In today's environmentally conscious world, businesses are increasingly focusing on reducing their greenhouse gas (GHG) footprint. But what if the biggest impact isn't always what you see? Scope 3, Category 3 emissions can be a hidden culprit, and understanding them is crucial for a comprehensive sustainability strategy.
What are Scope 3, Category 3 Emissions?
The Greenhouse Gas Protocol (GHG Protocol) is the world's most widely used standard for measuring and managing greenhouse gas emissions. It categorizes emissions into three scopes:
Scope 1: Direct emissions from owned or controlled sources (e.g., fuel combustion in boilers, fugitive emissions from leaks).
Scope 2: Indirect emissions from purchased electricity, heat, or steam.
Scope 3: All other indirect emissions that occur across a company's value chain, both upstream and downstream. Scope 3 emissions are further broken down into 15 categories.
Category 3: Fuel- and Energy-Related Activities Not Included in Scope 1 or Scope 2 focuses specifically on emissions from the use of fuels and energy that are not directly controlled or owned by the reporting company as per the GHG Protocol. This can include:
Upstream emissions of purchased fuels: Extraction, production, and transportation of fuels consumed by the reporting company - mining of coal, refining of gasoline, transmission and distribution of natural gas, production of biofuels, etc
Upstream emissions of purchased electricity: Extraction, production, and transportation of fuels consumed in the generation of electricity, steam, heating, and cooling that is consumed by the reporting company - mining of coal, refining of fuels, extraction of natural gas, etc.
Transmission and distribution (T&D) losses: Generation (upstream activities and combustion) of electricity, steam, heating, and cooling that is consumed (i.e., lost) in a T&D system – reported by the end user
Generation of purchased electricity that is sold to end users: Generation (upstream activities and combustion) of electricity, steam, heating, and cooling that is purchased by the reporting company and sold to end users – reported by utility company or energy retailer
Why Does Accounting for Scope 3, Category 3 Emissions Matter?
Category 3 emissions can be a significant contributor to your overall footprint, often exceeding Scopes 1 and 2 combined. Here's why tracking them is essential:
Transparency and Credibility: A complete picture of your GHG impact builds trust with stakeholders, including investors, customers, and regulators. It demonstrates your commitment to environmental responsibility and allows for transparent reporting on your sustainability efforts.
Improved Decision-Making By identifying areas with the most significant emissions across your value chain, you can prioritize reduction efforts and maximize the impact of your sustainability initiatives. This can lead to cost savings through improved energy efficiency and resource management.
Future-Proofing Your Business As regulations around greenhouse gas emissions become stricter, companies with a strong understanding of their Scope 3 emissions will be better positioned to comply. Additionally, consumers are increasingly demanding sustainable products and services. By taking action to reduce your Category 3 emissions, you can demonstrate your commitment to sustainability and gain a competitive advantage
Measuring Scope 3, Category 3 Emission:
Supplier-specific method:Involves collecting data from fuel providers on upstream emissions (extraction, production and transportation) of fuel consumed by the reporting company
Average-data method: Involves estimating emissions by using secondary (e.g., industry average) emission factors for upstream emissions per unit of consumption (e.g., kg CO2 e/kWh)
The Steps to calculate Scope 3 Category 3 Emissions:
Identify Relevant Activities: This involves pinpointing instances where your company relies on external fuels or energy sources that you don't directly control (e.g., electricity from the grid, transportation fuel used by suppliers).
Gather Activity Data:
Collect data on the quantity of fuel or energy used in these activities. Examples:
Purchased electricity: Annual electricity consumption (kWh) from utility bills.
Employee business travel: Total miles traveled by employees using personal vehicles for work (e.g., from expense reports).
Supplier transportation: Estimated fuel consumption by suppliers to deliver goods (may require collaboration with suppliers).
Select Appropriate Emission Factors: Utilize reliable databases to find emission factors based on the specific fuel/energy type and its source (e.g., emission factor for grid electricity varies by region).
Calculate Emissions as per the Technical Guidance for Calculating Scope 3 Emissions
Toolbox for Reduction: Taming the Category 3 Emissions
Here are some strategies to tackle Category 3 emissions:
Supplier Engagement: Work with suppliers to adopt sustainable practices that lower their emissions.
Renewable Energy Procurement: Shift towards renewable energy sources for electricity and fuel needs.
Process Optimization: Identify and implement efficiency improvements to reduce energy consumption.
StepChange: Your Sustainability Partner
Our ESG software simplifies emission measurement, analysis, and reduction across your entire supply chain. It seamlessly collects data from various sources, giving you a clear picture of your environmental impact.
With insightful dashboards, you can pinpoint areas for improvement and compare your performance to industry leaders. This empowers you to make data-driven decisions, collaborate with suppliers, and achieve real sustainability progress.
Going beyond compliance, tackling Category 3 emissions unlocks innovation, strengthens your brand, and fuels long-term business success. Let StepChange guide you on your sustainability journey. Explore our solutions today!