Scope 3 is changing the emissions reporting game
It used to be that corporate reporting requirements only applied to direct emissions from owned or controlled sources and indirect emissions from the generation of purchased electricity, steam, heating and cooling — known as Scope 1 and Scope 2. But with the rise of environmental regulation, Scope 3 emissions now factor in reporting, covering all other indirect value chain emissions.
Data on Scope 3 emissions is elusive. It comprises 15 categories of upstream and downstream activities and is 26 times higher than direct Scope 1 and 2 emissions on average. Since it’s not the traditional focus of corporate reporting, it lacks a mature foundation of measurement data to rest on, making it harder to calculate. What’s more, today’s evolving Scope 3 reporting requirements not only demand full value chain insight but measurable decreases in carbon emissions. In short, achieving net zero with Scope 3 management is an increasingly complex undertaking — especially for already busy sustainability teams.
In high-carbon-emitting fields with long, complex value chains — like manufacturing, chemicals and automotive — the task is nothing short of overwhelming. Many industries face specific challenges. For example, when reporting on Category 15 Scope 3 emissions — investments — financial institutions often struggle to gather relevant, granular primary data on financial assets and portfolio companies, forcing them to rely on secondary data based on industry averages or spend-based emission factors.
At the heart of these Scope 3 difficulties is a lack of centralized technology, data methodologies and standardized reporting requirements. While gathering supplier data from a few limited sources or relying on spend-based estimates may have enabled businesses to get by in times of regulatory laxity, the times are changing, and advanced, integrated technology is a new necessity.
