Deciphering Scope 3

Exploring organisational and operational boundaries

Now more than ever, organisations are under increasing pressure to measure their greenhouse gas (GHG) emissions, especially since climate change is being viewed as a financial as well as an environmental risk. What this means is that understanding how to navigate the complex process is essential.

A vital starting point, guided by the Greenhouse Gas Protocol (GHGP), is aligning processes with relevant calculation methods and reporting frameworks. This begins with defining organisational and operational boundaries for carbon measurements, providing a clear framework for assessing an organisation's carbon footprint.

Organisational boundaries determine an entity's financial or operational control over assets and emissions allocation.

Operational boundaries, on the other hand, identify direct and indirect emission sources within an organisation's purview.

These delineations shape data analysis and reporting, guiding the journey towards comprehensive carbon measurement and reporting.

Let's take a closer look at organisational and operational boundaries and how they relate to Scope 3 emissions.

Understanding organisational boundaries

Organisational boundaries define the extent of an organisation's responsibility for its greenhouse gas (GHG) emissions. They outline the operational domain within which an organisation assumes responsibility for emissions generated directly or indirectly through its activities.

Factors influencing organisational boundaries
Two primary approaches define organisational boundaries:

1. Equity share approach. This method determines an organisation's emissions accountability based on its ownership stake or equity share in other entities.
2. Control approach. A company assumes responsibility for 100% of the emissions it controls. It includes:
   
   
   1. Financial control, where an organisation retains the majority of risks and rewards of ownership and has control over financial policies, regardless of ownership percentage.
      
      
   2. Operational control, meaning an organisation or their subsidiaries exercise full control over day-to-day operational policies, extending beyond financial control to direct operational management.

Understanding operational boundaries

Operational boundaries establish the scope and parameters for an organisation's measurement and management of its GHG emissions. These boundaries distinguish between an organisation’s direct emissions (those it has some control over) and indirect emissions (beyond its control). By defining operational boundaries, companies can effectively identify, quantify and manage their carbon footprint across various emission sources within their business operations and value chains.

Refining operational boundaries with Scopes
Operational boundaries are further refined by categorising emissions into Scope 1, 2 and 3, following the GHGP guidelines:

• Scope 1 - direct emissions from an organisation's operations, such as company vehicles and buildings.
• Scope 2 - indirect emissions from purchased electricity, heating, and cooling.
• Scope 3 - all other indirect emissions present in a company's value chain, including upstream material collections and downstream product use.

Determining measurement approaches
Before data collection, companies must decide whether they fall under the equity share approach or the financial control approach. Additionally, they must determine whether to measure only Scopes 1 and 2 emissions or include the Scope 3 categories relevant to their business.

Understanding Scope 3 boundaries

Here’s a breakdown of what falls within Scope 3 boundaries and strategies for effectively measuring these emissions.

Assets and entities
Assets such as facilities and vehicles play a significant role in determining the scope of emissions. Under the operational control approach, emissions from operating leases for these assets typically fall within Scopes 1 and 2. However, under the equity share approach, these emissions may be categorised under Scope 3. Likewise, entities like subsidiaries, joint ventures and partnerships contribute to Scope 3 emissions.

Emissions calculation
Two Scope 3 categories are directly influenced by the boundaries of assets included in scopes 1 and 2:

1. Fuel and energy-related activities - emissions associated with fuels and electricity consumed solely in facilities and vehicles included in scopes 1 and 2.
2. Waste generated in operations - emissions are tied to waste generated exclusively in facilities or vehicles included in scopes 1 and 2.

Examples of Scope 3 emissions
Scope 3 emissions cover a broad spectrum of activities, including:

• Upstream emissions - associated with the production and transportation of purchased materials, goods, and services.
• Downstream emissions - associated with the use and disposal of products and services sold by the organisation.
• Employee commuting - emissions from employee travel to and from work.
• Business travel - emissions from corporate travel activities, such as flights and accommodation.
• Supplier emissions - resulting from activities across the organisation's supply chain, including manufacturing and distribution processes.

By understanding and addressing Scope 3 emissions, organisations can achieve a more holistic approach to carbon accounting and sustainability reporting.

How can technology help define organisational and operational boundaries?

There's a range of innovative tech available designed to help organisations define their organisational and operational boundaries, paving the way for effective carbon accounting and emissions management. Here's how:

• Automated boundary definition - carbon accounting software offers automated tools to swiftly establish organisational and operational boundaries.
• Streamlined emissions calculation - carbon accounting solutions facilitate the precise quantification of emissions within defined boundaries, eliminating manual errors and enhancing data accuracy.
• Comprehensive reporting capabilities - generate and share emissions data with regulatory authorities, stakeholders, and investors.

BraveGen - tailored solutions for every need
BraveGen offers a suite of software solutions tailored to meet diverse organisational needs:

BraveGen CSR

• Designed for organisations with rigorous reporting requirements, BraveGen CSR facilitates the collection, calculation, analysis and action planning for scopes 1, 2, and 3 emissions.
• Full Scope 3 coverage - addresses the complexities of Scope 3 emissions, offering robust tools to collect and report on the full breadth of value chain data, ensuring comprehensive reporting.

Conclusion

In today's climate-conscious landscape, measuring GHG emissions has become crucial for organisations. Understanding organisational and operational boundaries is the first step towards effective carbon accounting and comprehensive sustainability reporting.

Technology simplifies the process of defining boundaries, calculating emissions, and generating comprehensive reports. With tools tailored to cover all scopes, especially Scope 3, these solutions enable organisations to meet rigorous reporting requirements and achieve their sustainability goals. By leveraging technology, companies can confidently navigate the complexities of carbon accounting, ensuring accurate, transparent, and effective sustainability practices.

To find out more about how emissions are broken down into Scopes, download our eGuide to Mastering Scopes 1, 2 &3.