What are Scope 3 Emissions?
Scope 3 emissions are indirect GHG emissions that occur in a company’s value chain, encompassing both upstream and downstream activities. Unlike Scope 1 and Scope 2 emissions, which are directly controlled by the company (such as emissions from owned facilities or purchased energy), Scope 3 emissions arise from sources not owned or controlled by the organization but are influenced by its activities. This includes emissions from suppliers, product use, and end-of-life disposal.
According to the Greenhouse Gas Protocol, Scope 3 emissions typically represent the largest portion of an organization's total GHG emissions. They include a variety of categories—15 in total—each addressing different aspects of a company's operations and supply chain. Companies are encouraged to report on relevant categories to gain a comprehensive understanding of their environmental impact and identify opportunities for reduction. This blog delves into Scope 3, Category 10 emissions:
Scope 3, Category 10: Purchased Goods and Services
Scope 3 Category 10 emissions refer to the greenhouse gas emissions generated when third parties process sold intermediate products after they have been sold by the reporting organization. These intermediate products require further processing before they can be integrated into final products. This is further explained with examples in three key industries that are affected by these the most.
Key Industries Affected by Scope 3 Category 10 Emissions:
Scope 3 Category 10 emissions, stemming from purchased goods and services, are a critical component of a company's overall carbon footprint. This category encompasses emissions associated with the entire supply chain, from raw material extraction to product delivery. Let's explore this concept in detail within three key industries:
Chemicals Manufacturing:
In 2021, according to a report by McKinsey, the chemical’s industry contributed to ~2% of total emissions. Companies in this sector often sell intermediate chemicals that require further processing before they can be used in final products.
For a chemical manufacturer producing polymer resins, it’ll sell these resins to companies that manufacture plastic products, such as containers or automotive parts. Once sold, these resins undergo various processing stages, including heating, molding, and finishing. The emissions generated during these processes—stemming from energy consumption and raw material transformations—are categorized as Scope 3 Category 10 emissions for the original chemical manufacturer. This means that even though the chemical company does not directly control the processing activities, it must account for the associated GHG emissions.
Given that the chemicals sector is a significant contributor to global emissions, understanding and managing these indirect emissions is essential for companies aiming to set ambitious sustainability targets.
Metals and Mining:
The metals and mining industry also faces substantial Scope 3 Category 10 emissions due to the extensive processing required for raw materials before they reach consumers.
Consider a company that mines bauxite ore to produce aluminum. After extraction, the bauxite undergoes a complex refining process to create aluminum oxide, which is then smelted into aluminum metal. When this aluminum is sold to manufacturers who produce items like beverage cans or automotive parts, the emissions generated during the smelting and fabrication processes fall under Scope 3 Category 10 for the mining company.
The metals and mining sector is characterized by energy-intensive processes that contribute significantly to GHG emissions. As such, companies in this industry need to closely monitor their supply chains and collaborate with downstream processors to reduce their overall carbon footprint.
Textiles and Apparel:
The textiles and apparel industry is particularly affected by Scope 3 Category 10 emissions due to its complex supply chain and reliance on various intermediate products.
A garment manufacturer sources raw materials like cotton fabric from textile mills. Once purchased, this fabric undergoes additional processing—such as dyeing, cutting, and sewing—before it becomes finished clothing items sold in retail stores. The emissions generated during these processing stages are classified as Scope 3 Category 10 emissions for both the textile mill and the garment manufacturer.
In fact, studies show that approximately 96% of total emissions in the fashion industry stem from Scope 3, with significant contributions coming from processing activities. This highlights the critical need for brands to engage with their suppliers and implement sustainable practices throughout their value chains.
Addressing Scope 3 Category 10 Emissions in These Industries
To address Scope 3 Category 10 emissions in these industries, companies can implement a range of strategies, including:
Supplier Engagement: Collaborate with suppliers to encourage sustainable practices and reduce their emissions.
Product Design: Design products that are more energy-efficient and use fewer resources.
Renewable Energy: Increase the use of renewable energy sources to power manufacturing processes and facilities.
Efficient Transportation: Optimize transportation routes and modes to reduce emissions.
Circular Economy: Adopt circular economy principles to reduce waste and promote resource efficiency.
By understanding the significant role of Scope 3 Category 10 emissions in these industries and taking proactive steps to address them, companies can contribute to a more sustainable future.
Measuring Scope 3 Category 10 Emissions
Measuring Scope 3 emissions can be complex due to the involvement of multiple parties in the supply chain. However, there are several approaches that companies can use:
Site-specific method, which involves determining the amount of fuel and electricity used and the amount of waste generated from processing of sold intermediate products by the third party and applying the appropriate emission factors
Average-data method, which involves estimating emissions for processing of sold intermediate products based on average secondary data, such as average emissions per process or per product.
Companies should choose a calculation method based on their business goals and their ability to collect data from processing of sold intermediate products by third parties. In many cases, collecting primary data from downstream value chain partners may be difficult and that’s where the company can leverage tools like StepChange.
StepChange for your Value Chain
StepChange's ESG Accelerator is designed to address the challenges associated with collecting Scope 3 Category 10 data, particularly in the context of processing sold products. Here’s how the ESG Accelerator effectively supports organizations in overcoming these challenges:
Streamlined Data Collection: One of the primary hurdles in gathering Scope 3 emissions data is the complexity and variability of data sources across the supply chain. The ESG Accelerator simplifies this process by providing:
Automated Data Ingestion: The platform allows for seamless integration with various enterprise systems, enabling organizations to automatically collect and aggregate emissions data from multiple sources. This reduces manual data entry and the associated errors, ensuring a more accurate representation of emissions.
Enhanced Data Quality and Integrity: Ensuring high-quality data is crucial for accurate emissions reporting. StepChange’s ESG Accelerator addresses this need through:
Data Quality Checks: The platform includes features for identifying and flagging inconsistencies or anomalies in the data collected. This proactive approach helps organizations maintain data integrity and reliability, which is essential for credible ESG reporting.
Audit Trail and Version Control: By tracking changes made to data over time, organizations can ensure transparency and accountability in their reporting processes. This feature is particularly important when dealing with complex Scope 3 emissions calculations that involve multiple stakeholders.
Comprehensive Reporting Capabilities: Once data is collected, organizations need robust reporting capabilities to disclose their Scope 3 emissions accurately. The ESG Accelerator supports this through:
Automated Reporting Features: The platform automates the generation of standardized reports that comply with various international and regional ESG reporting standards (such as GRI and TCFD). This not only saves time but also ensures that reports are audit-ready and meet regulatory requirements.
Real-Time Dashboards: With real-time analytics capabilities, organizations can monitor their emissions performance continuously. This allows for timely adjustments in strategies to improve sustainability outcomes.
Benchmarking and Target Setting: To effectively manage Scope 3 emissions, organizations need to set clear targets based on industry benchmarks. The ESG Accelerator assists with:
Benchmarking Tools: Organizations can compare their emissions data against industry standards or peers, helping them understand their performance relative to others in their sector.
Target Setting: The platform and StepChange’s sustainability experts provide guidance to organizations in establishing realistic and science-based targets for reducing their overall emissions over time.
StepChange's ESG Accelerator offers a comprehensive solution to the challenges of collecting Scope 3 Category 10 data by streamlining data collection, enhancing data quality, facilitating supplier engagement, providing robust reporting capabilities, and supporting benchmarking efforts. By leveraging these features, organizations can significantly improve their ability to measure, analyze, and report on their Scope 3 emissions, ultimately driving more sustainable practices throughout their value chains.