Where to Start with Scope 3 Work?

Where to Start with Scope 3 Work?

Scope 3 covers indirect emissions in companies' value chains. The GHG Protocol Corporate Value Chain Standard defines these emissions in 15 categories. For many companies, Scope 3 can constitute 70-90% of total emissions. This magnitude makes the topic both important and challenging.

The right start determines project success. Projects that start without planning get stuck in the data collection process or remain incomplete in scope. A systematic approach ensures efficient use of resources and reliable results.

Screening Methods

The screening study begins with a quick assessment of all 15 categories. The purpose is to determine which categories are applicable and significant for the company.

Spend-based screening

The fastest screening method. Uses procurement data to make rough estimates for all categories.

Method: Expenditure amount × EEIO (Environmentally Extended Input-Output) emission factor

Advantage: Quick results, can be done with existing financial data.

Disadvantage: High uncertainty, sector averages may not reflect actual situation.

Data sources: Accounting records, purchase invoices, budget reports

EEIO models

Economic Input-Output Analysis is used to model the environmental impacts of economic activities.

Common EEIO databases:

• EXIOBASE (Europe-focused)
• USEEIO (US-focused)
• GTAP (global)
• Ecoinvent EEIO modules

Usage: Expenditure amount is assigned to a specific sector. Sector's emission intensity (kg CO2e/USD or EUR) is applied.

Hybrid screening

Activity-based approach for critical categories, spend-based approach for others. This provides balance between accuracy and efficiency.

Prioritization Criteria Matrix

Screening results are evaluated for prioritization. Magnitude is not the only criterion.

Evaluation criteria

Magnitude: Share in total Scope 3. Categories above 5% are generally priority.

Influence potential: How much reduction impact can the company have on this item? Are levers like supplier selection and product design available?

Risk: Are regulations, stakeholder expectations, market dynamics affecting this category?

Data availability: Can primary data be obtained? Is data collection cost reasonable?

Stakeholder interest: Are customers, investors, or regulators particularly interested in this category?

Prioritization matrix example

General Assessment of 15 Categories

Typical characteristics and applicability of each category:

Upstream categories (1-8)

Category 1 - Purchased goods and services: Largest category for most companies. Always applicable. Includes raw materials, semi-finished products, services.

Category 2 - Capital goods: Applicable for companies making investments. Machinery, building, vehicle purchases. Can fluctuate year to year.

Category 3 - Fuel and energy (outside Scope 1-2): Always applicable. Derived from Scope 1 and 2 data. Well-to-tank emissions, transmission losses.

Category 4 - Upstream transportation: Applicable for companies procuring materials. Logistics from supplier to facility.

Category 5 - Operational waste: Always applicable but generally small share. Varies by waste disposal method.

Category 6 - Business travel: Always applicable. Flights, vehicles, hotels. Should be re-evaluated post-pandemic.

Category 7 - Employee commuting: Always applicable. Home to work travel. Requires survey-based data.

Category 8 - Leased assets (upstream): Applicable for companies that lease. Parts not reported in Scope 1-2.

Downstream categories (9-15)

Category 9 - Downstream transportation: Applicable for product-selling companies. Logistics from facility to customer.

Category 10 - Processing of sold products: Applicable for intermediate product sellers. Not applicable for final product sellers.

Category 11 - Use of sold products: Critical for energy-consuming product sellers. Electrical appliances, vehicles, fuels.

Category 12 - End-of-life of sold products: Applicable for physical product sellers. Recycling, disposal emissions.

Category 13 - Leased assets (downstream): Applicable for companies that lease to others. Real estate, equipment leasing.

Category 14 - Franchises: Applicable for franchise-granting companies. Scope 1-2 emissions of franchisees.

Category 15 - Investments: Applicable for companies with financial investments. PCAF methodology is used.

Department-Based Data Map

Scope 3 data is collected from different departments within the company. Identifying the data owner for each category is critical.

Data ownership example

Data collection process

1. Data owner identification and notification
2. Sharing data requirements
3. Template and format standardization
4. Creating delivery schedule
5. Weekly follow-up meetings

Pilot Category Selection

Starting with all categories at once is risky. Starting with a pilot category allows learning the process.

