Measuring Scope 3 emissions
Only 49% of private companies report on Scope 1 and 2 emissions, compared with 88% of public companies. And just 29% report on any Scope 3 emissions vs. 70% of the public cohort. The effective coverage of Scope 3 emissions reporting is probably much lower, as many public and private companies are not yet reporting comprehensively on all 15 categories of Scope 3. In this edition, we explore what exactly are Scope 3 emissions and why are they so important?
What to expect today:
Overview of Scope 3 emissions
Complexity in reporting Scope 3 emissions
Overview of Scope 3 emissions
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. It includes upstream and downstream emissions, including those generated by suppliers and distributors, by employees’ business travel, and by the usage of products sold. Typically for any organization, Scope 3 emissions can range from 65-95% of their total carbon emissions footprint and make up the bulk of the overall emissions.
Although one company’s scope 3 is someone else scope 1+2 and while we may be double counting, a lot of suppliers depend on only one customer and it's not fair to allow companies to walk away by pushing their emissions to their suppliers. The cost of double counting in the short term is acceptable as there is urgency in solving the climate crisis. (Also read our article on measuring emissions here.)
How do scope 3 emissions differ across industries?
Some notable insights - as expected, cement, steel and transport services - industries which do not depend on a lot of suppliers - have a higher than usual mix of scope 1 + 2 emissions (> 50% of their total emissions). Cement industry's emissions arise from the production and distribution of cement while most of the steel industry's emissions come from its blast furnace. Oil and gas industry, since the extraction process itself is not that harmful as compared to burning of fossil fuels; most of its emissions seem to arise from their customers using oil and gas - thus having a higher scope 3 mix. Similarly, financial services emissions arise mostly in their financing of companies and their emissions - thus almost entirely made up of scope 3 emissions.
Complexity in reporting Scope 3 emissions
The e-commerce giant, Amazon evaluates the quantity of GHG emitted for each activities by taking the amount of the activity conducted (e.g., miles travelled or gallons of fuel burned) multiplied by its appropriate life cycle “emissions factor” (e.g., grams CO₂ per kilowatt-hour (kWh) of electricity used), which provides a representative value for the carbon dioxide emissions associated with that activity. Once the emissions for all activities are calculated, they sum them to produce the total carbon footprint for Amazon’s entire business.
Their team of researchers and scientists have combined cutting-edge life cycle assessment (LCA) science and Amazon Web Services (AWS) big data technology to develop a robust software solution that processes billions of operational and financial records from Amazon’s operations across the world to calculate their carbon footprint.
The following sections elaborate on the science and data behind each of the emissions models Amazon have built to measure its carbon footprint:
Amazon built a detailed emissions model to quantify the carbon footprint of each type of Amazon packaging (e.g., corrugate boxes or mailers) from production to end-of-life. Carbon emissions are released during the raw material extraction, processing, manufacturing, and disposal of packaging. Their environmental packaging model quantifies the carbon footprint of every package from manufacture to end-of-life given key parameters like material type, mass, and dimension.
Amazon quantifies the carbon footprint of Amazon devices sold during a given year using detailed data on the components of each device and the quantity sold each year. They produce detailed, parameterized models for their major device types, including Fire TV, Echo, Fire Tablets, Kindle, etc. They calculate the carbon footprint of each device type by inspecting the device’s “Bill of Materials”—which details the mass and make-up of each component used in a device—and model life cycle emissions of each component using a mix of commercially and publicly available LCA databases.
After each stage of the life cycle is modeled, their research team creates emissions factors for each device by aggregating the carbon emissions from the manufacturing, transportation, and device end-of-life phases. They scale these emissions factors by the quantity sold to estimate the carbon footprint associated with manufacturing, transportation, and the end-of-life treatment of all Amazon devices sold in a given year.
Customer Trips to Stores
Amazon created a model that calculates the aggregate emissions from customer trips to Amazon’s physical stores (e.g., Whole Foods Market) using publicly available travel behavior information from the Federal Highway Administration’s National Household Travel Survey (NHTS). Future versions of this model may incorporate customer survey data. This model focuses on the following three variables that affect emissions for this category of activities:
Mode of transportation used
Total customer trips per year
After assembling these data and emissions factors for all vehicle and transportation modes, they multiply the distance traveled by each mode by the appropriate emissions factor, then multiply that product by the number of total customers in a year.
Purchased goods and services
Extraction, production, and transportation of goods and services, not otherwise included in categories 2-8
Extraction, production, and transportation of capital goods purchased
Fuel-and-energy- related activities (not included in Scope 1 or Scope 2)
Extraction, production, and transportation of fuels and energy purchased, not already accounted for in Scope 1 or Scope 2, including:
Upstream transportation and distribution
Transportation and distribution of products purchased by the company between a company's tier 1 suppliers and its own operations
Waste generated in operations
Disposal and treatment of waste generated
Transportation of employees for business related activities
Transportation of employees between their worksites and their homes
Upstream leased assets
Operation assets leased by the company, not included in Scope 1 and Scope 2
Downstream transportation and distribution
Transportation and distribution of products sold by the company between the company's operations and the end consumer
Processing of sold products
Processing of intermediate products sold by downstream companies
Use of sold products
End use of goods and services sold by the company
End-of-life treatment of sold products
Waste disposal and treatment of products sold by the company
Downstream leased assets
Operation of assets owned by the company and leased to other entities, not included in Scope 1 and Scope 2
Operation of franchises, not included in Scope 1 and Scope 2
Operation of investments, not included in Scope 1 or Scope 2
Recommendations from the team
Earth Day - Climate Change Quiz
CNBC - Why tracking carbon emissions is suddenly a billion dollar opportunity (12 min video)
Enistic - Scope 3 emissions - a quick look (6 min video)