Identifying Most Material Scope 3 Emissions

Module three

To make a climate commitment and work towards achieving net zero, you’ll need to cut your business’ greenhouse gas emissions by at least 50% before 2030, from a base year no more than two years back in time.

This means that this decade, you must cut in half your own emissions. That’s both Scope 1 and Scope 2 emissions, as well as those Scope 3 emissions related to employee commuting, business travel including accommodation, employees working from home, water usage, waste and purchased goods and services.

Where other Scope 3 emissions are material to your total emissions and where data allows you to measure it, your company should also aim to cut Scope 3 emissions in half this decade.

But how do you know what Scope 3 emissions are material (or most relevant) to your business?

Materiality assessment

To asses their material issues, many large businesses carry out materiality assessments, which involve interviewing stakeholders to understand their concerns and researching global issues and trends. This insight is plotted onto a matrix to pull out the most relevant issues to the business.

We understand that this could be too complicated or time consuming for SMEs, so if you want to understand what other Scope 3 emissions you should be looking to measure and reduce, you can use our Scope 3 materiality checklist as a starting point.

What are Scope 3 emissions?

To understand your Scope 3 emissions, you first need to be clear on what’s included in Scopes 1 and 2.

Scope 1 covers your direct emissions from owned or controlled sources (gas and company vehicles). Scope 2 covers your indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by your business.

Scope 3 includes all other indirect emissions that occur in your value chain, as shown in the diagram and list from the Greenhouse Gas Protocol below.

Scope 1, reporting company

  • Company facilities
  • Company vehicles

Scope 2, upstream activities

  • Purchased electricity, steam, heating or cooling for own use

Scope 3, upstream activities

  • Purchased goods and services
  • Capital goods
  • Fuel and energy related activities
  • Transportation and distribution
  • Waste generated in operations
  • Business travel
  • Employee commuting
  • Leased assets

Scope 3, downstream activities

  • Transportation and distribution
  • Processing of sold products
  • Use of sold products
  • End of life treatment of sold products
  • Leased assets
  • Franchises
  • Investments

Why a closer look at your Scope 3 emissions is important

For many businesses, most of your emissions and cost reduction opportunities lie outside of your own operations, so measuring Scope 3 emissions can help you to:

  • assess where emission hotspots are in your supply chain
  • identify resource and energy risks in your supply chain
  • identify energy efficiency and cost reduction opportunities in your supply chain
  • create opportunities to engage suppliers in your sustainability initiatives
  • improve the energy efficiency of your products and services
  • create opportunities to engage your employees in reducing emissions from business travel and commuting

Next steps

This checklist will help you to identify any material Scope 3 emissions. If you identify any Scope 3 emissions that you believe to be material to your total emissions (potentially accounting for over 40% of your total emissions) and they’re possible to measure, you should include them in your baseline and as part of your reduction target.

Scope 3 emissions beyond employee commuting, business travel including accommodation, employees working from home, water usage, waste and purchased goods and services (measured by monetary value) can be extremely difficult to measure and we don’t cover that in this course, but you can use our list of useful organisations to find help with calculating these emissions.

This was last updated in October 2021 by Heart of the City.

Climate for SMEs: 4 Steps to Action is funded by the City of London Corporation in support of its Climate Action Strategy targets for a net zero and resilient Square Mile.

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