Understanding Scope 3.1 Emissions: A Quick Guide

The Greenhouse Gas (GHG) Protocol is a comprehensive standardized framework for measuring and managing emissions from private and public sector operations, value chains, products, cities, and policies. According to this framework, greenhouse gas emissions are categorized into the following groups:

• Scope 1 emissions are direct emissions from owned or controlled sources. 
• Scope 2 emissions are indirect emissions from the generation of purchased energy.
• Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.

Find everything you need to know about Scope 1, Scope 2, and Scope 3 at our GHG Protocol Guide.

The GHG Protocol has 15 subcategories within Scope 3 emissions from both upstream and downstream activities. When calculating their corporate carbon footprint, most companies should consider the first category, Scope 3.1, which covers emissions from the production of purchased goods and services, to be the most critical to their carbon accounting. This includes the production or extraction of raw materials, manufacturing, and transportation up to Tier 1 (direct) suppliers.

What makes this category particularly relevant for the future is that it gives companies a better understanding of which GHG emissions they are most directly responsible for (e.g., Scopes 1 and 2), and therefore have more control over reducing, as opposed to those emissions they are purchasing from their suppliers (Scope 3.1). Industrial companies committed to net-zero must do so efficiently to achieve results while maintaining growth and profitability. Their extensive supply chains, which can include thousands of suppliers, and these emissions can add up to a large portion of the company's emissions – in some cases, nearly all of a company's total GHG emissions. Businesses should take special care to measure and reduce these emissions, as they will be most affected by the upcoming Carbon Border Adjustment Mechanism and other carbon regulations.

To gather this information at scale, it's important that both internal and external stakeholders are able to align in one place to share the data necessary to develop the most accurate and impactful insights. Engaging with your procurement team is particularly important when assessing and reducing your company's Scope 3.1 emissions, as they are largely responsible for purchase orders and supplier engagement. If your company has an extensive supply chain, it's critical that they are aligned with your company's sustainability strategy.

Net-zero can't be achieved alone-it requires your organization to lead and mobilize stakeholders toward your goals. Directly engaging your suppliers and inviting them to collaborate is an effective way to gain their buy-in and identify your most strategic partners. 

By working closely with suppliers, companies can obtain accurate and validated data to develop actionable insights into how your company's purchased goods are manufactured and distributed. This is key to differentiating the emissions you produce from those you receive, allowing your teams to plan and execute targeted, high ROI reduction initiatives.

Choosing a Calculation Method
Measuring your company's Scope 3.1 emissions footprint starts with understanding which calculation methods your organization or solution can accommodate. An organization can use an spend or activity-based calculation, according to its needs and desired results. Depending on the calculation method, you will need to know:

- Product-specific GHG emissions originating at the direct supplier level (Tier 1) as well as in the upstream chain (Tier 2 to Tier n).

- Quantities for purchased items and components, such as number of units, weight, volume, etc.

- Cost of purchased goods and services

- Activity data at the supplier level, such as proportional energy and fuel consumption, waste, etc.

Enriching your primary data over time

Primary data relates to specific activities within a company's value chain, is provided and validated by the source, and is more accurate than secondary data that reflects industry averages or benchmarks. However, specific primary data on product-related GHG emissions for Tier 1 suppliers is often unavailable or of insufficient quality.

Carbon management is an ongoing process, and companies can begin their decarbonization journey by working with secondary data. This provides a starting point to build on, as the secondary data can later be replaced with primary data, leading to more accurate results and refined insights.

Choosing the right emission factors

Identifying the right secondary data sources and emission factors can also be an obstacle your team faces when calculating your company's carbon footprint. Emission factors are used to calculate GHG emissions based on:

• purchase spend, e.g. kg CO2e per euro purchase value for a particular product group;
• unit, e.g. kg CO2e per kg weight of a particular good;
• or activity data, e.g. kg CO2e per kWh. 

The type of emission factors that are needed will depend most on the company's choice of calculation method.

Overcoming data gaps

Initially, many companies may only be able to include a portion of their purchased goods and services in Scope 3.1 emissions calculations, so they will need to consider the level of validity when extrapolating the collected emissions data for the remaining purchases for which no data was collected. Similarly, emission factors may not be available for some specific processes, resulting in data gaps that must be filled over time either through primary data or by finding a database with appropriate proxy data.

With a mission to help companies drive sustainable transformation and achieve net-zero by 2050, carbmee always applies the 80/20 rule, meaning that 80% of emissions are typically found in hotspots that represent 20% of the value chain. EIS™ Carbon Management helps develop Scope 3.1 hotspot transparency within days. This enables companies to collaborate with suppliers and gain the granularity needed to make bold decisions to reduce emissions and plan an effective, efficient net-zero strategy.

Activity-based calculation for optimal transparency

The EIS™ solution uses an activity-based methodology to develop Scope 3.1 transparency, including the largest product categories and suppliers contributing to those emissions. Typically, emission factors are based on LCI databases and calculated using the methodology recommended by the GHG Protocol to determine the global warming potential of various materials and services. carbmee's activity-based approach uses ecoinvent models as-is, selecting them based on their best fit to the materials or services being modeled.

EIS™ Carbon Management can also model using a supplier-specific approach, which works similarly to our activity-based methodology. However, our supplier-specific approach replaces generic data from the database with enriched primary data obtained directly from customers or suppliers. This allows companies to not only calculate emissions more accurately, but also recommend and plan initiatives to achieve emissions reductions.

Collaboration for granularity

Involving suppliers directly can help gain their buy-in and identify your most strategic partners. With carbmee's collaboration feature, your company can increase the granularity of Scope 3.1 emissions by inviting suppliers to validate or edit emission factors for materials, energy mix, transportation, and more.

High ROI reduction

By aligning your suppliers with your sustainability goals, using activity-based carbon accounting, and increasing the accuracy of carbon footprints through collaboration, companies can make confident decisions to reduce emissions effectively and efficiently. 

With deeper insight, companies can tackle the 20% of hotspots that account for 80% of their emissions – the same emissions that are most vulnerable to taxation under the Carbon Border Adjustment Mechanism and other upcoming carbon regulations.

Talk to one of our industry experts to learn more about how EIS™ Carbon Management can help your company achieve Scope 3.1 carbon transparency.