Reporting Scope 3 emissions: Key frameworks and standards
Reporting Scope 3 emissions: Key frameworks and standards
Published on March 22, 2023 — By Jessica Boekhoff
Scope 3
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More and more purchasers, regulators, investors and consumers are seeking information about companies’ Scope 3 emissions — typically the largest area of most organizations’ carbon impact. This data is key to understanding the carbon footprint of products or services, and assessing climate-related risks.
Companies are stepping up and starting to report and address their Scope 3 emissions. But it can be confusing to understand exactly what needs to be reported and how, given the range of reporting frameworks and the difficulties involved in sourcing data about supply chain emissions.
So what are the key requirements for Scope 3 reporting?
Select a framework, standard or regulation below to see what's required, and get in touch with CarbonChain for help calculating your Scope 3 emissions for carbon reporting.
GHG Protocol
The widely accepted GHG accounting and reporting international standard, which underpins many of the other frameworks and standards listed on this page.
The key elements of the GHG Protocol’s reporting requirements are as follows:
- Report all GHG emissions in metric tons of carbon dioxide equivalent (CO2e), with all gases itemized in the calculation (if the breakdown is available to the reporting company)
- Report Scope 3 GHG emissions intensity metrics (all Scope 3 activities)
- Report base year selection, with rationale
- Report any reductions in absolute emissions and emissions intensity since the base year
- Adhere to 5 guiding principles: relevance, completeness (including justifying any exclusions), consistency, transparency and accuracy
Exclusions
For corporate carbon accounting, an emissions source can be excluded if the source is deemed "not relevant" typically using the 5 relevance criteria of: materiality; influence; stakeholder; risk; outsourcing.
For product carbon accounting, attributable emissions sources can be excluded if ALL of the following are true: data gap exists because primary or secondary data cannot be collected; extrapolated and proxy data cannot be determined to fill the gap; an estimation determines that the data is insignificant.
Recap: What is Scope 3?
The three scopes of emissions in an organisation's carbon footprint are:
Scope 1 = direct GHG emissions from owned or controlled sources
Scope 2 = indirect emissions, from the generation of purchased electricity, heat and steam
Scope 3 = all other indirect emissions in the value chain (upstream and downstream), including: purchased goods & services; capital goods; fuel & energy-related activities; transportation & distribution; leased assets; employee commuting; business travel; waste from operations; processing & use of products, investments & franchises.
GRI (Global Reporting Initiative)
A key standard setter for sustainability development reporting (including economic, environmental and social impacts). A common format for companies’ self-published annual sustainability reports.
The GRI’s requirements for reporting GHG emissions are based on the GHG Protocol. This means:
- Companies should report indirect (Scope 3) GHG emissions, both upstream and downstream;
- Organizations extracting and producing oil, gas and coal are expected to report emissions from the combustion of their productions, and take actions to reduce those emissions;
- Companies must provide reasons for excluding any Scope 3 data, and are expected to only exclude such data in exceptional cases. The GRI accepts the following reasons for exclusion:
- Legal prohibitions;
- Confidentiality constraints;
- Information unavailable / incomplete (in this case, the organization must specify exactly which entities, sites, geographic locations have data that is missing and cannot be reported).
Upcoming regulations
The frameworks and standards listed above are used by companies who voluntarily disclose their emissions. In some cases, mandatory disclosure regulations also include Scope 3. For example:
EU CSRD (Corporate Sustainability Reporting Directive)
A major update to the 2014 NFRD (Non-Financial Reporting Directive).
The EU CSRD will apply to over 50,0000 companies, and will phase in from 2024 (starting with large public-interest companies). Disclosure of Scope 3 GHG emissions is required, where relevant (the definition of relevance and significant categories is yet to be defined but it aims to align with the GHG Protocol). Reported information will need to be audited.
US Federal Suppliers Climate Risks and Resilience Rule
A new climate disclosure and target-setting rule for suppliers to the world’s biggest buyer.
Major US Federal contractors will need to publicly disclose Scope 3 GHG emissions through CDP in line with the GHG Protocol, and set science-based targets (including Scope 3 emissions if they count for more than 40% of the organization’s total emissions). Learn more.
US Securities and Exchange Commission (SEC) climate disclosure rules
Proposed new disclosure requirements for publicly listed companies in the US.
Under the proposed new SEC rule, public companies will have to report their climate-related risks, emissions, and net-zero transition plans, in detail, in line with TCFD recommendations, from 2025.