Challenges in Calculating Scope 3 (Value Chain) Emissions

Scope 3 emissions stems from the large number of activities involved, the need for detailed data from upstream and downstream partners, and the reliance on estimation methods and industry averages.

Carbon Footprint

Emissions

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Why Scope 3 (Value Chain) Emissions are Harder to Calculate?

Calculating Scope 3 (value chain) emissions presents significant challenges due to their complexity and breadth. Unlike Scope 1 and 2 emissions, which are easier to measure because they result directly from a company's operations or energy use, Scope 3 emissions encompass the full range of indirect emissions across a company's entire value chain. This includes everything from raw material extraction and product manufacturing to transportation, use and disposal. The difficulty in accurately measuring Scope 3 emissions stems from the large number of activities involved, the need for detailed data from upstream and downstream partners, and the reliance on estimation methods and industry averages. As a result, companies often face hurdles in collecting reliable data, ensuring consistency, and implementing effective reduction strategies.

Data Availability and Quality

One of the biggest challenges in calculating Scope 3 emissions is accessing reliable and comprehensive data. Because Scope 3 emissions are calculated taking into account all activities in the production chain, such as suppliers, customers and other third parties, companies often struggle to access accurate data. The data collected is often incomplete, outdated or inconsistent, resulting in a lack of understanding of the extent of emissions caused by products and services. This variability in data availability and quality makes accurate and consistent emissions measurement nearly impossible.

Involvement of Multiple Parties

The size of the data set used to calculate Scope 3 emissions is another factor that complicates the calculation process. Scope 3 emissions include not only the extraction and production of purchased materials, but also processes such as transportation, product use, and waste management. Many different companies/teams are involved in each of these processes. This makes it difficult to track and calculate emissions. For companies with global operations, this challenge is compounded by the need to provide a data stream that is compliant in nearly every region and jurisdiction.

Different Calculation Methodologies

The variety of methods used to calculate Scope 3 emissions leads to significant differences in emissions results. Companies calculate emissions by selecting the most appropriate method from the many methods specified in the GHG Protocol, such as fuel-based, dealer-based, supplier-based, or hybrid methods. Although each method has its own advantages and limitations, the level of detail of reported emissions differs depending on the method chosen. While it is difficult to develop a methodology that provides the same level of comfort for each sector, it is important to ensure consistency between methodologies to provide comparable reporting results.

Lack of Supplier Participation

Perhaps the most common barrier to calculating Scope 3 emissions is the lack of data flow from suppliers. Suppliers are reluctant to share detailed emissions data or are often unable to provide this information. To overcome this barrier, it is imperative that companies establish proper communication with their suppliers and ensure that they understand the importance of providing reliable data.

Integration with Current Systems

Because Scope 3 emissions calculations are relatively new and still evolving, integration with existing systems is a particular challenge. In order to accurately calculate and report emissions data, companies must adapt their existing systems to new updates and legislation, or build new systems from scratch. This naturally slows down the data collection and calculation process.

Various Reporting Requirements

The fact that Scope 3 emissions have different reporting standards for different institutions is one of the factors that creates various challenges in calculating Scope 3 emissions. Companies need to adapt their calculation methods to report to different institutions and protocols, which can affect the consistency of the calculation results. For example, reporting and disclosure standards such as GRI, EU CSRD and CDP may have different requirements. The need for companies to prepare and report separately for each standard adds complexity to the already difficult process of calculating Scope 3 emissions.

Need for Additional Staff and Expenses

Due to the larger scale of Scope 3 emissions compared to Scope 1 and Scope 2 emissions, and the large number of stakeholders and regulations involved, companies are developing solutions such as hiring additional staff, investing in ESG software and consulting services to calculate Scope 3 emissions. This situation can be seen as one of the factors that make Scope 3 emissions calculations difficult, as it creates an additional financial burden for many companies.