Calculating Scope 1 and 2 emissions has already become a part of everyday business for companies. An increasing number of companies are expanding their calculations to include Scope 3 emissions. The need for emissions calculation has increased, particularly due to stricter legislation and emission reduction targets set by companies. The need for emissions calculation may come as a surprise if, for example, a customer requires its suppliers to set emission reduction targets (SBTi) or if the impact of the CSRD reaches smaller companies beyond the largest ones. So, what should companies calculate and, more specifically, how are Scope 3 emissions determined?
The GHG Protocol standards are the most common approach to calculating emissions at the company level. The GHG Protocol Corporate Accounting and Reporting Standard & Corporate Value Chain (Scope 3) Standard also serve as the basis for calculations in accordance with the CSRD. The GHG Protocol divides emissions into three categories:
- Scope 1: Direct greenhouse gas emissions from the company’s own operations, such as fuel consumption by cars
- Scope 2: Greenhouse gas emissions caused by the company’s purchased energy (electricity, district heating, cooling)
- Scope 3: Indirect greenhouse gas emissions caused by the company’s value chain, divided into upstream and downstream emissions.
What is scope 3?
Scope 3 emissions refer to indirect greenhouse gas emissions generated in a company’s value chain. These emissions are generated both before (upstream) and after (downstream) the company’s own operations. Scope 3 emissions are not generated at the company’s own facilities or other premises, but rather by raw material suppliers or transport companies used as subcontractors, for example.
Scope 3 emissions are divided into 15 categories in accordance with GHG Protocol standards:
- Purchased goods and services
- Production goods
- Indirect emissions related to fuel and energy procurement
- Transportation and distribution (upstream)
- Waste
- Business travel
- Staff commuting between home and work
- Leased assets (upstream)
- Transportation and distribution (downstream)
- Processing of sold products
- Use of sold products
- End of life of sold products
- Leased assets (downstream)
- Franchising operations
- Investments
Many companies have extensive value chains, which means that scope 3 often contains the company’s most significant emission sources. Although the workload is usually greater than in scope 1 and 2 calculation, it is worth the effort, as scope 3 calculations provide a much more reliable and realistic picture of a company’s emissions.
At OpenCO2net, we perform several scope 3 calculations each year. The most common approach is to perform the entire scope 1-3 calculation for a company at once. In many cases, companies have already started with scope 1-2 calculations, and our experts assist them with their first scope 3 calculation to ensure that all relevant emissions and source data is covered. Calculations or calculation templates produced through consulting can be easily transferred to OpenCO2net users for calculations in future years. We have helped several companies with such projects, including Nevel, Heart Hospital, and Turku Energia.
Should scope 3 be included in carbon footprint calculation?
This question occasionally arises among companies, and the answer is quite clear. Scope 3 emissions must be included in carbon footprint calculations when the calculations are performed in accordance with the Greenhouse Gas Protocol standards and the company wishes to refer to this in its communications or other contexts. If a company’s sustainability reporting follows the ESRS E1 standard, scope 3 calculations must be included in the company’s emissions calculations. The standards require all emission sources identified as significant for the company’s operations to be included in the calculation. Only those categories in which the company does not generate emissions or where the amount of emissions can reasonably be assumed to be minimal may be excluded from the calculation.
The VSME standard, designed for smaller companies, requires companies to calculate at least their scope 1 and 2 emissions, which is already a good start for a company’s climate work. However, such information may not be sufficient for financiers or large companies in the supply chain, for example. Therefore, it is advisable to expand your own emissions calculations in the coming years to also cover scope 3 emissions in the value chain. In addition, setting various emission reduction targets, such as SBTi, requires companies to calculate their entire scope 1-3 emissions.
Which data is required for Scope 3 calculations?
Collecting data for Scope 3 calculations can be challenging and laborious. However, it is important to remember that the lack of data is not a valid reason for excluding a category or entire Scope 3 emissions from the calculation. Data collection can be time-consuming, so it is important to first determine the type of data you are looking for and where it can be found. This is where OpenCO2net’s experts can assist your company; we cannot dig through each of the company’s systems, but we can guide your searches and inquiries in the right direction.
In an ideal situation, every company in the value chain would report its own emissions, enabling the entire Scope 3 calculation to be carried out using this so-called primary data. We are still a long way from this ideal, but fortunately, average data and informed assumptions can help. Transport routes can be estimated or assumed, and average emission factors for raw materials can be found in the extensive OpenCO2 emissions database. Finally, it is essential that the company provides a clear report on how the calculation and assumptions were made during the process. We have previously written blogs on where and how to find reliable emission factors and what kind of impact currency-based (spend-based) emission factors have on calculations.
The most important thing is to start
Fortunately, everything does not have to be perfect on the first attempt. Like all other aspects of corporate responsibility, emissions accounting is also a process of continuous improvement. The first comprehensive calculation already provides a good picture of the company’s emissions level. It also reveals which scopes and categories are most relevant to the company in question. If purchased products and services (category 1) are the most significant in the company’s emissions calculation, the next step is to consider how the calculation for this category could be specified further in the coming years.
Although the first carbon footprint calculation is usually the most difficult, the process becomes easier and more precise over time. If emissions calculation is still unfamiliar to you, the easiest way to get started is to outsource the first calculation to an expert. They will identify the sources of emissions, select the correct emission factors, and provide guidance on collecting the necessary data.
If your company already has expertise in calculating its carbon footprint, the tools provided by OpenCO2net and one of Europe’s most comprehensive emissions databases, OpenCO2, can significantly speed up the process. OpenCO2net’s experts also help you combine the correct emission factors with your company’s baseline data, which simplifies the calculation process. This removes any uncertainty about the reliability of the emission factors, as we have reviewed them for you in advance.
The OpenCO2net carbon footprint platform provides all tools necessary for companies’ climate work. We offer access to the OpenCO2 emissions database and standard-based calculators, which will help your company towards climate-friendly operations. We also provide emissions calculations as a consulting service, which is a great way to get started with your first emissions calculation, for example!
