Mastering scope 3 emissions: A guide for logistics managers
Greg Herz, Content Lead
It’s no secret that corporations need to focus on sustainability — whether it’s to satisfy customer demand, fulfil voluntary reporting targets or meet mandatory climate disclosure legislation.
As a logistics manager, you’re in a unique position to have an impact on your business’s greenhouse gas emissions (GHGs). By understanding, managing and reducing your company's logistics carbon footprint — particularly the complex yet vital scope 3 emissions — you’ll be able to help your business achieve its sustainability targets and reduce long-term operational risks.
But what are scope 3 emissions, and how do you manage them in your logistics supply chain?
In this article, we’ll tackle scope 3 emissions head-on, providing you with a deep understanding of their significance, the challenges you’ll face in managing them, and how to overcome them. We’ll explore why they are relevant to your role as a logistics manager and which scope 3 emissions sources you should be prioritising to help meet your business’s carbon reporting and reduction goals.
What are greenhouse gases?
Before we delve into the intricacies of scope 3, let’s start at the beginning with an overview of what GHGs are.
GHGs are a group of gases released as a result of human activity that trap heat in the Earth’s atmosphere. Their heat-trapping properties contribute to what’s called the greenhouse effect, which drives global warming. As we release more GHGs into the atmosphere and global warming increases, the Earth’s atmospheric cycles and processes will start to become more erratic. This causes more extreme weather conditions like droughts and floods which will eventually make the planet inhabitable for humans.
Despite the wide use of the term carbon when describing GHGs, they encompass much more than just carbon-based molecules. This includes:
Carbon Dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Hydrofluorocarbons (HFCs)
Perfluorocarbons (PFCs)
Sulfur hexafluoride (SF6)
Nitrogen trifluoride (NF3)
While CO2 is the most released GHG worldwide, many have a proportionally greater warming effect on the planet. A single methane molecule (CH4), for example, has the equivalent impact of 28 CO2 molecules, and a single sulfur hexafluoride molecule (SF6) — a chemical often used in electrical insulation and circuit breaker production — is equal to the impact of 23,500 CO2 molecules.
The transportation sector, including logistics, is a major contributor to GHG emissions, with every truck, plane and ship adding to its impact.
What are the emissions scopes?
There are 3 main categories of GHG emissions, known as “scopes”. Defined by the Greenhouse Gas Protocol, scopes 1, 2 and 3 emissions represent the total direct and indirect GHGs produced by an organisation.
What are scope 1 and 2 emissions?
Scope 1 and 2 emissions are the direct and indirect emissions relating to the energy use for your company’s own operations.
Scope 1 covers direct emissions from your company’s owned or controlled sources, such as vehicles and on-site combustion. Scope 2 includes indirect emissions from the energy your company uses, like electricity or steam, which are produced offsite in a power station but used to power your company’s operations.
Typically, scope 1 and 2 are the easiest emissions to measure and report as you should have direct access to primary data such as energy bills or fuel receipts.
What are scope 3 emissions?
Scopes 1 and 2 emissions are just the tip of the iceberg when it comes to your business’s emissions. Scope 3 on the other hand, represents everything you don’t see within your value chain, meaning it can be massive, but difficult to quantify. For many companies, scope 3 emissions make up 65-95% of their total carbon footprint.
Scope 3 covers all GHG emissions that occur outside your company’s direct operations or control but still relate to activities within its corporate value chain. This includes everything from the emissions produced during the extraction of raw materials used to make your products, to the emissions generated during the transportation of your products, to the emissions associated with the use and disposal of your products. It even covers things like employee commuting and business trips.
What are upstream and downstream scope 3 emissions?
A good place to start with scope 3 emissions is to understand them as upstream or downstream of your business's operations.
Emissions that are produced from activities in your product’s lifecycle before they enter your company’s operations are considered upstream scope 3 emissions. These include emissions from activities involving suppliers, such as from the transportation of goods (such as parts or materials) to your facilities. Downstream scope 3 emissions are emissions produced from activities that occur once your product has left your company’s facilities, such as during its transportation to distributors, use by customers and end-of-life disposal or recycling.
Defining scope 3 emissions and their sources as upstream or downstream offers visibility into where significant emissions might occur in your business’s value chain, providing more useful insight into how you can make reductions.
What are the 15 scope 3 categories?
While defining emissions sources as upstream and downstream is useful, the sheer scale and complexity of scope 3 emissions make them difficult to measure and report. Additionally, scope 3 is spread across multiple business functions which can add complexity to effective carbon accounting and management. To help ease this complexity, the GHG Protocol Scope 3 Calculation Guidance separates scope 3 emissions into 15 distinct categories that span the entire upstream and downstream of a business’s value chain.
Upstream scope 3 emissions are categorised as:
1: Purchased goods and services
2: Capital goods
3: Energy and fuel-related activities (not included in scope 1 or 2)
4: Upstream transportation and distribution
5: Operational waste
6: Business travel
7: Employee commuting
8: Upstream leased assets
Downstream scope 3 emissions are categorised as:
9: Downstream transportation and distribution
10: Processing of sold products
11: Use of sold products
12: End-of-life treatment of sold products
13: Downstream leased assets
14: Franchises
15: Investments
What scope 3 emissions categories are relevant to logistics?
