Scope 3 emissions refer to indirect greenhouse gas emissions that occur in a company's value chain. These emissions are a result of activities that are not directly owned or controlled by the company but are associated with its operations. It's important to consider scope 3 emissions because they can account for a significant portion of a company's overall carbon footprint.

From its brief description, this category probably makes the least sense…

Scope 3 emissions are essentially every other emission in the value chain other than Scope 1 and 2, meaning most of a company's emissions are related to Scope 3 sources. In fact, it’s often around 80-90%! So it’s absolutely critical to account for Scope 3 emissions.

Scope 3 emissions are divided into 15 categories:

Let’s say for example, we are a very small-scale company that sells one cake a day. Scope 3 emissions would therefore come from the purchasing of ingredients for the cake, the freight associated with taking the cake from our kitchen to the shopfront, the disposal of any waste generated from the cake (eggshells, for example) and the equipment required to create the cake (oven, electric mixers etc.)

Now this is where it gets tricky. You might be thinking, what if this business gets its eggs from a large company, and they have no idea how many emissions are involved with their chicken farm? How are we supposed to account for that? This is a big problem – most of the time they don't know.

Step one is asking the supplier if they have the data, if they don't have that information, we are forced to use a generic industry average to get to the CO2e equivalent of buying these eggs. Sumday has a large database of emissions factor averages you can use and the standards say if you’ve tried everything else reasonable, then ok, rely on an average. BUT this isn’t practical for the rest of eternity. You need to actually measure how your suppliers are reducing emissions so you can reduce yours too.

That’s why Sumday makes it easy to engage with your suppliers, you can upload details and ask if they have started carbon accounting so you can include primary data. Like you, they’re probably getting their head around this too, so if they don’t have their data, you can pass on free access to Sumday’s training and software to help them get started. This can form part of your plan to improve the quality and availability of your data, so you can get a better understanding of your emissions and track your progress towards net zero year on year (and your suppliers can reap their own benefits too).

For a long time, stakeholders have said, "How am I supposed to know the emissions associated with companies I can't control?" or, "That's too hard, let's start with Scope 1 and 2." But as the world focuses on reaching net zero, it’s increasingly important to actually understand the emissions of those suppliers we buy goods and services from or those companies we invest in, so we can make informed decisions that align with our net zero strategies.

Accounting for scope 3 emissions has been voluntary in the past, but it won’t be for long. Standards such as the International Sustainability Standards Board (ISSB) and regulations like the  Californian Bills for Mandatory Scope 3 Accounting are moving the world of accounting and reporting to mandatory scope 3 emissions for large organisations, which means they will be tapping companies on the shoulder for this data through their own supply chains. So basically, it may as well be mandatory for most businesses.

Your company has a $100,000 travel budget each year. You're loyal FlightX customers (Elon is at it again, hopefully with a better logo this time). There are significant emissions associated with flying, obviously. In 2023 they miraculously discover a way to reduce emissions for each flight by 50%. You've been accounting using industry averages. Even though emissions associated with your FlightX travel have gone down, you still don't see that in your calculations. Because of this, it's hard for anyone to know for sure then that FlightX is a better procurement decision from a carbon perspective compared to their competitors, Flights R Us. The Flights R Us marketing budget is 10 times that of FlightX and they are making incremental changes they're very loud about, so most businesses associate sustainable travel with Flights R Us.

You can see the problem, right...

That's a big picture example, but it is the same for any suppliers who have made decisions to reduce their impact. You want to be able to account for that in your Scope 3 assessment. It is quite literally the only way you’ll be able to track progress towards net zero or make any real reduction to your scope 3 emissions.

This is the level of transparency we need to keep working towards in order to understand how we can  reduce our impact through informed purchasing decisions. The more businesses that start carbon accounting, the easier this will become.