Pilot category selection criteria

Data accessibility: For pilot, category with easily accessible data should be preferred.

Significance: Pilot category should have meaningful share in total Scope 3.

Learning potential: Pilot should contain lessons applicable to other categories.

Stakeholder interest: Category with customer or investor demand may be priority.

Common pilot categories

C1 - Purchased goods: Frequently selected as pilot due to being the largest category. Procurement data is generally available.

C4 - Upstream logistics: Logistics department data is generally well maintained. Data can be obtained from carriers.

C6 - Business travel: Travel agency data is standardized. Calculation is relatively easy.

Methodology Documentation Requirements

Scope 3 calculation requires transparent documentation. Critical for verification and year-over-year consistency.

Items to be documented

Organizational boundary: Which companies, facilities, and operations are included?

Category scope: Which categories are included, which are excluded and why?

Calculation method: Approach used for each category (supplier data, average data, spend-based).

Emission factors: Source, year, geographic scope, unit.

Assumptions: Estimates made when data is not available and their justifications.

Data quality: Quality assessment for each category.

Exclusions: Items that cannot be calculated or are insignificant and their justifications.

Software and Tool Options

Scope 3 calculation can be done with different tools.

Spreadsheets (Excel/Sheets)

Advantage: Flexibility, low cost, widespread knowledge.

Disadvantage: Limited scalability, difficult version control, high error risk.

Suitable situation: Initial projects, small companies, limited number of categories.

Carbon accounting software

Examples: Sphera, SAP Sustainability, Persefoni, Watershed, Normative

Advantage: Integrated databases, automation, reporting, audit trail.

Disadvantage: Cost, learning curve, vendor lock-in risk.

Suitable situation: Large companies, complex value chains, continuous reporting.

LCA software

Examples: SimaPro, GaBi, openLCA

Advantage: Detailed modeling, multiple impact categories, product-focused analysis.

Disadvantage: Not designed for corporate inventory, requires expertise.

Suitable situation: C11 (product use), C1 detailing, PCF integration.

Common Challenges and Solutions

Data access difficulty

Challenge: Getting data from suppliers is difficult, primary data is insufficient.

Solution: Phased approach - start with secondary data, engage suppliers over time. Start with spend-based estimates, collect primary data for critical suppliers.

Category confusion

Challenge: Same activity can be assigned to different categories, double counting risk.

Solution: Create category guide, clarify with examples, apply consistently.

Internal coordination

Challenge: Multiple departments involved, communication gaps.

Solution: Assign project manager, hold regular meetings, use RACI matrix.

Resource constraint

Challenge: Insufficient human resources and budget, competing priorities.

Solution: Prioritize, start with pilot, evaluate external support.

Timeline Expectations

Realistic project schedule is important for expectation management.

First Scope 3 inventory (comprehensive)

Total duration: 4-8 months

• Project planning and screening: 2-4 weeks
• Data map and collection: 8-12 weeks
• Calculation and analysis: 4-6 weeks
• Reporting and internal approval: 2-4 weeks

Next year update

Total duration: 2-4 months

• Data update: 4-6 weeks
• Calculation: 2-3 weeks
• Reporting: 1-2 weeks

Resource Requirements

Internal resources

Project manager: Coordination, stakeholder management, schedule tracking.

Technical expert: Calculation, methodology, data quality.

Data owners: Subject matter experts from each department.

Senior management sponsor: Resource allocation, prioritization.

External resources

Consulting: Methodology guidance, calculation support, verification preparation.

Software: License costs, implementation support.

Verification: Third-party verification body.

Budget items

• Consulting fee (if applicable)
• Software license (if applicable)
• Data purchase (emission factor databases)
• Verification fee (if applicable)
• Internal resource time

Conclusion

Starting Scope 3 work requires planning and prioritization. All categories should be evaluated through screening and prioritized according to magnitude and influence potential.

Starting with a pilot category allows learning the process and managing risks. Data map, department ownership, and methodology documentation should be defined from the start.

Realistic time and resource planning affects project success. First inventory takes longer, subsequent years become more efficient. Tool selection should be based on company size and complexity.

This systematic approach makes the Scope 3 project manageable and produces reliable results.