SCOPE 3 EMISSIONS DATA FOR IMPACT REPORTING

Organisations need emissions data now more than ever. They are increasingly aiming to tackle climate change: setting emissions and net zero targets and complying with EU regulations rank among the top priorities on corporate and investor agendas. To set realistic targets, organisations need to account for the emissions of their whole value chain.

The GHG Protocol classifies these emissions into three Scopes:

  • Scope 1 emissions are direct emissions from organisations’ 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 upstream and downstream value chain of the reporting company.

Scope 3 GHG emissions are typically the greatest component of companies’ and portfolios’ carbon footprint – reaching up to 90% of the total impact – as well as the trickiest to measure.

Sector breakdown: scope 1+2 vs scope 3 emissions

Need for data: Scope 3 emissions are key for reaching truthful overviews of organisations’ carbon footprints. They provide pivotal metrics to reach net zero targets and comply with incoming EU regulations. An urgent need for granular, robust, and reliable scope 3 emissions data is arising.

As more and more companies are committing to net zero targets, the need for Scope 3 emissions data is rapidly growing. Companies need to collect the right data to measure the value chain carbon footprint of their organisations.

Reporting Scope 3 emissions will soon be a requirement for obligated organisations in EU regulations. As of 2021, the EU Sustainable Finance Disclosure Regulation (SFDR) came into effect, imposing mandatory ESG disclosure to Financial Markets Participants: investors must report quantitatively on the Principal Adverse Impacts (PAIs) of their portfolios. From January 2023, the mandatory PAIs will include Scope 3 emissions.

Discover our GID SFDR PAI proxy data solutions

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 organizations 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.

GID SCOPE 3 EMISSIONS DATA SOLUTION

Measuring the carbon footprint of investment portfolios

Our Global Impact Database provides Scope 3 data. GID Scope 3 Data provides estimates of emissions in global value chains on a granular country-sector level. Thanks to our innovative input-output model for attribution, double counting is avoided, and value chain responsibility is determined based on companies’ value added.

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USPs:

  • Scope 3 emissions data for all types of investments and companies: listed, non-listed, SME, EM
  • Ready to use data covering global upstream and downstream value chain emissions
  • Pioneering methodology to attribute emissions along value chains and avoid double counting
  • Alignment with the Global GHG Accounting and Reporting Standard for the Financial Industry (PCAF) and with the GHG Protocol
  • Optional carbon emission valuation (expressing carbon impact in monetary units) to allow comparison with other non-carbon impacts (see GID page)
Scope 1, 2, 3 emissions

Applications:

  • Understand carbon footprint of complex value chains and portfolios to make better and more sustainable lending and investment decisions
  • Report on scope 3 emissions and be prepared to comply with current and upcoming regulation
  • Identify and manage carbon risks and opportunities and define priority areas for your impact and long-term value creation strategy
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For more technical information about the GID please see the GID technical overview or contact us here.

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