As we have covered in some of our recent articles – ‘Scope 3 GHG emissions explained’ and ‘4 key steps to starting your Scope 3 emissions reporting journey’ – there is both a significant need as well as a significant challenge in understanding an organization’s value chain (or scope 3) emissions. One of the key challenges is understanding which of the GHG Protocol 15 Scope 3 categories apply to your organization. Of these which are going to be material to your overall Scope 3 emissions footprint. In this article, we focus on one of the most common sources of Scope 3 emissions, which is an organization’s supply chain.
Supplier GHG Emissions Categories
Supplier emissions account for a large proportion of upstream emissions. These often fall into Category 1: Purchased goods and services. However, they can be associated with any of the Categories 1 – 8.
For example, emissions from the transportation of purchased products from a tier-one supplier to a reporting company, in un-owned or controlled vehicles, are accounted for in Category 4: Upstream transportation and distribution. Similarly, emissions related to fuel and energy purchased from suppliers by the reporting company fall under Category 3: Fuel and energy-related activities.
We will focus predominantly on Category 1: Purchased goods and services. This category includes all upstream emissions from the production of products, both goods and services, purchased by the reporting company.
Purchased Goods and Services GHG Emissions Calculation – Methods
There are multiple methods for calculating supplier emissions. These are broadly split into two approaches. Those that require information directly from the supplier and those that use secondary data.
The GHG Protocol defined supplier-specific and hybrid methods. Both involve the collection of data directly from suppliers. The supplier-specific approach generally relies on product level consumption data. On the other hand the hybrid method uses supplier data to calculate scope 1 and 2 emissions. However, it allocates these emissions based on spend and product purchased, for example.
Secondary data can be used to plug gaps where information is not available from the suppliers themselves. Average data and spend-based methods rely solely on secondary data. This also estimates emissions based on industry and material averages.
Benefits and Challenges of the Different Approaches
Engaging with suppliers directly poses a number of challenges to the reporting organization in terms of resource and cost. This is why it is crucial to understand which sources of Scope 3 emissions are material. Therefore we need to understand which represent opportunities for reduction. Even within an organization’s supply chain, deploying different calculation approaches can provide accuracy in categories where emissions are greatest and reduce the resource required in others.
In addition to potentially creating more accurate data, capturing supplier information directly ensures that suppliers can become educated and engaged in the emissions calculation process. It also provides the reporting organization with a means to assist the supplier organization in their own environmental reporting. Additionally, they can collaborate on ways to reduce emissions related to their commercial relationship and beyond.
Average data methods are suited to ensuring the greatest possible coverage of supplier emissions. This means that overall Scope 3 emissions can be reported in short, medium and long-term targets sets. However, if primary supplier data is not also utilized then the reporting organization has very few options for reducing Scope 3 emissions. For example, supplier emissions that are calculated solely on spending associated with purchased goods and services can only be reduced by reducing this spend.
The calculation methods adopted can therefore either improve or constrain an organization’s ability to meet Science-Based Targets or track the correct net-zero pathway.
How Supply Chain Sustainability Software Can Help
In order to ensure a scalable, robust and auditable process for addressing Scope 3 emissions. It is extremely likely that organizations will need the support of a software solution. An offline approach represents a serious resource commitment and significant potential for errors.
Utilizing software for calculating and managing Scope 3 emissions in the supply chain will enable reporting organizations to engage more effectively with larger numbers of suppliers and simplify the process of emissions reporting. Both buyers and suppliers are likely to be tackling this for the first time. In addition, they will need a solution that is both scalable and that can evolve with their needs.
Cority has a suite of software solutions designed to assist organizations in their Scope 3 emissions management. Our Sustainability Software solutions all utilize the maintained Cority GHG emission factor library of over 1 million emission factors to ensure accurate emissions calculation.
Integrated and Customizable Emissions Management
All of our solutions are also integrated to ensure that emissions data can be automatically shared between them. Cority’s Supply Chain Sustainability Software contains customizable GHG emission calculation wizards. You can distribute these to suppliers in a targeted manner, with resulting emissions data automatically included in the reporting organization’s overall scope 1, 2 and 3 footprints for management, target setting and performance tracking.
All emissions data captured in the Cority ecosystem can be assigned to any Scope 3 GHG categories at a data source level. This means that you can assign individual supplier emissions to multiple categories for accurate reporting.
Within our Supply Chain Sustainability Software, you can also categories suppliers to differentiate between production-related products. These include (e.g. materials, components, and parts). In addition, they include non-production-related products (e.g. office furniture, office supplies, IT support). This ensures that you can engage and assess suppliers in a targeted manner in order to collect the most relevant emission-related data in the most appropriate way.
