standards, the relevance and interests of stakeholders, or prioritization by cost shares, which can be easily evaluated using Enterprise Resource Planning (ERP). Then expand and refine the balance step by step or with each update.
Experience shows that data collection for purchased goods and services (Scope 3.01), transportation (Scope 3.04 and 3.09), waste (3.05) and employee commuting (Scope 3.07) is the biggest challenge for companies. However, if you consider the above points and know what data you need and where to turn, you can overcome this hurdle:
| Scope | Scope Description | Possible Sources/Documents | Relevant Unit |
|---|---|---|---|
| 3.01 | Purchased goods and services | Grouped shopping lists (e.g. by category and the Pareto principle); SAP statements | Purchased goods in tons (alternatively in pieces or issues) |
| 3.04 | Upstream transportation | Shopping lists; SAP statements; Google Maps | Tonnes of purchased goods + kilometers traveled per transportation means |
| 3.05 | Waste | Environmental management systems; invoices from the waste disposal company | Tonnen entsorgter Abfall auf Deponie, Recycling, Verbrennung Tons of disposed waste in landfill, recycling, incineration, etc. |
| 3.07 | Commuting by employees | HR; employee surveys | Mileage traveled, indicating the means of transportation, days worked from home |
While Scope 3 carbon accounting may seem challenging at first glance, a structured approach can help companies effectively address the challenges. By prioritizing the largest sources of emissions, actively engaging suppliers and using secondary data, you can lay the foundation for an accurate GHG balance. At the same time, you gain comprehensive transparency into your business practices and promote a sustainable and resilient value chain.
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