Challenges in measuring scope 3 emissions
Scope 3 complexity challenges
The need for Scope 3 emissions for effective corporate climate strategy, committing to net zero pledges and regulatory compliance is increasingly understood. However, there are three critical challenges when calculating scope emissions:
1. Collecting Scope 3 data is difficult:
Investors and organisations often have complex value chains, including suppliers, clients, lending and investment spanning across different countries and industries. Collecting data from all these direct value chain connections is a big challenge. Quality sector averages and proxies are also difficult to find, due to the time, expertise, and resources required to account for limitations, uncertainties, and inconsistencies.
2. Value chains often overlap, easily leading to double counting:
Tracking Scope 3 GHG emissions without double counting represents a significant challenge and requires a suitable measurement approach. As an example, the value chain impact of a coal producer includes impacts arising from combustion at a coal-based electricity plant. Simultaneously, the value chain impact of the electricity producer also includes this impact. To obtain an accurate insight into the emissions of both companies, double counting the same impact in different value chains should be avoided.
3. Attributing emissions within large value chains is a challenging task:
Today’s value chains include several tiers of suppliers and clients, making the definition of value chain boundaries and the attribution of responsibility among value chain partners a daunting issue when measuring Scope 3 emissions. This challenge is even more critical for the financial sector, as investment portfolios include hundreds or thousands of companies – located in multiple regions and spanning across many industries – that may be involved in more than one step along the production life cycle.