New Analysis Rethinks Scope 3 Emissions
The US Environmental Protection Agency defines Scope 3 emissions this way:
“Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain. An organization’s value chain consists of both its upstream and downstream activities. Scope 3 emissions include all sources not within an organization’s scope 1 and 2 boundary. The scope 3 emissions for one organization are the scope 1 and 2 emissions of another organization. Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total greenhouse gas (GHG) emissions.”
The clearest example is through the lens of fossil fuels. For an oil or gas company, Scope 1 and Scope 2 emissions involve extracting fossil fuels, processing them, distributing them, and then selling them to end users. When they talk about limiting their emissions, they almost always confine the discussion to their Scope 1 and Scope 2 emissions. They really don’t want to talk about what happens when their customers use those fuels to power industrial processes or transportation. It reminds me of Tom Lehrer’s satirical song about Werner Von Braun, who went from the architect of the V2 rocket program during World War II to a senior NASA adviser once the war was over. “Once the rockets are up, who cares where they come down? That’s not my department!, says Werner Von Braun.”
There has been a lot of talk about ESG — environment, social, and governance — goals by corporations. It’s a topic that makes MAGA lunatics lose their minds. Many red states have passed laws forbidding their pension funds from doing business with any financial institutions that promote such tripe, as if burying their heads in the sand will prevent the climate emergency from having any effects on their states. While the topic has been widely discussed for years, especially since the Paris climate accords of 2015, oil majors like Exxon still want to pretend that ESG considerations — which necessarily include a discussion of Scope 3 emissions — have no place in their corporate governance plans.
According to Bloomberg, the greenhouse gases produced by customers and supply chains typically account for more than 70% of a company’s carbon footprint. This reality means companies cannot credibly pledge to address their environmental impact without tackling this massive source of emissions, known as Scope 3. At the same time, problematic data issues attached to Scope 3 emissions have become legendary, with some arguing that companies have limited ability to influence their value chains anyway. The complexity of the topic, unsurprisingly, has proven to be a barrier for some companies trying to set net-zero targets.
Science Based Targets Initiative Scope 3 Report
In a paper published July 30, 2024, the environmental organization known as the Science Based Targets initiative (SBTi) put forward a possible new approach aimed at enabling companies to “better assess and communicate their climate performance” in a way that goes beyond simply disclosing aggregate Scope 3 emissions. Specifically, the Science Based Targets initiative is exploring how to include new metrics that evaluate the alignment of a company’s procurement and revenue generation with global climate goals. Corporate Scope 3 targets “can serve as a powerful mechanism to integrate our global climate goals into the core of the economy” by focusing on how companies source goods and produce income, the organization says.
The idea is to measure how “operational expenditure is directed towards and revenue is derived from entities, activities, commodities, products and services that have achieved a level of emissions performance compatible with reaching net-zero emissions. Tackling supply chain emissions is conceptually more difficult than tackling direct emissions within a company,” said Holger Hoffmann-Riem, who works for the Swiss nonprofit Go for Impact and sits on SBTi’s Technical Advisory Group. “The main challenge is not to lower Scope 3 emissions, but rather to make sure that all suppliers reduce their own direct emissions as quickly as possible.”
SBTi Stirs Up A Hornets Nest
To get on the path to achieving the goals of the Paris climate accord, SBTi said it is assessing both emissions-based metrics that measure “impact” and non-emissions-based metrics that track “outcomes.” But in what may seem an unlikely admission from a climate group with science in its name, the SBTi said climate science may not hold all the answers.
“While science can tell us the timeline and the shape of the emissions curve, it may not provide the requisite understanding of how companies should act to address their emissions. For many outcome metrics, such as the share of procurement spend going to suppliers with science based targets, or the share of high emitting commodities that are net zero certified, the benchmarks for determining future performance levels may not be directly derived from climate science.”
Currently, Scope 3 emissions, which are measured in tons of carbon dioxide equivalent (tCO2e) represent an aggregate of 15 different categories of emissions sources from purchased goods and services to business travel. Exploring new metrics to capture that nuance might be impactful, said Gilles Dufrasne, policy lead on global carbon markets at Carbon Market Watch. “Saying that a car manufacturer must have a certain percentage of battery electric vehicle sales, or a steel manufacturer must have a defined amount of green steel would help us move away from the very coarse metric of tCO2e,” Dufrasne said. “The idea of complementing the greenhouse gas targets with other, sector-specific metrics is really interesting and promising.”
SBTi’s Scope 3 paper was released as part of a broader package of research that will inform an update of the group’s Corporate Net Zero Standard, its closely followed framework for corporate decarbonization. In a separate report the group said it found various types of carbon credits to be “ineffective in delivering their intended mitigation outcomes.” That report provoked a firestorm of criticism from environmental advocates, but cheers from participants in the carbon offset market. Alberto Carrillo Pineda, SBTi’s chief technical officer, said in an interview that the goal of the review is to “bring a more nuanced approach” to a topic that has attracted “very entrenched, very polarized positions.”
When done right, a carbon credit represents one ton of CO2 emissions that have been removed from, or not added to, the atmosphere, and are typically generated from forestry or renewable energy projects. Demand for such credits, which BloombergNEF estimates could grow to $1 trillion from roughly $2 billion today, stems from a realization that companies will struggle to deliver the outright emissions cuts needed to align with the goal of limiting global warming to 1.5C. “These instruments can have value if they’re used in the right way, and also if they incentivize the right outcomes,” Pineda said.
Designing more appropriate metrics is just one of a series of options SBTi said it’s considering to enhance Scope 3 target setting. The new approach focuses on defining the boundaries of targets to ensure companies prioritize action on “the most climate-relevant activities,” as well as a more thoughtful consideration of the extent of a company’s influence over emissions sources.
Doreen Stabinsky, a professor of global environmental politics at College of the Atlantic and a member of the SBTi Technical Council, said the new Scope 3 paper is a welcome offering. “It’s a refreshing, science based approach, and 180 degrees different from the message the SBTi board was attempting to send in their April communique. The answer to Scope 3 emissions is not ‘it’s so difficult, so let’s just use carbon credits,’” Stabinsky said. “It’s actually ‘let’s get much more clarity on the problems with decarbonization in different value chains and choose approaches that address them specifically.'”
The Takeaway
Scope 3 emissions. Hoo boy, what a can of worms. The concept is simple, but the specifics are hard to define. That makes it easy for corporations to bob and weave around any proposed standards, which means a lot of greenwashing happens, but very little progress toward addressing our global climate emergency takes place. It does seem that a lot of this defugalty could be avoided by simply placing an appropriate price on carbon and methane emissions, one that starts low to give the business world some time to adjust, before ramping up to something close to the actual impact those emissions have on the environment.
If SBTi can’t seem to agree on how effective carbon offsets are, maybe we need to think differently on this thorny and convoluted topic. Any ideas from CleanTechnica readers would be most welcome.
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