Sustainable Development Technical Section

The Facts and Myths of Scope 3 Greenhouse Gas Emissions 

The rules pertaining to disclosure of corporate Scope 3 greenhouse gas (GHG) emissions proposed by the Securities and Exchange Commission (SEC) in early 2022 has caused a big stir in the investment community and the publicly traded companies in the United States. Early this March, Mr. Gensler, chair of the SEC indicated that SEC is considering scaling back its emission disclosure rule for Scope 3 emissions, acknowledging the calculations weren't as "well developed". 

Scope 3 GHG emissions, according to the U.S. Environmental Protection Agency (EPA), represent GHG emissions as a "result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain. Scope 3 emissions include all sources not within an organization's scope 1 and 2 boundary". 1 Scope 1 and 2 GHG emissions refer to emissions directly released from a company's business assets and operations, and emissions from the production of utilities purchased by a company to power its operations. 

By definition, Scope 3 covers a diverse category of emission sources. One company's Scope 3 emissions might be Scope 1 and 2 emissions of another company up and down the value chain. Due to confidentiality issues, data collection for Scope 3 emission accounting could become extremely complex, time consuming, and highly uncertain. This has contributed to the fact that, to date, very few companies are fully evaluating their Scope 3 emissions and far fewer companies are willing to disclose them. 

On the other hand, Scope 3 emissions play a key role in efforts addressing climate change. Science Based Target Initiative (SBTi), an effort developed in accordance with the Paris Agreement, requires applicants to disclose their Scope 3 emissions if the Scope 3 emission exceed 40% of Scope 1 and 2 emissions combined. Being able to understand and quantitatively assess Scope 3 emissions might provide very valuable insights for companies.  Raw material acquisition, product end use, material shipping, and waste treatment, disposal, or recycling sometimes are the best places for a company to effectively reduce their carbon footprints. 

The present talk will focus on how Scope 3 emissions are being assessed currently, the international standards that are being adopted for evaluating Scope 3 emissions, their advantages and limitations, best practices on how to streamline data collection process, improve data quality, reduce uncertainties, and apply insights from Scope 3 analysis. 

The Facts and Myths of Scope 3 Greenhouse Gas Emissions 

The rules pertaining to disclosure of corporate Scope 3 greenhouse gas (GHG) emissions proposed by the Securities and Exchange Commission (SEC) in early 2022 has caused a big stir in the investment community and the publicly traded companies in the United States. Early this March, Mr. Gensler, chair of the SEC indicated that SEC is considering scaling back its emission disclosure rule for Scope 3 emissions, acknowledging the calculations weren't as "well developed". 

Scope 3 GHG emissions, according to the U.S. Environmental Protection Agency (EPA), represent GHG emissions as a "result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain. Scope 3 emissions include all sources not within an organization's scope 1 and 2 boundary". 1 Scope 1 and 2 GHG emissions refer to emissions directly released from a company's business assets and operations, and emissions from the production of utilities purchased by a company to power its operations. 

By definition, Scope 3 covers a diverse category of emission sources. One company's Scope 3 emissions might be Scope 1 and 2 emissions of another company up and down the value chain. Due to confidentiality issues, data collection for Scope 3 emission accounting could become extremely complex, time consuming, and highly uncertain. This has contributed to the fact that, to date, very few companies are fully evaluating their Scope 3 emissions and far fewer companies are willing to disclose them. 

On the other hand, Scope 3 emissions play a key role in efforts addressing climate change. Science Based Target Initiative (SBTi), an effort developed in accordance with the Paris Agreement, requires applicants to disclose their Scope 3 emissions if the Scope 3 emission exceed 40% of Scope 1 and 2 emissions combined. Being able to understand and quantitatively assess Scope 3 emissions might provide very valuable insights for companies.  Raw material acquisition, product end use, material shipping, and waste treatment, disposal, or recycling sometimes are the best places for a company to effectively reduce their carbon footprints. 

The present talk will focus on how Scope 3 emissions are being assessed currently, the international standards that are being adopted for evaluating Scope 3 emissions, their advantages and limitations, best practices on how to streamline data collection process, improve data quality, reduce uncertainties, and apply insights from Scope 3 analysis.