To reach climate goals like achieving net zero emissions or aligning with the Science Based Targets initiative (SBTi) standards, organizations need to look deeper than their direct emissions. By digging into indirect emissions, like those across your value chain, you can often uncover significant opportunities to make a climate impact.
These indirect value chain emissions, known as scope 3 emissions, typically account for the majority of an organization’s overall carbon footprint. While you may not have direct control over them, there are typically still many levers to pull that can lead to a significant reduction in scope 3 emissions.
In this guide, we’ll take a closer look at:
What are scope 3 emissions?
Why do scope 3 emissions matter?
The challenges of tackling scope 3 emissions
Five specific steps to scope 3 reductions
Using Supply Chain Reductions (SCRs)
The value of working with an experienced decarbonization partner
What are scope 3 emissions?
Scope 3 emissions are indirect emissions from a company’s value chain, including both upstream and downstream activities. Upstream activities are business expenses, such as capital goods and business travel. Downstream activities are everything from distributing products to stores to customer disposal of sold products.
Scope 3 emissions — also called value chain emissions — differ from scope 1 and 2 emissions based on where they occur and the control a company has over these scopes.
Scope 1 emissions include all direct emissions that a company owns or controls, such as emissions from boilers, furnaces, or company vehicles.
Scope 2 emissions include all emissions from purchased energy for the company’s own use, including electricity, steam, heating, and cooling.
Technically, scope 2 emissions are indirect, as another company creates emissions when generating that energy, such as by burning natural gas to generate electricity. However, these indirect emissions differ from scope 3 indirect emissions, because the reporting company still has more control over how much energy they use, for instance, based on what they set office thermostats at.
Scope 3 emissions, however, are more dependent on how other organizations operate. While they do fall outside of a company’s direct control, companies still have a lot of power to manage their scope 3 emissions. This can be done through ways like adjusting which suppliers they choose to work with and how they position their products for end-consumption.
Why do scope 3 emissions matter?
It might seem like focusing on your scope 1 and 2 emissions carries the most weight, but the reality is that scope 3 emissions account for the bulk of most companies’ emissions. On average, scope 3 emissions account for 75% of total emissions for companies reporting to CDP.
Dividing emissions into different scopes like this then makes it easier to see where your emissions are coming from and devise strategies to reduce them.
For example, you might find that your company’s office electricity consumption (scope 2) has lower emissions than purchased goods and services (scope 3). So, from an emission reduction standpoint, procuring more low-carbon products or services could be more effective than procuring renewable electricity — though, ideally, you could do both.
Digging into your scope 3 emissions means digging into your supply chain and downstream processes like this. Doing this can create a whole host of business benefits, like cost savings from reducing packaging and improving supplier relationships.
In addition, stakeholders increasingly understand that most emissions tend to lurk under the scope 3 category, so companies that effectively address their value chain emissions can attract the attention of more investors and customers, and comply with international regulations and standards.
One of those standards is SBTi, and to align with SBTi criteria, companies need to set scope 3 targets covering at least 67% of their scope 3 emissions (assuming their scope 3 emissions account for at least 40% of all emissions, which is often the case).
And while it might seem that sustainability is becoming less of a priority for organizations overall due to changing legislative policy in the U.S., there’s still a clear business case for improving your environmental footprint through scope 3 emission reductions.
Recent Bain research found that half of B2B buyers say they already purchase more from sustainable suppliers than those that aren’t as sustainable and almost 70% plan to increase these purchases over the next three years.
Bain also found that 80% of consumers think their choices make a difference, yet accessibility is one of the top barriers to more sustainable lifestyles.
So, that creates an opening for companies to engage consumers who want to make more sustainable choices. The relationship can be reciprocal, such as by informing customers on how to dispose of your products more sustainably, which makes them feel more in control of their environmental footprints while reducing your own scope 3 emissions.
The challenges of tackling scope 3 emissions
While the reasons for tackling scope 3 emissions are clear, it’s not always easy to do so in practice.
