Scope 3 emissions are indirect greenhouse gas (GHG) emissions that occur in a company’s value chain but are from activities not owned or controlled by the company, according to the Environmental Protection Agency (EPA).
Why are scope 3 emissions important?
“Indirect emissions still matter, and they have to be on someone’s books,” Lila Holzman, senior energy program manager at corporate climate accountability nonprofit As You Sow, said in an interview with FreightWaves.
Holzman said that European companies have a higher chance of disclosing scope 3 emissions and including them in emission-reduction goals. Many companies in the U.S. and around the world are skipping over them, and the resistance makes sense.
For any company aiming for the common sustainability goal of net-zero emissions by 2050 or sooner, it would be much easier to reach that goal without including scope 3 emissions. However, a company with “net-zero emissions” that omits scope 3 emissions could create a false sense of progress and still be “contributing massively to climate change,” Holzman said.
If every company in the world disclosed their scope 1 and 2 emissions and committed to a net-zero emissions goal by 2050 or sooner, the inclusion of scope 3 emissions would not be nearly as important. That is not the case today. If companies want to make real climate progress, they need to take responsibility for scope 3 emissions and provide customers with a more transparent overview of their total emissions, Holzman said.
What about scope 1 and 2 emissions?
Scope 1 and scope 2 emissions are the most common GHG emissions that companies disclose. These involve the direct GHG emissions from sources owned or controlled by a company (scope 1) and the indirect emissions related to the purchase of electricity, steam, heating and cooling for a company (scope 2), according to the EPA.
Example time
Picture this. Your company is a vehicle manufacturer. Depending on suppliers and contracts, your scope 1 and 2 emissions might include emissions from:
- Manufacturing the vehicles.
- Utilities purchased for manufacturing and running your buildings.
- Company-owned vehicles.
- Other direct company activities.
Your scope 3 emissions include indirect emissions that happen during upstream and downstream activities such as:
- Warehousing and distribution.
- Employee travel and commuting.
- Waste disposal.
- Wastewater treatment.
- Purchased materials.
- Shipping materials from suppliers.
- Shipping finished products to customers.
These could all be examples of scope 3 emissions provided that your company does not own or operate any of the activities listed.
For a company that outsources many aspects of its operations and supply chain activities, scope 3 emissions could easily account for the majority of the company’s GHG emissions.
Where things are headed
Right now few of the largest GHG-emitting companies include their scope 3 emissions, and some companies are especially reluctant to get involved in climate action.
Though this is a challenge, the road to science-based emissions targets that include scope 1, 2 and 3 emissions might not be as long as you think.
As major global corporations set ambitious emissions targets and climate goals, they are also looking at their supply chains. Some are evaluating their suppliers, shippers and warehousing providers on their sustainability efforts. If those large companies include scope 3 emissions in their goals, companies in every part of their supply chains will be roped into climate action. Or resistant companies might lose business.
“When you’re moving, others have to move with you if they want to stay in business,” Scott Sureddin, CEO at DHL Supply Chain in North America, said in an interview with FreightWaves.
Sureddin was referencing Deutsche Post DHL Group’s commitment to ensure that its suppliers understand and adhere to its new sustainability goals recently announced in an extensive sustainability road map.
The bottom line: Scope 3 emissions matter, and companies of all sizes should include them in emission-reduction goals and calculations to better address climate change.
Click here for more FreightWaves articles by Alyssa Sporrer.
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