Understand the complexity of scope 3 emissions diagnostics – the DEEP solution

Not yet mandatory in inventories made by companies, indirect greenhouse gas (GHG) emissions can hide the greatest impact left on the environment by an organization. Listed in the so-called scope 3, which tracks the supply chain in general, these emissions are difficult to calculate and, therefore, reduced.

It is estimated that, in sectors of the economy, scope 3 emissions are 10 to 20 times higher than those of scopes 1 and 2 . This may be higher for companies operating in the service sector or lower for those in the primary and extractive sectors. Some examples come from tech giants. Amazon reported that 78% of its emissions in 2019 were scope 3. Netflix, on the other hand, calculates that half of the 1.1 million tons of CO2 came from indirect sources in 2020. Apple's case is even more emblematic: 98% of its emissions occur outside the organization's gates, which demonstrates the importance of effective measures aimed at the supply chain.

It is almost a consensus that, for a company, it is not possible to develop an effective low carbon strategy without an accurate portrayal of scope 3. Although there is an international guide established by the GHG Protocol (see link ), which covers fifteen categories that compute upstream data ( what happens in prefabrication) and downstream  (the product path after it leaves the company), carrying out this inventory can be quite complex.

Of the sources of emissions considered to be scope 3, some are simpler to point out, such as “business trips”. But when it comes to estimating “goods and services”, for example, the account seems more challenging – only 30% of companies in the United States, for example, have included this source in reports reported to the CDP, Carbon Disclosure Project  .

In this highly complex scenario, the DEEP method offers the possibility of connecting its platform to that of the client and calculating the sources of emissions based on each financial transaction that the company makes. When it comes to measuring the upstream chain in the categories of “employee transportation” and “purchased goods and services”, for example, the solution developed by DEEP combines published emissions data with economic data and uses the most robust scientific methods to extract the information. All this from a company financial transaction or any existing accounting fact.  

Until then, this data collection, when done, was mostly done manually in an arduous journey with suppliers, summarized in numerous tables and spreadsheets. In addition, different companies tend to adopt different methodologies, which can result in an inaccurate inventory and make it impossible to compare data between organizations.

“Usually, companies that include scope 3 in their inventories select the most relevant suppliers and seek partnership to calculate. This generates incentives to reduce emissions”, comments Linda Murasawa, managing partner of Fractal Assessoria de Negócios, a sustainability specialist and member of DEEP's Group of Expert Advisors.

According to CDP, two approaches are most common to calculate emissions in the “purchased goods and services” category: asking suppliers to disclose emissions associated with the goods or services they supply; use an environmentally extended input-output economic model. The problem is that the data can reach the analyst who takes care of the inventory quite unstandardized, since each supplier usually calculates their emissions differently. 

The input-output matrix is ​​considered a good way for companies that want to start measuring scope 3, but it is necessary to go ahead and consider methodological uniformity in the report. And, at this point, the solution developed by DEEP also offers transparency and confidence that this standard will be adopted throughout the entire process. 

“DEEP's customers can use the platform not only for themselves, but for the supply chain. This degree of speed and accuracy is very important and can help a company choose which supplier to keep and which to exclude based on sustainability”, analyzes Murasawa.

Although voluntary, the decision to inform these polluting sources is encouraged. Good reputation management is seen as an important benefit: it is not enough to say that a company's products are low carbon, it is necessary to show that this quality reaches the supply chain. Another advantage is the potential to jump ahead in the implementation of future regulations, as the ESG standard advances and decarbonization measures begin to become a demand from consumers ( see example ).

In addition to these points, the preliminary results brought by the new IPCC (Intergovernmental Panel on Climate Change) report, the AR6 , reinforce the weight of the private sector to divert the planet from the 4ºC warming route by the end of the century, which is the scenario more certain according to the level of current global emissions. Companies are expected to drastically reduce their pollution load and, as demonstrated by the examples of several organizations, this will only be possible with an accurate scope 3 report. Only then will it be possible to decarbonize the economy at the speed that humanity needs.






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