Why should I measure my Scope 3 emissions?

If you own a car and fill it with petrol to drive from London to Edinburgh, it's clear that you’re responsible for those emissions.

But if you take a flight, the plane is owned by an airline, and they fill it with jet fuel. You are still responsible for your share of the flight’s emissions. You decided to fly and to massively increase the emissions for your journey.

If you don’t account for Scope 3, that switch from a car to a plane would look like a reduction in your emissions, when its actually an increase.

Your consumption of goods and services typically represents around 90% of your total emissions. Scope 3 is where you’ll find your biggest risks, your biggest opportunities and be able to multiply your impact on reducing emissions by influencing others.

Why should I measure my Scope 3 emissions?

In simple terms, Scope 1 is the fuel you burn, Scope 2 is any fuel burnt to generate the electricity you use, and Scope 3 is everything else, the fuel burnt to produce and transport everything you buy, from coffee beans to insurance.

The emissions in your Scope 3 don’t come from you directly, but you are responsible for them. If you didn’t buy that pack of coffee, or that computer or that insurance policy, the proportion of emissions created to produce them wouldn’t exist.

Not accounting for Scope 3 is effectively outsourcing your emissions to other organisations and countries. If you are responsible for buying something, you are responsible for the emissions created in its production.

A factory manufactures coffee mug and transports them by lorry to another business, a shop, that buys the mugs to sell to its customers. The factory reports the emissions from the kiln used to make the mugs and the fuel for their lorry in their Scope 1. The shop reports the factory's Scope 1 as part of its Scope 3 supply chain emissions.

Both the factory and the shop can influence emission reductions.

The factory could make their kiln more efficient, and could switch to an electric lorry. The shop could buy from another factory that had already made emission reductions, or could ask the factory for fewer but larger deliveries to increase efficiency. The shop could ask if the factory can redesign the mugs so they need less time in the kiln.

Is it double-counting to report emissions from my suppliers?

Part of the reason that emissions are split into three Scopes is to show how they relate to each other. Reporting your Scope 3 emissions is not double-counting, the deliberate overlap between client and supplier emissions reflects areas where both can take decarbonisation actions.

Your Scope 1 and 2 emissions are not double-counted in your Scope 3. Your suppliers’ Scope 1 and 2 emissions are part of your Scope 3. And your combined Scope 1, 2 and 3 emissions are part of the Scope 3 emissions for any organisations you supply goods or services to.

The overlap of different scopes – a supplier’s Scope 1 being counted as part of your Scope 3 - is deliberate, to show that both the supplier and the purchaser have responsibility for the emissions and responsibility and influence to reduce them.

What are the benefits to my business in reporting Scope 3?

With Scope 3 emissions typically accounting for 90% of a company’s carbon footprint, it represents your greatest area of impact, and your greatest areas for risk and opportunity within your supply chain.

Cost reductions

Identifying emission hotspots can reveal areas for significant cost reductions, through efficiency, material changes and waste reduction. Your Scope 3 data can help you choose different suppliers, different products and different materials that could lower costs alongside emissions.

Stakeholder engagement

Investors, stakeholders, employees and customers increasingly want transparent climate reporting and evidence of emission reductions. A survey by KPMG found that 46% of employees want the company they work for to demonstrate a commitment to ESG, with a third actively researching a company’s ESG commitments when looking for a new job.

Reputation and influence

If you make any claims about your carbon and sustainability actions, but customers can see a high-impact supply chain, you are putting your reputation at risk. Conversely, working on reduction actions across your supply chain gives you many more examples to talk about as part of your sustainability storytelling, which can widen your influence even further.

Competitive advantage

Many of your clients will increasingly be asking for carbon data from their suppliers; they may need to comply with legislation in the areas where they operate (like the EU), even if those regulations don't affect you directly. Having full Scope 1, 2 and 3 emissions will give you a competitive advantage when the availability and quality of your carbon data is part of their tender and procurement decision-making.

What legislation and policies affect my carbon footprint reporting?

Regulatory and commercial pressure is quickly moving from voluntary disclosure to mandatory reporting, especially concerning Scope 3. Even if your organisation isn’t required to report Scope 3, it can benefit you to do so.

If you supply any goods or services to a large corporate which is required to report its Scope 3 emissions, being able to supply your full Scope 1, 2 and 3 emissions puts you a competitive advantage as you are helping their Scope 3 reports to be more reliable.

Reporting requirements are increasingly being passed down supply chains. The following legislation and standards may apply to your supply chain now or in the near future:

UK Sustainability Reporting Standards: The UK government is actively consulting on adopting the International Sustainability Standards Board (ISSB) IFRS S2 climate standards. These global standards mandate the disclosure of Scope 1, 2, and 3 emissions. This signals that mandatory Scope 3 reporting is the likely future for large UK companies.
Public Procurement Notice (PPN 06/21): This UK Government notice already requires businesses tendering for major public sector contracts to demonstrate a carbon reduction plan, which effectively requires Scope 3 reporting to be credible.
EU Corporate Sustainability Reporting Directive (CSRD): This major piece of EU legislation will mandate Scope 3 disclosure for thousands of large companies, including many UK businesses with significant EU operations or listings, with reporting requirements starting as early as 2025.

The SME Sustainability Data Taskforce have published a voluntary standard for SME emissions reporting, which includes Scope 3. This is a voluntary, SME-appropriate data standard that will allow SMEs to measure once and report to multiple stakeholders. (Small World Consulting are members of the task force).

Can I set net-zero targets without including my Scope 3 emissions?

No. All the leading standards for setting carbon reduction and net-zero targets either require Scope 3 or encourage it to be included.

The SBTi (Science Based Targets Initiative) will not validate targets as being science based or aiming for net zero if Scope 3 is not included.

CDP submissions that exclude Scope 3 are deemed incomplete and will receive a low score.

The GHG Protocol is the standard that first set out reporting requirements for Scopes 1, 2 and 3 and a full emissions inventory across all three Scopes is expected.

How does SWC calculate Scope 3 emissions in carbon accounts?

Small World Consulting use spend-based accounting to calculate your Scope 3 emissions from your procurement data. We have our own world-leading input-output model, SWC MRIO [link] which we use to calculate your share of an industry’s emissions based on how much you spent with that industry.

For most purchases from UK based organisations, we will use the UK as the country of demand, but for purchases from a specific country we will use that as the country of supply, making your emission calculations far more representative.

We’re also able to substitute any supplier-specific data, for example your suppliers Scope 1 and 2 data, again making your Scope 3 emissions more reflective of your actual carbon emissions.

Our carbon footprinting is trusted by the likes of large corporates like BT Group and Mountain Equipment, to small family-run companies like Jude’s Ice Cream and Lake’s Free Range Egg Company.