Key Issues
A second and related reason is that Scope 3 represents the main channel of influence over climate change for many firms, especially in sectors where direct emissions and energy intensity are low. By meeting consumers’ expectations for reduced emissions during use and disposal, and by demanding effective carbon management from their own suppliers, firms are helping to stimulate demand for and supply of low-carbon goods and services throughout the economy.
The issue is not that companies in the Nordic region are unaware of their influence over emissions outside their own operations. On the contrary, 73% of Nordic 260 respondents indicate that their products and services directly help third parties to avoid GHG emissions, compared with 70% for the Global 500. The question, therefore, is how to proceed practically with tracking and quantifying Scope 3 emissions.
The good news here is that improved protocols for Scope 3 reporting are now available. A new Corporate Value Chain (Scope 3) accounting and reporting standard was published under the GHG Protocol in October 2011. The International Organisation for Standardisation (ISO) is also drafting a new standard that will help companies to measure their carbon footprint on a comparable basis.
One practical option for respondents is to work with an external partner who can also help to verify Scope 3 emissions. Verification in general has received more emphasis in CDP this year (see Box), but it is likely to be particularly important in future for Scope 3 given the greater complexity involved.
Another option for companies wishing to improve Scope 3 monitoring would be to join CDP’s Supply Chain programme, through which suppliers respond to the CDP questionnaire and an additional supplier module. This already applies the new GHG Protocol standard and provides a solid basis for measuring upstream Scope 3 emissions. Participating companies have reported response rates as high as 100%, which is testimony to the influence wielded by major customers. They have also found that the process helps to identify ‘carbon hotspots’ in the supply chain, and to find new ways of cooperating with suppliers to reduce waste and emissions.
Figure 16: Total reported emissions by sector, Global 500.
128 256 512 1024 2048 4096
16 32 64
1 2 4 8
It seems unlikely that companies will be formally required to report Scope 3 emissions in the near future. Carbon taxation and emissions trading generally apply to Scopes 1 and 2 only, and it might be legally problematic to hold companies to account for emissions that are not strictly under their control. Nevertheless, Scope 3 is of the greatest relevance for investors, consumers and anyone else with an interest in transparent reporting of GHG emissions. It is precisely in this area that voluntary reporting initiatives may add the most value.
Scope 1 Scope 2 Scope 3
25
Utilities
Telecommunications
Materials
Information technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
million metric tons CO2e (logarithmic scale)
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