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With new regulations and shareholder pressure, businesses can no longer afford to ignore this crucial part of their carbon footprint: Scope 3 emissions. It is incredibly important to understand the sources and impact of these emissions.
Scope 3 emissions play a pivotal role in the broader landscape of carbon emissions. Carbon emissions are the release of CO2 (carbon dioxide) and other carbon compounds into the atmosphere. CO2 occurs naturally in the air and atmosphere, but it is also released through burning fossil fuels. Currently, we are emitting carbon at an unprecedented rate, which is accelerating climate change. As we emit more and more CO2, we are trapping heat energy which is warming the planet. To help the environment, we must reduce our carbon emissions, and businesses play a key role in this effort. To lower overall emissions, businesses must reduce their own. What’s the first step in this process? Tracking their current emissions.
Tracking emissions is not a choice for many companies. In Europe, under the Corporate Sustainability Reporting Directive nearly 50,000 EU companies are required to produce sustainability reports. California's Climate Accountability Package requires reporting from companies doing business in California. In some cases however, other forces compel companies to track emissions. Many companies feel pressure from environmental groups or corporate customers. Ultimately, tracking emissions helps businesses set sustainability goals and effectively measure progress.
Company emissions can be categorized into Scope 1, Scope 2, and Scope 3 emissions. In order to produce accurate reports, it is important to know the difference between scopes.
Scope 3 emissions account for 90% of Coca-cola’s carbon footprint. This is one of many cases where Scope 3 emissions make up the vast majority of a company's total emissions. They are crucial to account for but, since Scope 3 includes many categories, it can be difficult to calculate. Here are categories as defined by the EPA:
Different industries will have a different distribution of emissions by scope. In the oil and gas sector, there are significant Scope 1 and Scope 2 emissions from manufacturing petroleum products. There are also a lot of Scope 3 emissions from the usage of these products. In contrast, the financial services industry primarily focuses on Scope 3 emissions related to financing, lending, and investments.
To better understand how these emissions break down within Scope 3, let’s zoom into an example. A technology company known for producing smartphones and other tech devices could have the following Scope 3 emissions:
In recent years, Scope 3 emissions have gained increased attention due to evolving regulatory standards and increasing pressure from customers, investors, and organizations. B Corp, one of the most well-known sustainability certifications, requires a report of the company’s Scope 1, 2, and 3 emissions fully in line with the GHG Protocol. In 2027, California’s senate bill 253 will mandate large companies doing business in California to report their scope 3 data from 2026. In recent years, regulations have tightened and consumer expectations have evolved. Climate conscious customers have been pushing companies to be more transparent regarding their environmental impact, which includes reporting Scope 3 emissions. There are long term financial risks associated with neglecting climate goals which is why many investors are also demanding thorough reporting to inform their decision making.
Although calculating Scope 3 emissions may seem complex, tools like Aclymate make it easy. Aclymate's supply chain reporting feature allows companies to invite vendors to share information about their processes. The tool efficiently processes this data, producing a report with precise, spend-based Scope 3 emissions while staying aligned with industry standards like the GHG Protocol. By comparing vendor emissions, businesses can make climate focused decisions about which vendors to prioritize.
Ready to simplify Scope 3 reporting? Start your journey with Aclymate today.