SCOPE 3 emissions in GHG accounting – a challenge for companies

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Carbon accounting has established itself as a key tool for making a company's ecological footprint measurable and transparent. The CSRD Directive is obliging more and more companies to prepare a CO₂ balance sheet. The CSRD refers to the requirements of the Greenhouse Gas Protocol (GHG Protocol), a globally recognized standard for the preparation of greenhouse gas balances.

The GHG Protocol divides emissions into three categories: Scope 1 comprises all direct emissions (e.g. from own energy generation at the site), Scope 2 all indirect emissions resulting from energy use (e.g. purchased energy) and Scope 3 all other indirect emissions along the company's value chain. 

The collection of emissions for Scope 1 and 2 is comparatively simple, e.g. via consumption measurements or energy bills, which is why many companies have so far concentrated on these scopes and have neglected the determination of Scope 3 emissions due to their complexity. However, Scope 3 emissions are often the most significant source of greenhouse gases and therefore also the greatest potential for reduction.​

The GHG Protocol divides Scope 3 emissions into 15 subcategories (see figure): The first eight relate to upstream activities of companies, e.g. purchased goods or business travel. The other seven categories deal with downstream business activities, e.g. downstream transportation. The complexity of determining the emissions results, among other things, from the different calculation methods in each category as well as the de-pendence on business partners (e.g. suppliers) and other players in the data procurement process. These challenges, which require an additional commitment of human resources, as well as the previous lack of flexibility in recording Scope 3 emissions meant that this data was rarely or never collected. This has come to an end with the introduction of the CSRD.

The CSRD and the associated standards for sustainability reporting (European Sustainability Reporting Standards, ESRS for short) require companies to record and publish Scope 3 emissions in accordance with the GHG Protocol in addition to Scope 1 and Scope 2 emissions. While emissions for Scope 1 and Scope 2 must be published from the year of the commitment, Scope 3 emissions only have to be reported from the second year onward.

Depending on the industry, Scope 3 emissions can account for 75% to 95% of a company's total emissions. This once again illustrates the great potential for greater climate protection and sustainability. By determining and publishing emissions along the value chain, companies can better understand their environmental impact and develop targeted measures to reduce them. This makes it possible to make their own business strategies more sustainable (e.g. through the targeted development of measures to reduce emissions) and to ensure a positive brand image.

At a time when regulatory requirements are becoming stricter on the one hand and consumer awareness of environmentally friendly products and services is growing on the other, it is essential for companies to record, analyze and reduce their CO₂ emissions. The ESRS standards require companies to record and publish their Scope 3 emissions, among many other disclosure points. Fulfilling this obligation brings with it many challenges, but also opportunities.

  

By determining Scope 3 emissions, companies can better assess their own and their suppliers' and partners' impact on the climate and thus determine concrete measures for reducing emissions. 

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