Reducing carbon emissions is a big challenge, but it’s also one of the most meaningful actions companies can take for a sustainable future. Measuring your direct emissions (Scope 1) and energy use (Scope 2) might feel straightforward, but figuring out scope 3 emissions, the indirect ones from your supply chain and beyond, can seem complicated.
Don’t worry. This comprehensive guide will explain it step by step so you’ll know exactly how to measure and manage these emissions.
Understanding Scope 3 emissions
What are Scope 3 emissions?
Scope 3 emissions include all the greenhouse gases your business indirectly causes throughout your entire value chain. These are the emissions beyond what your company directly produces (Scope 1) or the energy it uses (Scope 2).
Scope 3 covers things like the materials you buy, how your products are used and thrown away, and activities like business travel, shipping, and even how employees commute to work. For example, a clothing company's scope 3 emissions might include emissions from fabric production, transportation of garments, and customer use (such as washing and drying).
Why are scope 3 emissions important?
Scope 3 emissions often comprise the largest portion of a company’s carbon footprint, sometimes even as much as 90%. Addressing them is key to steering your company towards meaningful climate action.
Beyond environmental benefits, calculating scope 3 emissions can:
- Improve your business’s transparency
- Meet regulatory requirements
- Build trust with sustainably focused customers.
By addressing these emissions, businesses can uncover inefficiencies and identify opportunities to save costs, such as optimising supply chain logistics or reducing waste.
Preparing to measure Scope 3 emissions
Map your value chain
The first step is understanding your value chain. Think of this as listing everything involved in your process, from the materials and services you buy to what happens to your products when customers are done with them. A clear map will help you pinpoint where emissions occur.
- For goods-based businesses: start with a high-level overview of your business operations, then break it down into specific activities, such as procurement, manufacturing, logistics and end-of-life product management.
- For service-based businesses: consider areas like office operations, employee commuting and third-party services.
Identify relevant categories
Scope 3 emissions are divided into 15 categories outlined by the Greenhouse Gas Protocol, the world’s most widely used GHG accounting standard.
These categories cover everything from purchased goods to business travel, upstream energy use and downstream product disposal. Not all of these will apply to your business, so it’s important to focus on what matters most.
For example:
- Retailers: Focus on emissions from suppliers and product use.
- Manufacturers: Prioritise raw material extraction and logistics.
- Service providers: Look at employee commuting and business travel.
Understanding which categories contribute the most to your emissions ensures you target your efforts effectively.
Collect the right data
Now it’s time to collect information. Whenever possible, get data directly from your suppliers or partners. If that’s not available, you can use general estimates like industry averages. Tools like supplier surveys, invoices and emissions databases can help you gather the details you need.
To improve accuracy, engage with suppliers early and provide clear guidelines on the data you need. For example, a supplier questionnaire can help you gather information on energy usage, transportation methods and waste management practices.
Collaboration is key, offering incentives or sharing best practices can motivate your partners to provide better data.
Calculating Scope 3 emissions: A step-by-step process
Step 1: Choose your calculation method
There are typically three main approaches to calculating emissions:
- Spend-based: Uses financial data, like the amount spent on goods or services, to estimate emissions. So if you know how much you spend on raw materials, you can then use industry averages to get a good estimate of the emissions tied to those purchases. This method is quick and works well when detailed activity data isn’t available.
- Activity-based: Relies on specific, measurable data points, such as the number of miles driven, the amount of electricity used or the weight of goods transported. This approach provides more accurate results because it’s based on actual activities rather than financial estimates. For example, tracking the fuel consumption of your delivery trucks will result in more accurate emissions data.
- Hybrid: Combines both spend-based and activity-based data for a more comprehensive approach. This method is especially useful if you have detailed data for some activities but need to use financial estimates for others. So in theory, you might use activity-based data for your transportation emissions and spend-based data for purchased goods where detailed activity data isn’t available.
Choose the method that aligns with your data quality and resources. Many businesses find that a hybrid approach works best.
Step 2: Apply emission factors
Emission factors are what allows you to use activity data to calculate your carbon emissions. For instance, if you know how much fuel your supplier uses, you can multiply that by the relevant emission factor to calculate emissions.
Be sure to use reliable databases, such as the UK’s DEFRA or the U.S. EPA, to find accurate, up-to-date factors. When applying these factors, be sure to consider regional variations and industry-specific details to improve accuracy.
Step 3: Combine and analyse data
Once you’ve calculated your emissions across each of the 15 categories, combine them to get a complete picture of your scope 3 footprint. If you run into any gaps in your data, use conservative estimates and document your assumptions for transparency.
To analyse your data, identify the biggest contributors to your emissions. This insight will help you prioritise reduction efforts and set realistic goals. Visualisation tools, such as dashboards or heatmaps, can make it easier to communicate findings to stakeholders.
Addressing common challenges
Data availability and accuracy
One of the biggest hurdles organisations face is incomplete or low-quality data. When this happens, it’s important to reach out to your suppliers and encourage them to improve their reporting. Providing them with clear tracking templates or incentives can often help bridge the gap.
To overcome accuracy issues, cross-check data from multiple sources and use third-party verification when possible. Building long-term partnerships with suppliers can also lead to more reliable data over time.
Complex supply chains
If your supply chain involves multiple layers, it can be difficult to try and encourage each supplier to change the way they report. In this case, simplify it by focusing on your largest or most impactful suppliers. Encourage collaboration and prioritise transparency to tackle emissions together.
Scope 3: Turning insights into action
Setting targets and reduction strategies
Knowing your organisation’s scope 3 emissions is just the beginning. From here you can use this data to set science-based targets and find opportunities to reduce emissions.
This could look like switching to lower-carbon suppliers, optimising transportation routes or designing more sustainable products. Circular economy principles, like reusing materials or designing for recyclability, can also play a role in reducing emissions.
Reporting and transparency
Include your scope 3 data in sustainability reports to showcase your organisation’s progress. Frameworks like the Carbon Disclosure Project (CDP) can guide you in presenting your results clearly and credibly.
When reporting, include context about your methods, data sources and any assumptions made. This level of transparency builds trust and demonstrates your commitment to sustainability.
The role of SaaS tools in streamlining calculations
Technology can take the headache out of scope 3 measurement. Software platforms like Plan A simplify data collection, automate calculations and give you insights into your emissions hotspots. Look for tools that offer comprehensive reporting and supplier collaboration features to save time and improve accuracy. Features like scenario analysis or benchmarking can also help you identify the most effective reduction strategies. Explore Plan A's software via the interactive demo below:
Key takeaways for businesses: Why measuring scope 3 is worth the effort
Calculating scope 3 emissions might seem daunting, but it’s one of the most impactful steps you can take toward sustainability. You gain vital insight into your carbon footprint by mapping your value chain, focusing on relevant categories and leveraging the right tools. These insights are going to help you meet regulatory requirements, reduce emissions, and strengthen your business’s reputation in a sustainability-focused economy.
By gaining a clear understanding of your value chain, fostering collaboration with suppliers and leveraging the relevant tools, you can drive meaningful progress toward sustainability in your company. Start small, stay consistent and remember that every step toward reducing emissions contributes to a more sustainable future.
Don't hesitate. Schedule a call with Plan A’s experts to learn how our platform can transform your sustainability goals.
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