Introduction
An effective carbon accounting strategy requires a detailed understanding of an organization’s Scope 1, Scope 2, and Scope 3 emissions based on the Greenhouse Gas (GHG) Protocol. Traditionally, the focus for most organizations has been on calculating Scope 1 and Scope 2 emissions from their own operations. Recently, it's become paramount that organizations must also account for Scope 3 GHG emissions along their value chains and product portfolio to comprehensively manage their opportunities to reduce emissions. A growing body of research shows that Scope 3 emissions can account for a larger impact than the company’s Scope 1 and Scope 2 emissions. Initiatives, such as the Task Force on Climate-related Financial Disclosures (TCFD), are mandating full disclosure of Scope 3 emissions. Other than geography-specific regulatory requirements, accounting for Scope 3 emissions can help unlock business opportunities in a low-carbon economy.
While Scope 3 emissions are an increasingly important indicator, organizations face multiple challenges in determining Scope 3 emissions, as described in the following table.
| Challenge | Description |
|---|---|
| Lack of reliable, accurate, and specific data | Organizations struggle to collect relevant and sufficiently granular primary data from their suppliers to manage the data that's needed and to calculate Scope 3 emissions. |
| Lack of clarity in reporting boundaries | Organizations find the task of defining clear value chain boundaries a challenge when they're calculating Scope 3 emissions. While the 15 scope 3 categories are designed to serve unique purposes, overlaps can occur in reporting boundaries in a complex product life cycle. |
| Lack of resources | The calculation of Scope 3 emissions requires data management, resources, and quality processes, which then requires leadership support, budget, and time to value. |
| Multiple methodologies | This module follows the methodologies that are outlined in the Technical Guidance for Calculating Scope 3 Emissions by GHG Protocol standard. However, inherent challenges are associated with using methods such as hybrid, average, supplier-specific, and spend-based approaches, which involve making certain assumptions and dealing with data uncertainties. |
In the subsequent unit, you'll use a fictional Scope 3 scenario to describe the challenges and complexities with accounting for Scope 3 Category 1, Category 2, and Category 4.
For more information, see Scope 3 Inventory Guidance | US EPA.