Scope 3 emissions refer to indirect emissions that result from the activities of an organization, but which occur outside of its immediate control, such as emissions from the supply chain, business travel, and product use. Scope 3 emissions reporting is a significant challenge for organizations, as it involves complex data collection and analysis, as well as engaging with stakeholders outside of the organization’s immediate control. That being said, it is common knowledge that unfortunately, many companies simply make these figures up in the absence of any meaningful data.
Complexity of data collection
One of the primary challenges of Scope 3 emissions reporting is the complexity of data collection and analysis. Organizations often have limited visibility into the emissions generated by their suppliers, customers, and other stakeholders. This lack of data makes it difficult for organizations to accurately quantify their Scope 3 emissions and can result in incomplete or inaccurate reporting. To address this challenge, organizations must develop effective data collection and analysis processes that involve engaging with suppliers, customers, and other stakeholders to gather the necessary information.
Lack of standardized methodologies for calculation
Another challenge of Scope 3 emissions reporting is the lack of standardized methodologies for calculating and reporting emissions. There are currently no universally accepted standards for Scope 3 emissions reporting, which can lead to inconsistent and incomplete reporting across organizations. To address this challenge, organizations must work collaboratively with stakeholders and industry associations to develop standardized methodologies for calculating and reporting Scope 3 emissions.
Challenge of engaging stakeholders
Engaging with stakeholders outside of the organization’s immediate control is also a significant challenge in Scope 3 emissions reporting. Organizations must work with suppliers, customers, and other stakeholders to gather the necessary data and engage them in sustainability efforts. This can be challenging, as stakeholders may have different priorities and goals than the reporting organization. Organizations must develop effective communication and engagement strategies to build relationships and collaborate with stakeholders.
Costly and resource-intensive
Scope 3 emissions reporting can be costly and resource-intensive. Collecting and analyzing data from a wider range of sources in the value chain, engaging with stakeholders, and implementing sustainability initiatives can require significant investment of time, money, and resources. This can be a significant challenge for organizations, particularly small and medium-sized enterprises, that may lack the resources to invest in sustainability reporting. The costs associated with reporting on Scope 3 emissions can vary depending on the size and complexity of the organization, the industry sector, and the availability of data.
Company examples
As previously stated, reporting on Scope 3 emissions can be challenging for many companies, as it requires collecting data from a range of suppliers and partners, as well as making estimates and assumptions about emissions that occur outside of a company’s direct control. Here are some companies that have faced challenges in reporting on their Scope 3 emissions:
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Walmart: Walmart has struggled to collect data on emissions from its supply chain, which accounts for a significant portion of the company’s overall emissions. The company has set a goal to eliminate 1 billion metric tons of greenhouse gas emissions from its supply chain by 2030, but achieving this goal will require significant collaboration with suppliers and partners. See our Walmart ESG report.
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Apple: Apple has faced criticism for not reporting on Scope 3 emissions related to the use of its products. The company has argued that it is difficult to estimate these emissions accurately, as they depend on how customers use and dispose of their devices. See our Apple ESG report.
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Amazon: Amazon has faced criticism for not reporting on Scope 3 emissions related to the use of its cloud computing services. The company has argued that it is difficult to estimate these emissions accurately, as they depend on how customers use and manage their data. See our Amazon ESG report. See our Amazon ESG report.
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Chevron: Chevron has faced criticism for not reporting on Scope 3 emissions related to the use of its products, particularly gasoline and diesel fuel. The company has argued that it is difficult to estimate these emissions accurately, as they depend on how customers use and maintain their vehicles. See our Chevron ESG report.
These are just a few examples of companies that have faced challenges in reporting on their Scope 3 emissions. However, many companies are working to improve their reporting and reduce their overall carbon footprint by collaborating with suppliers, investing in renewable energy, and promoting energy efficiency throughout their value chains.
Solving the Scope 3 emissions reporting challenge
This all adds up to a fundamental data gap challenge in Scope 3 emissions data. The data gap problem for Scope 3 emissions arises because these emissions occur outside of a company’s direct control and often involve multiple actors in the value chain, making it difficult to obtain accurate and comprehensive data.
So what can be done to solve the Scope 3 emissions data gap problem?
Establish a clear Scope 3 emissions accounting methodology
Develop a standardized methodology for accounting for Scope 3 emissions that is aligned with international standards and guidelines such as the GHG Protocol. This will ensure consistency and comparability in reporting across industries.
Identify priority Scope 3 emissions sources
Identify and prioritize the most significant Scope 3 emissions sources by using data and analysis to determine the most material and impactful sources of emissions in your value chain. This can help to focus efforts and resources on the most critical areas.
Engage with suppliers and partners
Engage with suppliers and partners in your value chain to encourage them to report on their emissions and work collaboratively to reduce emissions. This can involve developing partnerships and sharing best practices to drive emissions reductions.
Use technology solutions
Use technology solutions such as supply chain mapping tools, data analytics, and machine learning to identify emissions hotspots and gaps in data. This is an exciting area that Permutable is currently working on, by using our work in carbon emission predictive modelling using machine learning to more accurately predict Scope 3 emissions where data is unavailable. Read more about our work in this area here and get in touch to be a BETA user of our carbon emissions dashboard here.
Set ambitious emissions reduction targets
Set ambitious emissions reduction targets for Scope 3 emissions and regularly monitor progress towards these targets. This can help to drive action and accountability across the value chain and encourage suppliers and partners to take action to reduce emissions.
Reporting Scope 3 emissions is a significant challenge for organizations, as it involves complex data collection and analysis, engaging with stakeholders outside of the organization’s immediate control, and developing standardized methodologies for reporting. However, addressing these challenges is critical for organizations to effectively manage their sustainability impacts and achieve their sustainability goals. By developing effective data collection and analysis processes, engaging with stakeholders, and collaborating with industry associations, organizations can overcome these challenges and successfully report their Scope 3 emissions. Looking for more information on emissions reporting? Don’t forget to read our guide to understanding scope 4 emissions here.
