In today’s environmentally-conscious landscape, Consumer Packaged Goods (CPG) businesses are increasingly prioritizing their carbon footprint and sustainability initiatives. Central to this endeavor is the comprehensive understanding and management of Scope 3 emissions, which can contribute up to about 95% of a company’s overall emissions. Building upon established frameworks and practical insights, this guide combines key principles from Scope 3 Inventory Guidance and additional resources to offer organizations a holistic approach to mitigating their environmental impact while optimizing sustainability efforts.
Understanding Scope 3 Emissions
Scope 3 emissions encompass the indirect greenhouse gas emissions generated throughout a company’s value chain, extending beyond its immediate operational boundaries. While Scope 1 and Scope 2 emissions focus on direct and indirect emissions from owned or controlled sources, Scope 3 emissions capture a broader spectrum of environmental impact arising from activities not directly controlled by the reporting organization. These include emissions from the extraction and production of purchased materials and fuels, as well as transportation, distribution, use of sold products, and disposal of waste generated in supply chain operations. Within supply chains, Scope 3 emissions often constitute the largest portion of a company’s carbon footprint, dwarfing the emissions from Scopes 1 and 2. This is because supply chains are complex networks involving numerous upstream and downstream activities, each contributing to emissions.
(Scope 3) Accounting
and Reporting Standard, page 5.
Scope 3 emissions are grouped into 15 distinct categories, each capturing different aspects of a company’s value chain, from upstream activities such as procurement and transportation to downstream activities like product use and end-of-life treatment. Understanding these categories is crucial for organizations seeking to comprehensively assess and address their environmental impact.
Below is a detailed tabulation of the 15 Scope 3 emissions categories, providing clarity on the various sources that contribute to a company’s indirect greenhouse gas emissions.
| Category | Description |
| UPSTREAM | |
| Category 1 | Purchased goods and services |
| Category 2 | Capital goods |
| Category 3 | Fuel- and energy-related activities (not included in Scope 1 or Scope 2) |
| Category 4 | Upstream transportation and distribution |
| Category 5 | Waste generated in operations |
| Category 6 | Business travel |
| Category 7 | Employee community |
| Category 8 | Upstream leased assets |
| DOWNSTREAM | |
| Category 9 | Downstream transportation and distribution |
| Category 10 | Processing of sold products |
| Category 11 | Use of sold products |
| Category 12 | End-of-life treatment of sold products |
| Category 13 | Downstream leased assets |
| Category 14 | Franchises |
| Category 15 | Investments |
Scope 3 Calculation: Best Practices
Accurate quantification of Scope 3 emissions necessitates adherence to standardized methodologies and continuous improvement. By following established guidelines and practical recommendations, organizations can streamline their emission calculation processes and enhance data accuracy over time.
Key Steps in Scope 3 Calculation
Determine Relevant Scope 3 Categories: Conduct a thorough assessment to identify Scope 3 emission categories relevant to the organization based on size, influence, risk, and stakeholder expectations. Given that Category 1 typically represents the largest area of Scope 3 emissions for CPG companies, prioritize activities such as purchased goods and services, including raw materials and packaging materials, transportation and distribution, and end-of-life disposal or recycling of products. Collaboration with internal stakeholders and reference to standardized protocols facilitate this determination process.
Estimate GHG Emissions: Employ appropriate calculation methods such as spend-based carbon accounting or activity-based (average data) to estimate emissions for relevant Scope 3 categories. Utilize available emission factors and calculation tools to ensure consistency and accuracy in estimation, considering factors such as fuel-based, distance-based, or spend-based calculations.
Continuous Improvement and Expansion: Continuously refine data sources and calculation methodologies to improve the accuracy and comprehensiveness of Scope 3 emissions estimation. Prioritize categories with significant emissions impact and expand reporting coverage as data availability improves over time.
Supply Chain Integration and Guidance
Given that Scope 3 emissions often originate from supply chain activities, effective engagement with suppliers is paramount. Leveraging supply chain guidance and sector-specific engagement strategies enables organizations to foster collaborative relationships with suppliers and drive emission reduction initiatives throughout the value chain. This can be achieved through scheduled surveys with suppliers to facilitate the collection of their data, commuting habits, and any other information that may help determine their carbon footprint.
Utilization of Emission Factors
Accurate estimation of Scope 3 emissions for CPG organizations relies on reliable emission factors specific to each emission category. By leveraging our life cycle assessment tool, organizations can derive precise estimates of their environmental impact across diverse Scope 3 categories. For example, when estimating emissions associated with the production of packaging materials our life cycle assessment tool enables us to consider factors such as raw material extraction, manufacturing processes, transportation, and end-of-life disposal/recycling. By incorporating detailed data and robust emission factors into our calculations, we can provide CPG organizations with accurate insights into their environmental footprint and identify opportunities for emissions reduction and sustainability improvements.
Conclusion: Driving Sustainable Change
By integrating insights from Scope 3 Inventory Guidance and supplementary resources, organizations can navigate the complexities of Scope 3 emissions management with greater confidence and accuracy.. Prioritizing Scope 3 emissions is particularly critical for Consumer Packaged Goods (CPG) companies, given that Scope 3 typically represents the largest segment by far of emissions in the CPG sector.
For suppliers, addressing Scope 3 emissions can lead to enhanced collaboration, cost savings, and operational efficiency, while also positioning them as preferred partners for sustainability-minded brands. Brands benefit from prioritizing Scope 3 emissions by improving their environmental footprint, enhancing brand reputation, and meeting the increasing demands of environmentally conscious consumers. Retailers can gain a competitive edge by working with suppliers and brands that prioritize Scope 3 emissions reduction, thereby strengthening their supply chain resilience, attracting environmentally conscious consumers, and differentiating themselves in the market.
Carbonbright remains committed to supporting organizations in their sustainability endeavors. Contact us to explore how we can assist you in measuring, analyzing, and mitigating your Scope 3 emissions effectively, empowering you to optimize sustainability efforts and contribute to a greener future.
