Learn about Scope 3 Category 1 emissions, focusing on purchased goods and services, and discover strategies to reduce them. Strengthen your ESG approach with this expert guide.
Delve into the specifics of Scope 3 Category 1 emissions, which arise from purchased goods and services. This comprehensive post sheds light on the challenges and opportunities in managing these emissions, offering practical strategies to help your business minimise its environmental impact. By addressing Category 1 emissions, you can make significant progress in your sustainability journey and bolster your ESG performance. Leverage expert insights from ESG Pro to drive meaningful change within your supply chain.
3.1 Purchased Goods and Services
Supply Chain Insights: Tackling Emissions from Purchased Goods and Services
1. Introduction to Scope 3, Purchased Goods and Services Emissions
Scope 3 emissions, specifically under the category of “Purchased Goods and Services,” refer to the indirect greenhouse gas (GHG) emissions associated with the production of goods and services that a company buys or acquires. These emissions occur outside of the company’s direct operations and ownership but are a consequence of its business activities. This category is part of the broader Scope 3 emissions, which encompass all indirect emissions that occur in a company’s value chain, including both upstream and downstream activities.
2. Importance of Purchased Goods and Services Emissions
Emissions from purchased goods and services can be significant, often representing the largest share of a company’s carbon footprint, especially for organisations in sectors like retail, technology, and services where direct emissions (Scope 1) and indirect emissions from energy use (Scope 2) are relatively low compared to the embodied emissions in the products and services they procure.
These emissions arise from a wide range of activities, including but not limited to:
Extraction and processing of raw materials
Manufacturing processes of suppliers
Transportation and logistics required to deliver goods to the company
Addressing Scope 3 emissions from purchased goods and services is not only essential for environmental reasons but also provides competitive advantages by improving efficiency, reducing costs, and meeting the increasing expectations of customers, investors, and regulatory bodies for sustainable practices. As global awareness and regulatory pressure around climate change continue to grow, effectively managing these emissions becomes increasingly important for companies aiming to demonstrate leadership in sustainability.
3. Example: Retail Clothing Company
Imagine a retail clothing company that sells various apparel products. Here’s how Scope 3 emissions from “Purchased Goods and Services” might apply in this scenario:
Supply Chain Emissions: The clothing company purchases clothing items from manufacturers located domestically and internationally. The production of these clothing items involves various processes such as growing raw materials (e.g., cotton), manufacturing textiles, dyeing fabrics, cutting and sewing garments, and packaging. Each stage of the supply chain contributes to emissions, including energy use, transportation, and waste generation.
Transportation Emissions: Once manufactured, the clothing items are transported from factories to distribution centres and then to retail stores. This involves transportation via trucks, ships, planes, or trains, depending on the distance and logistics involved. The emissions from transportation activities, including fuel combustion and associated logistics, contribute to Scope 3 emissions for the clothing company.
Lifecycle Considerations: In addition to the production and transportation phases, the entire lifecycle of the clothing items contributes to Scope 3 emissions. This includes emissions associated with the use of the products by customers (e.g., washing, drying), as well as end-of-life treatment (e.g., disposal, recycling). Factors such as the durability of the clothing items, consumer behaviour, and waste management practices influence the overall environmental impact.
4. Calculation of Purchased Goods and Services Emissions
Calculating Scope 3 emissions for purchased goods and services involves assessing the indirect greenhouse gas (GHG) emissions that occur in the supply chain of the goods and services a company buys. This can be complex due to the diverse range of products and services, as well as the depth of the supply chain. However, a structured approach can help in estimating these emissions. Here’s a general methodology:
Define the Scope of Purchased Goods and Services
Identify Categories: Determine which categories of goods and services to include in the calculation. This can range from raw materials to office supplies, depending on the company’s operations.
Set Boundaries: Decide on the boundaries of the calculation, such as which stages of the lifecycle (from raw material extraction to delivery to the company) to include.
Collect Data
Spend Data: Gather data on the amount of money spent on each category of purchased goods and services. This information is often available in the company’s procurement or financial system.
Supplier Data: Where possible, obtain specific emission data from suppliers regarding their products or services. This can be challenging but provides the most accurate results.
Choose a Calculation Method
Several methods can be used to estimate emissions, depending on the availability of data:
Economic Input-Output Life Cycle Assessment (EIO-LCA): Use national economic data to estimate the environmental impact per unit of economic output in different sectors. This method is useful for a broad estimate when specific data is not available.
Environmental Extended Input-Output (EEIO): Similar to EIO-LCA but includes additional environmental factors. It’s based on the relationship between industries in an economy and their environmental impact.
Supplier-Specific Data: Use emission factors or data provided directly by suppliers. This method is more accurate but requires cooperation from suppliers.
Industry Averages: Apply industry average emission factors if specific supplier data is not available. These factors can be found in databases and literature.
Calculate Emissions
Apply Emission Factors: Multiply the amount of goods or services purchased (or the spend on these goods and services) by the relevant emission factors to estimate the GHG emissions. The formula will vary depending on the calculation method used but generally follows:
Aggregation: Sum the emissions across all categories of purchased goods and services to get the total Scope 3 emissions from this category.
Adjust and Refine
Data Quality: Continuously seek to improve the quality of the data used for the calculation, including obtaining more accurate data from suppliers or more relevant emission factors.
Verification: Consider third-party verification of the calculation to ensure accuracy and credibility.
5. Conclusion
Effectively managing Scope 3 emissions within the realm of purchased goods and services demands a strategic and collaborative effort. Companies are increasingly recognising the importance of extending their environmental stewardship beyond direct operations to encompass the broader impacts of their supply chains. By implementing sustainable procurement practices, engaging in partnerships for greener supply chains, and driving innovation in eco-friendly product development, businesses can significantly reduce their indirect emissions. This commitment not only aids in mitigating global climate change but also enhances brand integrity, meets stakeholder expectations for sustainability, and positions companies as leaders in corporate responsibility. Embracing this challenge is key to achieving comprehensive environmental sustainability and fostering a greener economy.
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