GHG Protocol Scope 3 Standard: a framework for sustainable value chain management
Scope 1 and scope 2 reporting has become commonplace: 94% of the responding companies in the Global 500 now report emissions in the former category, and 93% in the latter. Scope 3 reporting, on the other hand, is incomplete and inconsistent: only 72% of the Global 500 current report any scope 3 emissions. But that’s about to change. The GHG Protocol Scope 3 Standard has just been published, which clearly defines 15 categories of scope 3 emissions and provides detailed guidance on how to account for and report those emissions.
Companies that aim to be leaders in GHG management will be expected to make a full accounting of their scope 3 emissions. Stakeholders including investors, customers and environmental groups want to know that companies are effectively managing climate-related risks and opportunities from their full value chain. The release of the GHG Protocol Scope 3 Standard has redefined and raised the bar for defining corporate climate leadership.
We expect companies will start reporting scope 3 emissions more completely and consistently to meet a variety of business goals, such as managing risks and opportunities, identifying and reducing impact (both financial and environmental), setting targets and tracking performance, engaging suppliers, and enhancing reputation and stakeholder information through comprehensive public reporting. Some examples of companies using scope 3 data to manage risks and opportunities include substituting GHG-intensive raw materials in purchased goods, developing lighter packaging in sold goods, achieving greater efficiencies in the design of sold products, and developing new low-carbon product offerings.
Ford Motor Company, a global vehicle manufacturer, identified multiple business objectives for measuring its scope 3 emissions, including mitigating its climate-related risks in the supply chain and identifying opportunities for efficiency improvements. Ford determined that it could best manage GHG emissions through direct supplier engagement and collaboration. As a result, Ford reached out to 128 of its key suppliers in 2011 – representing nearly 60% of Ford’s $65 billion in annual purchases – and requested the suppliers’ scope 1 and scope 2 emissions data, allocated to Ford’s purchases, as well as information about the suppliers’ corporate climate strategy; 86% of the suppliers responded.
Kraft Foods, a global food products company, developed a complete scope 3 inventory to understand and evaluate its value chain GHG emissions. In the first year of scope 3 reporting, Kraft Foods used industry-average life cycle inventory data from various public and commercial sources to calculate scope 3 emissions. The company found that scope 3 emissions comprise more than 90% of the company’s combined scope 1, scope 2, and scope 3 emissions. Within scope 3, Kraft Foods found that emissions from category 1 (purchased goods and services), including raw materials and its agricultural supply chain, comprised 70% of its total scope 3 emissions. Kraft Foods plans to continuously improve the quality of its GHG inventory. The company’s experience highlights the value of using secondary data to identify where to prioritize GHG reduction efforts and target opportunities to collaborate with suppliers in future years to better measure progress and achieve GHG reductions.
Pankaj Bhatia Director, GHG Protocol World Resources Institute
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