When it comes to measuring emissions related to your business’s logistics supply chain activities, there are 2 scope 3 categories that are most relevant: Category 4 (Upstream transportation and distribution) and Category 9 (Downstream transportation and distribution).
Scope 3 Category 4: Upstream transportation and distribution
Scope 3 Category 4 comprises all the emissions from the transportation and distribution of products purchased by your business from tier 1 suppliers in vehicles and facilities not owned by your company. For example, this could be the GHG emissions produced by trucks, ships and storage facilities used to deliver components to manufacture your products if they are produced by 3rd party suppliers. It also includes the emissions from the transportation and distribution of products between your company’s facilities in vehicles it does not own. However, it does not include the transportation of purchased goods upstream of your tier 1 suppliers — this comes under scope 3 category 1.
Scope 3 Category 9: Downstream transportation and distribution
Scope 3 Category 9 covers the emissions produced from the transportation and distribution of goods once your products have left your company’s facilities until they arrive at the final customer. This includes 3rd party distribution centres, retail stores and last-mile delivery. In some cases, the emissions produced when transporting goods from your company’s facilities to distribution centres can be considered scope 3 category 4 emissions if your company pays for the transportation and distribution, but this is usually not the case.
Challenges with managing your business's scope 3 logistics emissions
The lack of transparency and complex nature of logistics supply chains makes managing and analysing your business’s emissions particularly difficult. These are the key issues organisations often face:
Complex and resource-heavy data collection
Ideally, scope 3 data should be provided by your suppliers such as logistics providers and freight forwarders. Depending on your industry and the complexity of your products, you may have hundreds or even thousands of logistics partners, making the task of gathering and collating this data particularly time-consuming and resource-intensive.
Limited and incomplete emissions data
The nature of relying on external sources for emissions data means you are also likely to receive varying quality of data from suppliers, making it difficult to compare and produce actionable insights for reducing your scope 3 emissions.
Lack of visibility across regions
The global nature of supply chains means that emissions from activities occurring outside your business’s operating region can be especially difficult to calculate. For example, how do you accurately measure the emissions from a third-party trucking company operating in a country without strict legislation or standard practice for tracking their fuel usage?
Evolving reporting standards
As governments and international bodies develop more stringent environmental regulations, companies are facing legal obligations to report scope 3 emissions. For companies that operate in several regions with differing reporting regulations, managing the requirements for multiple climate disclosure regulations exposes them to the risk of fines for inaccurate or improper reporting.
How to simplify your logistics scope 3 emissions management
Despite these challenges, there are ways to simplify the management of your scope 3 emissions. Here’s how you can start:
Utilise advanced tools and technologies
Technology is on your side when it comes to calculating your company’s scope 3 emissions. Carbon accounting software tools designed to help you measure and manage scope 3 emissions in your supply chain can integrate with your existing logistics management systems, enabling you to collect emissions data from your supplier network and analyse your carbon footprint all in one place.
Find out more about carbon reporting software in our blog: How carbon accounting software can transform logistics management
Collaborate with supply chain partners
It’s also important to remember that you don’t have to calculate your scope 3 emissions alone. Your suppliers, customers and logistics partners all have a responsibility to help gather the necessary data for reporting GHG emissions. Collaborating with them and building a strong data-sharing network will reduce the hassle of meeting your calculating and reporting obligations. Building strong relationships across the supply chain can also help you improve data accuracy and work together on emissions reduction strategies.
Implementing best practices: Using the GLEC Framework
Luckily, transport and logistics already has a well-established and scientifically-based methodology for calculating and reporting scope 3 emissions. Developed by the Smart Freight Centre (SFC), the Global Logistics Emissions Council Framework provides a clear process for calculating emissions from freight transport.
Working with suppliers that calculate their emissions using GLEC-accredited software will ensure accuracy, transparency and accountability in your emissions calculations.
Reporting scope 3 emissions
Accurate and transparent reporting is a critical part of managing your scope 3 emissions. It enables you to meet sustainability goals and regulatory requirements like the EU’s Corporate Sustainability Reporting Directive (CSRD). The GHG Protocol’s Corporate Accounting and Reporting Standard guides on how you should format and submit emissions reports, including those for your scope 3 categories 4 and 9.
The key aspects to correctly reporting these emissions involve categorising emissions by scope and providing clear calculations for each, enabling stakeholders to understand the sources of emissions and opportunities for reduction. If any emissions categories are excluded, businesses must justify these exclusions. By documenting the sources and calculations used, companies can build stakeholder trust and ensure compliance with climate disclosure regulations.
Reducing scope 3 emissions in your logistics supply chain
Once you have identified your company’s scope 3 emissions, you can start thinking about how to reduce your scope emissions from transport and logistics. Collaborating with your suppliers to develop a comprehensive carbon reduction plan should be your first port of call.
Take the lead in managing your company’s scope 3 emissions
Tackling the complex nature of scope 3 emissions is crucial for achieving your company’s broader sustainability goals. As a logistics manager, you are uniquely positioned to drive significant reductions within your company’s logistics supply chain. By utilising carbon accounting software, leveraging strong collaboration with supply chain partners and adhering to established frameworks like the GLEC Framework, you can streamline data collection and analysis, making the daunting task of tracking scope 3 emissions more manageable.
This will help you assess and implement practices to actively minimise your logistics-related carbon footprint, helping your company achieve its sustainability targets and reduce long-term operational risks.
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