Some of the most common challenges include:
Because scope 3 emissions are indirect, it’s difficult to fully and accurately collect emissions data across all your suppliers and all your downstream operations. Even if you fully map your supply chain, some downstream data isn’t easy to capture—like whether consumers compost waste or throw your product packaging in the trash (the latter generally creates more methane, one of the most potent greenhouse gas (GHG) sources).
Another challenge is the lack of direct control over your scope 3 emissions. Even if you are able to collect data from customers on how they use your products, for example, that doesn’t mean you can directly change their usage in a way that lowers your scope 3 emissions. Similar examples can be found in upstream emission areas; your suppliers might be open to suggestions, but unless you change suppliers, they’re ultimately in control over their operations and, therefore, their emissions that show up in your scope 3 totals.
Similar to data complexity is the difficulty of navigating different measurement and reporting standards. While there are commonly used methodologies, like those from the Greenhouse Gas Protocol (GHGP), you might run into issues like suppliers using different reporting standards.
A step-by-step guide to scope 3 reduction
Despite the challenges of tackling scope 3 emissions, there are clear ways to manage them more effectively. Consider the following five steps to build your scope 3 emissions reduction strategy:
Before you can get deep into solving how to reduce scope 3 emissions, you first need to measure them. While difficult, there are several accepted methodologies, including:
- Economic input-output model: This is an efficient, albeit broad-brush, methodology based on spending data and industry-standard emission factors. While it’s relatively easy to measure, the downside is that it’s hard to show scope 3 emissions reductions if your spend stays the same (e.g., switching from one supplier to another that has more climate-friendly operations would not change the measured emissions if the spend is equivalent).
- Life cycle assessments (LCAs): Rather than basing emissions on spend, LCAs estimate emissions based on industry averages for specific categories (e.g., plastic vs. aluminum packaging) or company published product carbon footprints (PCFs). While it’s more involved than the economic input-output model, the advantage is that changing the types of products and services you procure affects your scope 3 measurement.
- Supplier emission allocation: A third option is to allocate the scope 1 and scope 2 emissions of a supplier to the specific product or service you purchase. The GHGP recommends minimizing this approach when possible because it can add uncertainty to calculations, and it may even be inaccurate depending on how the allocated emissions are calculated.
In many cases, it’s necessary to take a combined approach, such as using LCAs where possible and filling in the gaps with spend-based data. The GHGP provides further guidance for how to measure the different categories of scope 3 emissions, including downstream processes where supplier data may not apply.
Once you complete measurement, you can identify hot spots where your emissions are concentrated, thereby telling you where to focus your efforts next.
Next, you should set specific targets for scope 3 reduction. Depending on your broader goals— for instance, whether you want to get a science-based target approved or want to achieve net-zero by a specific date—your targets may vary.
Focus on what’s realistic, though, rather than what sounds good. Also, consider how control varies across scope 3 categories, despite all being indirect emissions. A dairy company might be able to address some scope 3 emissions through agricultural supply chain reductions, but it likely doesn’t have much say over the efficiency of customers’ refrigerators used to store the milk they buy.
With your targets in place, you can then create a roadmap for reaching these goals. The roadmap should include detailed levers that you plan on pulling to reach your scope 3 targets, including specifying which person or department will be responsible for particular initiatives. For example, engaging suppliers on renewable energy procurement would likely fall to both your sustainability and your procurement teams.
Looking for help building your scope 3 roadmap?
3Degrees can help you build a scope 3 emission reduction roadmap based on scientific modeling to give you confidence that your strategy will enable you to reach your targets. Our team utilizes a proprietary Emissions Reduction Model that compares a business-as-usual scenario against target emissions to identify potential gaps in your strategies and determine which particular levers you need to put more emphasis on to reach your reduction goals.
One of the most impactful ways to reduce scope 3 emissions is to engage suppliers, working with them to lower their scope 1 and 2 emissions, which in turn lowers your scope 3 emissions.
