Demystifying the Maze: A Breakdown of Scope 3, Category 1 Emissions

Understanding where your true emissions footprint lies is key in the intricate labyrinth of climate action. While direct emissions (Scope 1) and energy-related ones (Scope 2) hold the spotlight, the hidden villain often lurks in the shadows: Scope 3 emissions. And within this enigmatic realm, Category 1: Purchased Goods and Services reigns supreme, dwarfing your operations' combined impact and electricity use (World Resources Institute, 2023). Today, we deeply dive into this crucial category, revealing its intricacies and exploring strategies to tame its beastly impact.

What are Scope 3, Category 1 Emissions?

Imagine the colossal chain reaction triggered by your cup of morning coffee. From cultivating the beans to brewing the final cup, emissions are generated at every step – emissions you're indirectly responsible for. Scope 3, Category 1 captures these upstream emissions embedded in the goods and services you purchase. This category includes all upstream (i.e., cradle-to-gate) emissions from producing products purchased or acquired by the reporting company in the reporting year. Products include goods (tangible products) and services (intangible products). Cradle-to-gate emissions include all emissions that occur in the life cycle of purchased products, up to the point of receipt by the reporting company (excluding emissions from sources that are owned or controlled by the reporting company) (Greenhouse Gas Protocol, 2022). It encompasses everything from the raw materials in your laptop to the transportation your deliveries take (CDP, 2023).

Industry Giants and Hidden Emissions

The invisible footprint of purchased goods and services looms large across industries. For manufacturers, these emissions can comprise over 80% of their total footprint (GHG Protocol, 2022). The paper and IT services they rely on in the finance sector contribute significantly. (CDP, 2023). Even seemingly service-oriented sectors like healthcare, and medical equipment, rack up considerable emissions (World Business Council for Sustainable Development, 2020). 

Why Does Accounting for Category 1 Matter?

Ignoring Scope 3, Category 1 emissions is akin to painting a rosy picture with half the canvas covered. By failing to account for them, you underestimate your true climate impact and risk jeopardizing your sustainability goals (WBCSD, 2020). These emissions contribute substantially to global warming, and tackling them head-on is crucial for a truly responsible and impactful climate strategy (IPCC, 2022). 

By unearthing the truth of your Category 1 emissions, you unlock the power to:

• Unveil the full picture: Analyze your supply chain emissions. They are 70-90 % of your total impact!
• Embrace responsible procurement: Choose sustainable suppliers, products, and services. It's a powerful lever for reducing hidden emissions.
• Align with the global effort: Ignoring Scope 3, Category 1 emissions puts you out of step with the fight against climate change.

By acknowledging and tackling this hidden giant, you unlock innovation, collaboration, and responsible leadership in the race for a sustainable future.

Measuring Category 1 Emissions

Measuring Category 1, Scope 3 emissions requires careful attention to detail, whether you're following the Greenhouse Gas Protocol (GHG Protocol) or the International Organization for Standardization (ISO) standards. Here's a breakdown of the main approaches:

GHG Protocol

• Supplier Engagement: Collaborate with suppliers to collect their emissions data directly for goods and services you purchase. This offers the most accurate information but requires strong supplier relationships.
• Industry Average Data: Utilize industry-specific averages developed by organizations like CDP or WBCSD when supplier data is unavailable. This offers a faster approach but may need to be more precise.
• Spend-Based Methods: Estimate emissions based on the monetary value of your purchases, using relevant emission factors specific to the purchased goods and services. This is a cost-effective method but potentially less accurate than direct data collection.

ISO 14064

• Activity Data: Multiply activity data (e.g., quantity of materials purchased) by relevant emission factors for the specific goods and services. This requires detailed activity data and accurate emission factors.
• Input-Output Analysis (IOA): Utilize economic models to estimate emissions indirectly based on your industry and financial transactions. This can be complex but potentially provides more comprehensive data. 

