In light of the European Commission’s recent press release, it’s pretty clear that including Scope 3 emissions in our reporting is super important. In my experience, almost 90% of manufacturers’ emissions come from the supply chain, so these indirect emissions are a huge part of the sustainability picture. Even though we still struggle with data collection issues, the regulatory landscape is slowly changing and suppliers along the value chain are catching up with the new requirements.
The Current Challenge
Right now, manufacturers have a tough time accurately calculating Scope 3 emissions. I mean, these calculations can be really complex. But as more suppliers get on board and better data becomes available, the estimates will get better. The European Commission’s goal is to boost transparency and consistency in sustainability reporting so that in the future robust Scope 3 data will be key for making strategic decarbonisation decisions.
Approaches to Calculating Scope 3
There are a few ways to approach Scope 3 calculations, each with its own pros and cons:
• Spend-Based Calculations Using Financial Data: This method uses financial spend data as a proxy for emissions. Often it’s the only option when you don’t have detailed consumption data. But while it’s okay for basic reporting, it’s not so great for developing targeted strategies or comparing products.
• Averages Based on Activity Data (like Weight or Volume): Here, you use LCA databases to apply average emission factors based on consumption data. This works fine if you have the data, but it doesn’t allow for precise product comparisons since it relies on general averages.
• LCA Calculations or Product Carbon Footprints: This one’s the most precise as it involves doing detailed LCAs or calculating a product-specific carbon footprint. Sure, it requires getting primary data from suppliers—which can be a real headache—but it gives the detail needed to compare products and develop strategic plans.
Why Scope 3 Must Stay in the Reporting Framework
Even with the current challenges in collecting and calculating the emissions, keeping Scope 3 in our reports is in my opinion, important for several reasons.
If we remove Scope 3 emissions from the reporting framework, we’d ignore most of a manufacturer’s environmental impact. Including the Scope 3 emissions give a much more realistic and complete picture of the emitted emissions in the supply chain.
Integrating Scope 3 data isn’t just about ticking boxes for compliance—it’s about pushing manufacturers and suppliers to innovate. By including climate impact alongside price, quality, and delivery, companies can encourage their suppliers to cut their products' carbon footprint, which can help build a more competitive and sustainable supply chain.
Collecting and refining Scope 3 data is difficult right now, but I believe that it is a valuable learning process. Over time, as the data quality improves, companies can make more precise strategies and better decisions, aligning with the EU’s sustainability and NET-zero goals.
In short, even with the Omnibus regulations, Scope 3 emissions are vital for sustainability reporting. They truly reflect the actual environmental impact of manufacturing and help create a more competitive market where climate performance is a key factor in choosing suppliers. It might be a bumpy road, but the long-term benefits for manufacturers, suppliers, and the climate make it totally worth it.