This engagement can cut across several categories, such as working with suppliers on product redesigns to reduce their emissions intensity, encouraging suppliers to switch to renewable energy, or collaborating with suppliers on policy advocacy that can reduce everyone’s emissions, such as making clean energy more accessible, which would have an effect on your entire supply chain, including downstream customers.
The journey to decarbonization doesn’t stop after establishing a roadmap or convincing suppliers to make changes. You need to engage in continuous measurement to track your progress, especially because what you measured previously might not apply in the future.
For example, while a supplier might have implemented more energy-efficient practices in their operations, your organization may have grown to where the volume you’re purchasing from them outpaces their improvements. As such, that might lead to higher emissions.
Those findings might lead you to consider increasing engagement further, such as by incentivizing your supplier to switch to renewable energy so that growth doesn’t necessarily lead to more emissions.
Targeted scope 3 reduction for strategic decarbonization
One scope 3 strategy that’s worth singling out is the use of Supply Chain Reductions (SCRs). Also known as carbon insetting, SCRs involve working directly with suppliers on interventions that reduce their scope 1 or 2 emissions, thereby reducing your scope 3 emissions.
For example, food and beverage companies often have hot spot areas in their emissions footprints from agricultural practices, such as the methane emissions from livestock. SCRs can directly lower these emissions by working directly with farmers to install a manure management system or use a feed additive that lowers the emissions intensity of that farm, or another method.
In other words, SCRs fund carbon reductions directly within your supply chain, enabling you to directly address those emissions and claim the scope 3 reductions.
3Degrees: your partner in scope 3 decarbonization
Figuring out how to reduce scope 3 emissions is easier with the right partner. 3Degrees has over 20 years of experience in climate solutions and proven methodsthat enable you to make defensible, reportable emissions reduction claims.
The process is straightforward.
- We’ll start with measurement. 3Degrees consultants can use our in-house scope 3 screening tool that enables them to gain an understanding of your organization’s value chain emissions with preliminary measurement.
- Next, using our proprietary Emissions Reduction Model, we’ll conduct a thorough analysis of your emissions sources and help you identify hot spots. We then work together to create a customized climate strategy that can include setting clear, science-based targets or aligning with other standards you want to follow.
- With the data from the Emissions Reduction Model, we will help you develop a roadmap that has clear, actionable steps and solutions that you can socialize to get buy-in across your organization.
- Then, we help you implement and manage supplier engagement programs that make a significant, quantifiable impact on your scope 3 emissions, such as using SCRs that align with your specific supply chain.
- Finally, we can help you monitor and improve your strategy on an ongoing basis.
By working with 3Degrees, you can build confidence and see meaningful results toward scope 3 decarbonization, along with reaching associated climate goals.
If you’d like to start measuring and managing your scope 3 emissions more effectively, please get in touch.
FAQs about scope 3 emissions
Want some quick answers to frequently asked questions about scope 3 emissions? Take a look at the following:
What's most important between scope 1, 2, and 3 emissions?
Remember that your scope 3 emissions are another organization’s scope 1 and 2 emissions; therefore, all scopes of emissions are important in their own ways. You can determine the focus most important to your organization by conducting an initial GHG inventory.
Most organizations typically find that scope 3 emissions stand out as the largest source of their total emissions. As such, addressing scope 3 emissions can have a very large climate impact that reduces your carbon footprint and the carbon footprint of other organizations.
Why should my organization develop a scope 3 emissions reduction strategy?
In addition to scope 3 emissions typically accounting for the vast majority of a company’s total emissions, developing a scope 3 emissions reduction strategy can create related business benefits. For example, implementing SCRs can strengthen supplier relationships, which might help by giving your organization a priority with that supplier if you need to increase capacity.
How can I start implementing a scope 3 reduction strategy?
To start implementing a scope 3 reduction strategy, you need to measure your emissions. From there, you can set targets and build a roadmap to achieve your goals. Working with decarbonization partners like 3Degrees, with our scope 3 screening tool and proprietary Emissions Reduction Model, can help you more easily and confidently reach your emission reduction goals.