Analyzing and Setting Targets for Reducing Category 1 Emissions

When analyzing Category 1, Scope 3 emissions and setting targets for value chain sustainability, you can delve into several key areas such as mapping your supply chain by using metrics such as absolute emissions from each good or service purchased, and intensity as per unit good or service purchased or monthly and seasonal changes in the emissions from each good and service purchased. 

• Categorize your purchases: Group your purchases by category (e.g., raw materials, IT services) and emissions ranking to prioritize areas for improvement. 
• Identify your key suppliers: Analyze your purchasing data to pinpoint the suppliers responsible for the majority of your Category 1 emissions.
• Understand their processes: Research your suppliers' production processes, materials used, and energy consumption to identify specific emission hotspots.

Set internal science-based targets to reduce Scope 3, Category 1 emissions by supplier engagement and other means that align your reduction goals with the Science Based Targets Initiative (SBTi) to ensure they are ambitious and contribute to global climate goals. 

Demystifying your hidden footprint requires a deep dive into Category 1 emissions. Map your supply chain landscape using multiple metrics: absolute emissions per good or service, emission intensity per unit, and even temporal trends exposing seasonality or fluctuations. Categorize your purchases by type and emission impact, making it easier to prioritize high-impact areas. Identify key suppliers whose emissions loom large, then decipher their processes to pinpoint specific hotspots. Finally, set ambitious, science-based targets aligned with the Science Based Targets Initiative (SBTi). Engaging your suppliers and implementing targeted reduction strategies will help you tame the category 1 beast and unlock value chain sustainability. 

Taming the Category 1 Beast: A Toolbox for Reduction

The battle against Category 1 emissions demands innovation and collaboration. Let's explore diverse strategies companies and governments can wield to conquer this hidden giant:

Supplier Collaboration

• Engagement and Knowledge Sharing: Partner with key suppliers to identify emission hotspots and co-develop reduction strategies.
• Incentivize Sustainability: Offer financial incentives or preferential contracts to suppliers who invest in emission reduction initiatives.
• Technology Transfer: Share your sustainability expertise and resources with suppliers, helping them adopt better practices and technologies.

Sustainable Procurement

• Life Cycle Assessment (LCA): Analyze the full environmental impact of purchased goods and services, choosing options with lower embodied emissions.
• Prefer Sustainable Sources: Prioritize suppliers with strong sustainability commitments and certifications like ISO 14001.
• Circular Economy Strategies: Explore opportunities for reuse, repair, and recycling within your supply chain, reducing reliance on virgin materials.

Inspiring Examples

• Honda Motors: Partnering with suppliers to improve energy efficiency and switch to renewable energy sources, achieving a 9% reduction in Category 1 emissions between 2018 and 2022 (Honda Environmental Report 2022).
• Unilever: Investing in sustainable sourcing platforms like "Source to Shelf" and setting ambitious targets to reduce Category 1 emissions by 50% by 2030 (Unilever Sustainable Living Plan 2023).
• Indian Government's Jal Jeevan Mission: Providing clean tap water to rural communities, reducing the need for bottled water and its associated emissions by an estimated 27 million tonnes of CO2 equivalent per year (Jal Jeevan Mission website).

Beyond Reduction: Innovation and Advocacy

• Support the development and adoption of industry-specific emission factors and accounting methodologies for better measurement and transparency.
• Advocate for government policies and regulations that incentivize sustainable practices and carbon neutrality throughout supply chains.
• Invest in research and development of innovative technologies and solutions that can revolutionize emission reduction strategies across various sectors.

Remember, reducing Category 1 emissions is a marathon, not a sprint. By combining these strategies, fostering collaboration, and embracing continuous improvement, businesses and governments can become champions in taming the Category 1 beast, paving the way for a sustainable future.

StepChange empowers you to see through your blind spots and unlock real sustainability beyond your walls. Our data-driven platform unveils all the emission hotspots in your supply chain by calculating your Scope 3 emissions across categories. StepChange’s ESG Software helps you pinpoint emission hotspots, prioritize actions, and collaborate with suppliers to drive reductions through your entire value chain. With ESG Software, you can set ambitious, science-based targets that showcase your climate leadership attract conscious consumers and investors, and analyze your baseline to start improving!