Achieving Scope 3 Emissions Reporting Maturity – Part 2

This stage focuses on inventory completeness and more accurate determination of emissions factors.

What does reporting competence look and feel like when it comes to Scope 3 emissions? Perhaps the more relevant question to begin with is - who should be targeting this phase we have dubbed reporting competence? Well-resourced organisations, who are able to, should jump straight into the reporting competence stage, especially those who are energy and material intensive, such as those in the resources sector.

This is the 2nd of a 4-part series by Greenbase that Fraser Eynon, one of our senior consultants, shared on the stages of Scope 3 greenhouse gas reporting maturity. This stage of an organisation’s roadmap towards Scope 3 emissions reductions focuses on inventory completeness and more accurate determination of emissions factors.

In part 1 of this series, we discussed that the purpose of increasing reporting maturity was to eventually reduce Scope 3 emissions. Inventory completeness is important as an organisation must be aware of all the emissions sources that exist within its value chain to capture all opportunities for emissions reductions as well as set a complete baseline for reduction targets.

Inventory completeness is based on a Scope 3 specific materiality assessment against the Greenhouse Gas Protocol’s 15 categories for value chain emissions accounting.

In a Scope 3 materiality assessment, each of these Scope 3 categories are assessed to determine relevancy to the organisation, for example:

• Size – contributes significantly to the organisation’s total Scope 3 emissions

• Influence – emissions can be influenced by the organisation (e.g. direct suppliers)

• Risk – contributes to the organisation’s risk exposure

• Stakeholders – deemed critical by key stakeholders

• Sector guidance – identified as significant by sector-specific guidance

Determining more accurate emissions factors at this stage is also more important as an accurate baseline is vital to make successful progress towards real emissions reduction targets. Reporting accuracy is also important when ESG disclosures are made to the general public and investors for integrity’s sake.

Each category may have nuances in the types of emissions factors that are applicable and preferred for determining emissions. The Greenhouse Gas Protocol provides a hierarchy for the best types of emissions factors to use for each category. For example, for the “upstream purchased goods and services” category, the hierarchy from most to least preferred is as follows:

1. Supplier-specific factors

2. A hybrid method – Supplier-specific factors where possible and other factor types as needed.

3. Average data factors

4. Spend based factors

An organisation in this phase of reporting should be reporting on 100% of their expenditure on goods and services using at least a spend factor to satisfy the inventory completeness aspiration of this phase.

From here, key goods and services can be individually considered to see if a more preferred type of emission factor can be used. The more emissions intensive a good or service is, the more it should be prioritised to find a better emissions factor type.

In this process, remember that the goal of Scope 3 emissions reporting is to achieve value chain emissions reductions. If only generic factors are used, then the only way to reduce emissions is to reduce spend on, or use less of, a particular purchased good or service. Using generic factors means an organisation misses out on the opportunity to actively change procurement practices to reduce value chain emissions.

A note on spend factors: not all spend factors are created equal. At this stage of reporting maturity, we usually recommend using readily available spend factors that are applicable to specific goods and services as opposed to the broad industry spend factors historically used in online calculators.

Reporting competence is where many organisations we speak to are at in their Scope 3 reporting roadmap; however, it is not the end of the journey. It is a strong platform to move towards Scope 3 Reporting Mastery, which will be discussed in Part 3 of this series!

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