October 13, 2011
Greenhouse Gas Protocol Sets Standards for Scope 3 Reporting
by Robert Kropp
A new report provides guidance to companies for reporting on indirect emissions in their supply
Any detailed analysis of corporate greenhouse gas (GHG) emissions requires the inclusion of
emissions in supply chains, where for many industry sectors the impact on climate is most
pronounced. In fact, a 2008 analysis published in the McKinsey Quarterly found that as much as 60%
of corporate GHG emissions originate in supply chains.
Yet, reporting on Scope 3
emissions, which include indirect sources as supply chains, "Remains a challenge for most
companies," according to a report published earlier this year by the CDP Supply Chain
program of the Carbon Disclosure Project (CDP).
"Developing a full
corporate GHG emissions inventory," the report states, "Enables companies to understand their full
emissions impact across the value chain and focus efforts where they can have the greatest impact."
Noting that the reporting of Scope 3 emissions have thus far been considered optional by GHG
Protocol's Corporate Standard, the new report adds additional requirements and guidance to create
more consistency in Scope 3 inventories.
By accounting for Scope 3 emissions, companies
can better identify risks and opportunities associated with GHG exposure. Planning a Scope 3
inventory can help companies anticipate regulatory changes, identify new market opportunities, and
communicate credibly with key stakeholders. On the other hand, failure to account for supply chain
emissions can expose companies to increased regulatory and reputational risks.
standards require companies to account for all Scope 3 emissions, while disclosing and justifying
any exclusions. GHG Protocol also recommends that companies establish an emissions reduction target
and track their performance in meeting it.
Accounting for and reporting on Scope 3
emissions should be based on principles of relevance, completeness, consistency, transparency, and
accuracy. For instance, the report states of transparency, "Information should be recorded,
compiled, and analyzed in a way that enables internal reviewers and external assurance providers to
attest to its credibility."
Scope 3 reporting that will now be required by GHG Protocol
include total GHG emissions reported in metric tons of CO2 equivalent, and a description of the
methodologies, allocation methods, and assumptions used to calculate scope 3 emissions.
Optional reporting includes information on supply chain engagement, product performance,
historic emissions, and the level of uncertainty in reported data.