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99.9% of companies don't know 90% of their CO2 emissions

Imagine paying thousands of dollars for an analysis of your Scope 1 & 2 emissions, spending months collecting data and taking ambitious reduction measures - so you invest a lot of effort into making your business more sustainable & climate-friendly - but then you find out it all only covers a fraction of your business' actual impact on the environment. Why? Because Scope 3 emissions make up the vast majority of total GHG emissions for most businesses in absolute terms.

If you're wondering now what's missing, this article will be of value to you. Here's what it's about:

⁉️What exactly are Scope 3 emissions

⁉️ Why they are so often ignored

⁉️ Why the product perspective is so crucial

⁉️And what you can do even if you're not a multi-million dollar company.

For most companies, Scope 3 emissions represent 75% to 99% of total GHG emissions. At the same time, most companies focus primarily on analyzing Scope 1 and 2 emissions. A lot of effort for little impact?

What scopes actually?

Quick recap: According to the Greenhouse Gas Protocol (an international standard for accounting greenhouse gas emissions), GHG emissions caused by companies are divided into three scopes. Scope 1 includes direct emissions from company-owned sources, Scope 2 emissions are those caused by electricity, and Scope 3 includes all indirect upstream and downstream emissions. In other words, what retail companies do to generate their revenue - the manufacturing or merchandising of products. If you want to know more about this, check out this blog article (only available in German, sorry!).

So why is Scope 3 so difficult?

The reasons why the majority of a company's footprint is not even captured by many companies can be broken down into four main issues: The issue of accountability, the complexity of Scope 3 emissions, the lack of binding and uniform standards, and communication difficulties.

👉 Problem 1: Accountability

The first problem with Scope 3 emissions is obvious: The emissions that count as Scope 3 for one company are the Scope 1 emissions of another company, for example in the supply chain. Of course, it is easy to shift the responsibility over this - but if no one feels responsible, these will be neglected and not included in reduction measures. It is important to start where the majority of emissions occur and, ideally, to include business partners in the responsibility. Product carbon footprints (PCFs) can shed light on the issue - but to calculate them, you have to look at material procurement and production, as this is where most emissions are caused.

Additionally, Scope 3 emissions are often outside corporate control because they involve upstream and downstream processes and are thus generated in the supply chain or by consumers.

👉 Problem 2: Complexity

Scope 3 emissions are broad and vary widely by company type. This makes them the most complex part of the Corporate Carbon Footprint (CCF) and the most time-consuming to capture. Often, Scope 3 assessments involve a lot of manual effort in terms of data collection and entry (edie, 2020).

👉 Problem 3: Binding standards

Overall, there is a lack of common and binding national or international standards on how companies can report and measure their Scope 3 emissions. The GHG protocol provides a good starting point - however, its comprehensibility is limited and this makes it, especially for SMEs difficult to follow. This is particularly problematic since the complexity described above requires exactly such guidelines in order to be able to track Scope 3 emissions in an uncomplicated way. Only if scope 3 emissions are tracked is it possible to enforce effective reduction measures and offsets. There are already some guidelines, from the GHG Protocol, ISO standards, or at EU level, but they are so complicated that it is hardly possible, especially for small and medium-sized businesses, to follow them.

👉 Problem 4: Communication

Scope 3 emissions analysis is complex, but on top of that, communication is also difficult. But hey, that's exactly why Product Carbon Footprints help you - they cover most of your Scope 3 emissions (check!) and at the same time give you valuable metrics to understand and communicate CO2 emissions at product and portfolio level to your customers.

A few facts and figures

Due to the problems described above, Scope 3 emissions are more difficult to calculate for SMEs, given limited resources and knowledge. Therefore, it is worth taking a look at how the larger companies are addressing their Scope 3 emissions. The Corporate Climate Responsibility Monitor provides an overview of the Scope 3 emissions of 25 large companies and examines their sustainability commitments. The total emissions of these 25 companies - including Amazon, Apple, BMW, Google and IKEA - together account for about 5% of global greenhouse gas emissions. And on average, 87% of those are Scope 3 emissions.

At Carrefour - one of the world's largest retailers - Scope 3 emissions account for 98% of total emissions. The main source of GHG emissions is in the supply chain of products (= upstream Scope 3 emissions), and thus outside the company's control. Additionally, Carrefour promises to be "carbon neutral" by 2040 - but only includes Scope 1 and 2 emissions - which account for less than 2%.

The picture is similar to the other companies studied. Apple claims on its website that by 2030 "every Apple device sold will have zero impact on the climate." This climate neutrality is to be achieved through reduction and compensation measures. But even at Apple, upstream and downstream Scope 3 emissions - the purchase of goods for product manufacturing and device use - account for the majority (about 96%) of total emissions. And the Corporate Climate Responsibility Monitor research finds that the carbon neutrality claim covers only about 1.5% of the total corporate carbon footprint in 2020.

For Amazon (Scope 3 = 76%), BMW (Scope 3 = 97%), IKEA (Scope 3 = 99%) and all other companies, a similar picture emerges. Climate neutrality promises and reduction measures that do not or not sufficiently cover Scope 3 emissions and partial CO2 offsetting that lacks transparency.

Scope 3 emissions, as the main source of corporate emissions, also offer the greatest potential for effective reduction measures and a real impact on the climate. Scientists agree: There is an urgent need for science-based targets and guidelines for companies, as Scope 3 emissions are insanely climate-relevant and customers are increasingly demanding this (CNBC).

Our tips & tricks for you and your Scope 3 emissions

Pay 12€ per ton of CO2 and then advertise with climate neutrality? Better not! There are two things about this that are absolutely not recommended: Avoid statements like climate neutral - this suggests that your products or company activity have no impact on the environment - something that is almost unattainable. Especially if you only cover a fraction of your emissions and CO2 offsets are via low-cost projects in the global south.

Absolute NO-GO: Promising carbon neutrality without including Scope 3 emissions.

If you're wondering now how you're supposed to tackle your Scope 3 emissions when the big guys already can't do it decently? Here are our tips for you on how to avoid greenwashing and achieve effective climate protection with your business:

👍 Communicate honestly and transparently and don't make empty promises you can't keep.

👍 Include your products in accounting and reduction measures. This is where the greatest leverage for real climate protection lies.

👍 When carbon offsetting, make sure that the climate protection projects are trustworthy and comply with the "Oxford Principles for Net Zero Aligned Carbon Offsetting".

Always keep in mind that you don't have to do everything perfectly from the start. The point is to get started now and begin where it really makes sense. The time of empty promises and expensive CO2 accounting should really be over now. Creativity is now needed to develop smart ideas and approaches for effective climate protection and to identify hotspots. Transparency should be at the top of the agenda, both about results and about challenges and difficulties.

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