Goals of this article:
- Define the concept of scope 3 GHG emissions and how companies can change theirs
- Explain the connection between scope 3 emissions and carbon footprint assessments
- Present how scope 3 GHG emission factors are calculated
- Describe how value chain models can vary and how this can affect GHG emission factors
1. GHG emissions from value chains
The concept of scope 3 emissions has been first developed by the World Resources Institutes (WRI) and the World Business Council for Sustainable Development (WBCSD). They provide their definition of this concept in the documents of the GHG protocol [1].
In the glossary of the GHG protocol standard, scope 3 emissions are defined as:
“All indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.”
And, to clarify, scope 2 emissions are defined as:
“Emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the reporting company.”
Many other organisations have provided more detailed definitions of scope 3 emissions.
These explanations present a further common agreement that scope 3 emissions are connected to GHG sources that are not owned or directly controlled by the reporting company.
Scope 3 emissions can also be linked to the concept of “environmental” externalities [2–3], which means that suppliers and customers of a reporting company are connected to its scope 3 emissions. The reporting company can thus affect the scale of its scope 3 emissions by, for example, making informed choices on its suppliers and changing how its customers use and discard its products.
The GHG protocol standard provides general technical guidance for the calculation of scope 3 GHG emissions [4] (see appendix D) and various tools on their website [5]. These guides and tools are useful for understanding how data from the reporting company should be connected to the indirect GHG emissions from most of its suppliers (i.e. except energy suppliers) and its customers. Other standards, like ISO 14064 [6], provide similar guidelines to assign indirect GHG emissions to different categories.
With that being said, most of these documents provide little or vague information on how indirect GHG emissions from the value chains of suppliers and customers (i.e. scope 3 GHG emission factors) can be calculated. It then becomes interesting to look into the concept of carbon footprint assessments for products and services (see the introduction of this assessment method in our August blog article).
2. Link between scope 3 GHG emissions factors and carbon footprint assessments
As hinted in our September blog article, carbon footprint (CF) values for products and services can be connected to scope 3 GHG emission factors that are used to calculate the amount of scope 3 GHG emissions for a reporting company.
In its general definition, the CF value of a product or service is the sum of all GHG emissions across the different stages of its value chain (also known as the full life cycle) [7]. The figure below shows a simplified example of the connection between CF values that can be linked to different products and the related GHG emissions in the different scopes of GHG assessment for a company.
In the figure, a “cradle-to-gate” boundary [8] is shown to consider the GHG emissions from a section of the company’s value chain. The obtained CF value in this limited perspective for 1 product A is then equivalent to the upstream scope 3 GHG emission factor for 1 product A from a supplier of the reporting company. The evaluation of downstream scope 3 GHG emission factor for 1 product D can also be calculated from a part of its cradle-to-grave CF value. In that case, it is important to consider only the GHG emissions that are occurring when the customer of the company is using the product and when he discards it. The example of the figure also shows that not all products have direct GHG emissions, but they all need to be considered to evaluate the various CF values and their related scope 3 GHG emission factors
3. How to calculate the scope 3 GHG emissions factors (e.g. carbon footprint values)
Section 2 of our blog article from September describes the general 4-step procedure to evaluate and publish the full life cycle CF values for organisations, products & services. Here, we will be looking at how we can use the description of different activities of various companies to calculate the CF values for products and services, which can then be used to obtain scope 3 GHG emission factors. This analysis will show how different organisations could share their specific information to obtain scope 3 GHG emission factors for all companies, products and services around the world.
The figure of section 2 shows, with a simplified example, that all value chains can be described by connected activities that create different products in various companies. In a similar manner, it is possible to evaluate the CF values of all products and services from these activities (or companies) if all inputs and outputs of materials, infrastructure, energy, products, services and GHG emissions are known for all the activities of a value chain. The figure below provides a visual description of how activities from different companies need to be informed to allow for the calculation of CF values.
If such information was shared by all companies around the world, environmental accountants could combine the data to evaluate the CF values (or scope 3 GHG emission factors) for all organisations, products and services. However, such data can be considered sensitive for companies, so this level of description of all activities along value chains is hard to find beyond average models of industries. The other option is that each organisation calculates the “cradle-to-gate” aggregated CF values of their products or services and share these scope 3 GHG emission values with their customers.
4. The challenges of consistently modelling activities and values chains
If all value chains of products and services around the world could be modelled with the simplified example of the figure in section 3 (above), it would be rather straightforward for all organisations to use a common consistent modelling strategy that would streamline the exchange of scope 3 GHG emission factors between companies. Sadly, the world is not as simple and many complex modelling choices must be made to tackle some “real-world” aspects. The list below presents a few of the challenges that are encountered by environmental experts and data providers.
- Varying level of details: Different organisations will aggregate the description of activities at different levels of detail that may prevent connections in value chains. For example, an activity can describe inputs and outputs of a company, a sector or a country.
- Physical or market perspective: Some organisations will try to represent the flows that are actually connecting activities in the “real world” and others will connect activities with financial responsibilities in mind.
- Activities with more than one reference product: Sometimes, an activity will create 2 or more products at the same time, which forces the allocation of inputs to the many outputs. Different methods can be used for such allocations (e.g. by mass, by cost).
- Who is responsible for the impact of waste treatment: The end of a value chain is not always easy to identify. For example, which product should get the impact of recycling? The product that forces the recycling activities or the product that uses recycled materials.
A variability of Scope 3 GHG emission factors for the same products or services is thus observed between different studies and databases (see section 3 of our blog article from September). These differences mean that the exchange and use of consistent scope 3 GHG emission factors between organisations is difficult when modelling choices are changed.
Some GHG assessment standards are tackling the challenge of consistency by providing specific modelling rules for value chains, but most of them are still rather tolerant of the allowed options to encourage organisations to share some information about their GHG emissions.
In our next blog article, we will provide more applied examples of the GHG emissions evaluations for products under different modelling rules to show the level of variability that can be observed and explain why a lack of consistency between studies and data sources can be of concern. If you have any questions on one of the previous articles or would like to make a suggestion on topic deep dives, please do not hesitate to reach out to our team.
