When it comes to reporting Scope 3 emissions, only a few currently choose to study their impact, which is understandable given the difficulty of measuring them.
Scope 3 – why is it so hard to count?
Under Scope 3, the GHG Protocol distinguishes 15 categories for which a company should assess materiality and report the significant ones. The category most relevant to the retail and FMCG industry is Category 1, Purchased goods and services. The essence of the problem is to obtain emission factors for each SKU and each purchased foreign service. It can be said that the revolution in carbon footprint reduction is underway, but the revolution in calculating the carbon footprint per product or service and sharing this information externally has not even begun.
Another carbon footprint calculation method proposed by the GHG Protocol can be of help: “Environmentally-extended input output modelling (EEIO)”. EEIO modelling uses external supply-use databases that can be used to analyse the environmental impacts associated with the final consumption of particular product groups.
In a similar way, you can model your carbon footprint in each of the 15 categories, provided you know the value of spending in that category over a given period and the sector to which the financial outlay was allocated.
Which scopes will my company need to report?
Under global ESG data reporting standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), metrics for GHG emissions apply to all three GHG Protocol scopes. Growing awareness of climate impacts and market expectations increase the need to understand a company’s carbon footprint, especially for Scope 3. Furthermore, the secondary legislation of the Sustainable Finance Disclosure Regulation (SFDR) is currently still under development, while a document sent for further consultation by European financial regulators, containing a set of potential indicators to be reported by financial market participants and financial advisors, clearly sets out the requirement for carbon footprint reporting in all three scopes.
Summary
As identifying the sources of emissions as well as collecting the information necessary to calculate the carbon footprint is a complex and time-consuming process, it is worth preparing for it now. It will be necessary to accurately identify areas of impact, data sources, use data capture tools and calculate the carbon footprint, and obtain the necessary data from business partners. This will also allow you to reliably and efficiently calculate your carbon footprint, set reduction targets and earmark the necessary actions, and also communicate with market participants.